This country-specific Q&A provides an overview of Tax laws and regulations applicable in Dominican Republic.
How often is tax law amended and what is the process?
Over the past 40 years, the Dominican Republic has undergone at least 15 tax law amendments or fiscal reforms. Since 2000 ,roughly eight tax law amendments or new laws have been introduced. The last two were consecutive, one in 2011, and the other in 2012.
some experts are forecasting a potential fiscal reform following the country’s next general elections, to address the nation’s fiscal deficit and increasing debt. The Legislative Branch, holds the mandate to amend or draft new these new regulations. Once approved, they need to be ratified by the Executive Branch.
It is important to point out that the current Tax Administration has been very active in the past 3 years with the enactment of complementary regulations about different tax matters.
What are the principal administrative obligations of a taxpayer, i.e. regarding the filing of tax returns and the maintenance of records?
The principal administrative obligations of a taxpayer include:
a) Taxpayer Registration: taxpayers are obligated to register their information at the General Directorate of Internal Taxes (DGII per its Spanish Acronym) to obtain a National Taxpayer’s Registration (RNC) number. The RNC must be used in all documents and transactions related to tax obligations and taxpayers must communicate any changes that modify the data included in their RNC.
b) Filing of Tax Returns and Payment of Taxes: taxes must be paid by taxpayers according to the activities or the assets they possess. Depending on the nature of the business or the individual’s income level, various tax returns might need to be filed:
i. Annual Income Tax (ISR) Return: Individuals and corporations need to file an Annual Income Tax return.
ii. Value-Added Tax (ITBIS): Individuals and corporations subject to ITBIS (similar to VAT in other countries).
iii. Asset Tax: legal entities s must submit the Asset Tax return on the same deadline as the Annual Income Tax Return.
iv. Other Returns: There are other specific returns depending on the nature of the business or income, such as the selective consumption tax, and others.
c) Maintenance of Records: Entries in records and accounting books should be made as operations are carried out and must be kept for a period of ten years, with receipts, proofs of payment, or any other documents related to such operations.
d) Fiscal Receipt Number: Taxpayers must request authorisation from the DGII to issue invoices with Fiscal Receipt Numbers to substantiate the transfer of goods or the provision of services.
e) Withholding: Entities that make certain types of payments, are required to withhold the taxes included in question 23.
Who are the key tax authorities? How do they engage with taxpayers and how are tax issues resolved?
The DGII is the main tax authority, which is in charge of administering and collecting the country’s internal taxes. The DGII is, however, subject to the supervision of the Ministry of Treasury, which exercises supervisory power over it to verify that its operations comply with the current legal provisions.
The DGII engages with taxpayers through their offices located all around the country, where taxpayers can go to comply with their obligations and require assistance and guidance. DGII also provides access to some of services through their online platform, where taxpayers can file returns and pay taxes, as well as register and update data in the RNC, without the need to travel to the DGII.
The General Directorate for Customs (DGA by its Spanish acronym) is the agency responsible for overseeing the import and export of goods through the country’s borders. In this capacity is the authority in charge of collecting custom taxes.
In case of disagreements between the taxpayer and the DGII or DGA (together the Tax Administration), there is an administrative procedure in place, where the taxpayer can appeal or contest the findings or decisions of the administration the Reconsideration Appeal.
After the Reconsideration Appeal is decided, the matter can be taken to ordinary justice, through a Recurso Contencioso Tributario” (Tax Litigation Appeal) before the Superior Administrative Court (TSA by its Spanish Acronym). Decisions of the TSA can be appeal before the Supreme Court of Justice of the Dominican Republic who will judge on the correct application of the law by the TSA and if applicable will uphold the decision and send back to the TSA for a new review.
Are tax disputes heard by a court, tribunal or body independent of the tax authority? How long do such proceedings generally take?
The reconsideration appeal is reviewed by the same Tax Administration, who has a period of 65 business days to issue a decision but it usually answers depending on its workload.
The Tax Litigation Appeal will be decided by TSA, a court specialised on administrative disputes. This instance lasts up to 1.5 – 2 years after the appeal has been filed. If the case is later appealed before the SCJ, it may take up to 1.5 – 2 or more years to obtain a final decision.
What are the typical deadlines for the payment of taxes? Do special rules apply to disputed amounts of tax?
a) Individuals: The deadline for filing and payment of the Income Tax Return for Individuals is until March 31st of each year. If the payment deadline falls on weekends or holidays, payment can be made on the next business day.
b) Companies or legal entities: The Income Tax Return for Companies or legal entities (IR-2) must be submitted no later than 120 days after the company’s closing date. The tax due must be paid and settled on that same date.
c) Companies or legal entities as withholding agents: legal entities acting as withholding agents for their employees, must file the declaration and pay this tax within 10 days after the closing of the declared period.
Companies or legal entities must submit the Asset Tax return on the same deadline as the Annual Income Tax Return and the resulting tax payable must be paid in two equal installments, the first due on the same deadline set for the payment of the ISR and the second within a period of six months from the expiration of the first installment.
The declaration and payment of this tax must be made within the first 20 days of the month following the declared period (e.g.: January must be declared and paid by February 20th).
Excise Tax (or ISC).
This tax is filed and paid no later than the twentieth day of each month.
Regarding disputed amounts, pursuant to Articles 91, 94 and 96 of the Tax Code, the Tax Administration is entitled to adopt coercive enforcement measures for collection only after the alleged tax debt becomes definite, liquid and enforceable. In a decision of 10 December 2018, the Constitutional Court has interpreted these conditions to mean that “in cases in which the taxpayer challenges the debt, the administration requires a court decision with res judicata authority, in order to exercise the enforcement powers at the coercive collection phase recognized in legislation”, in other words there must have been a court decision which cannot be appealed any further, before the DGII can start the coercive collection process.
Are tax authorities subject to a duty of confidentiality in respect of taxpayer data?
According to Article 47 of the Dominican Tax Code, the information that the Tax Administration obtains from taxpayers, responsible parties, and third parties by any means will initially be confidential and may be used for the purposes of said administration and in cases authorized by law.
There is only an exemption for the application of this article and is when the information is requested by competitors to confirm the value of taxes paid by the companies operating in their same market.
Is this jurisdiction a signatory (or does it propose to become a signatory) to the Common Reporting Standard? Does it maintain (or intend to maintain) a public register of beneficial ownership?
The Dominican Republic is currently not a signatory jurisdiction of the Common Reporting Standard and there is currently no information available on whether it plans to become a member in the near future.
Pursuant to Law No. 155-17, Against Money Laundering and the Financing of Terrorism, obligated entities must carry out a due diligence process, which allows identifying, verifying, and disclosing their beneficial owners. In this regard, Article 38 of the aforementioned law establishes as one of the objectives of due diligence the identification of the beneficial owner and the application of reasonable measures to verify their identity. likewise, article 104 of the previously mentioned law establishes the obligation to have updated information of its Beneficial Owners, in the RNC.
What are the tests for determining residence of business entities (including transparent entities)?
Pursuant to the Dominican Tax Code, companies or legal entities will be considered tax residents if the Dominican Republic if: a) the place where they mainly carry out their activities; b) the place where their main business headquarters are located; c) the place where the event generating the tax obligation occurs; or d) when they are incorporated in accordance with Dominican laws or have its headquarters business or effective address in the country.
Permanent establishment is defined as fixed place of business in which a foreign legal entity carries out all or part of its activity, such as: headquarters, offices, branches, commercial agencies, factories, workshops, oil or gas wells, quarries or any other place of extraction of natural resources, including supervision activities thereof; construction or supervision activities derived from the sale of machinery or equipment when their cost exceeds 10% of the sale price of said goods, business consulting services provided they exceed six months within an annual period, or has dependent representatives or agents, when the latter carry out all or almost all of their activities on behalf of the company.
To verify this, the Tax Administration has the power to request documents that include proof of residence, like service agreements, corporate documents, invoices, among other documents.
Do tax authorities in this jurisdiction target cross border transactions within an international group? If so, how?
Yes, because Dominican taxes are based on a territorial system of taxation. This means all income derived from activities performed in, property situated or economically used in, or economic rights used in, the Dominican Republic are taxed locally, regardless of the domicile, residence or nationality of the participants, or the contracting location. Also, certain foreign investments that generate income are subject to local taxes.
Is there a controlled foreign corporation (CFC) regime or equivalent?
No, at the moment the country does not have a controlled foreign corporation regime or equivalent.
Is there a transfer pricing regime? Is there a "thin capitalization" regime? Is there a "safe harbour" or is it possible to obtain an advance pricing agreement?
The Dominican transfer pricing regime is included in Article 281 and 281 bis of the Dominican Tax Code and the Transfer Pricing Rules Applicable to Transactions Between Related Parties No. 78-14, all based on international guidelines.
The regime establishes that all companies resident are obligated to report their commercial or financial intercompany operations if they involve transactions with: (i) an associated/related party, as defined by the Article 281 of the Dominican Tax Code; or (ii) individuals or entities incorporated or located in Special Fiscal Regimes included in a list prepared by the Tax Administration.
In 2012 the fiscal reform introduced a thin capitalisation rule where the maximum debt-to-equity ratio allowed to taxpayers is 3:1; over this threshold, the deduction of interest expense is limited. The Tax Code also include the possibility to execute advance pricing agreements (APAs) with the Tax Administration.
Is there a general anti-avoidance rule (GAAR) and, if so, how is it enforced by tax authorities (e.g. in negotiations, litigation)?
The country has several rules like the general anti-avoidance rules. Taking into consideration that Dominican taxes are based on a territorial system, the Tax law establishes certain obligations to guarantee the payment of ISR and the ITBIS, like regulation of the concept of tax resident and obligations of local withholdings.
Is there a digital services tax? If so, is there an intention to withdraw or amend it once a multilateral solution is in place?
No, currently there is no digital service tax. The Tax Administration has been discussing the creation of a new regulation that will establish a tax for digital services, but it hasn’t been approved yet.
Have any of the OECD BEPS recommendations, including the OECD’s recent two-pillar solution to address the tax challenges arising from digitalisation of the economy, been implemented or are any planned to be implemented?
On October 10th, 2019 the Dominican Republic, through the Ministry of Treasury, joined the Inclusive Framework of the Project against the Erosion of the Tax Base and the Shifting of Benefits (BEPS), as part of the effort to apply the highest international standards in terms of tax transparency and in the fight against tax evasion and avoidance.
How has the OECD BEPS program impacted tax policies?
Through Resolution No. 201-114 of December 1, 2021, the Tax Administration introduced modifications to the Resolution No. 201-4502, that establishes the obligation to use the Electronic Invoice System and the deadlines for non-active users to adopt the new plan. The provisions established in the regulation apply to taxpayers who are ultimate parent company or member entity of a multinational group who are residents of the Dominican Republic and their consolidated income is equal to or greater than RD$38,800,000,000.00 (approximately 600 million euros).
The Dominican Tax Law already regulates Price Transfer Operations in accordance with the OECDE. Also, there is a project to modify the Title I of the Dominican Tax Code, that has been submitted for review and as mentioned in the previous questions, the creation of new regulation for digital services is in the talks.
Does the tax system broadly follow the OECD Model i.e. does it have taxation of: a) business profits, b) employment income and pensions, c) VAT (or other indirect tax), d) savings income and royalties, e) income from land, f) capital gains, g) stamp and/or capital duties? If so, what are the current rates and how are they applied?
Yes the Dominican Republic follows the OECDE model. The tax law includes the following taxes and rates:
Income Tax (ISR): taxes at a rate of 27%, all gross income minus deductions specified by law..
Tax on assets: is levied on assets, mainly real estate, of legal entities The rate is 1% annually calculated on the total amount of taxable assets.
ITBIS: applies to imports, internal transfers of goods or the provision and location of services, regardless of who performs same. The rate is 18% and it is paid on a monthly basis.
Finally, to the extent that an individual or company carries out other activities, it might be subject to other taxes and withholding obligations, such as: capital gains tax, excise tax (ISC), tax on transfer of local assets, withholdings for interest payments and payments abroad, and withholdings for payments dividends, among other information fiscal obligations applicable to all tax residents.
Is business tax levied on, broadly, the revenue profits of a business computed in accordance with accounting principles?
Yes, income tax is mainly based on revenue profits of the business computed in accordance with the accounting principles.
Are common business vehicles such as companies, partnerships and trusts recognised as taxable entities or are they tax transparent?
Yes, companies, partnerships and trusts are recognized as taxable entities. However, trusts incorporated in accordance to the Law No. 189-11 for the Development of the Mortgage Market and Trust Funds in the Dominican Republic are subject to a special tax regime.
Is liability to business taxation based on tax residence or registration? If so, what are the tests?
The obligation to declare and pay income tax in the Dominican Republic is based on the tax residence and as established in question 8.
Are there any favourable taxation regimes for particular areas (e.g. enterprise zones) or sectors (e.g. financial services)?
The Dominican Republic currently has a few tax incentive legislations applicable to different economic sectors, including:
Tourism: Law No. 158-01 on the Promotion of Tourist Development, grants the exemption of 100% of all taxes to individuals or legal persons investing, promoting or undertaking tourism projects in any of the specific areas identified by the law, for a period up to 15 years and several tax credits after obtaining a special resolution from the Council for the Promotion of Tourism (CONFOTUR).
Industrial Sector: Law No. 392-07 on Competitiveness and Industrial Innovation and its amendment by Law 542-14, grants tax reductions with objective of innovation and modernisation of the national productive apparatus.
Renewable Energy: Law No. 57-07 of Renewable Energy grants several tax incentives for the development of renewal energy projects.
Free Zones: Law 8-90 on Export Free Zones establishes tax incentives for free zones installed on Free Zone Parks for the manufacture of objects or services that are going to be exported.
Border Developments: Law No. 28-01 for development of border areas, grants tax exemptions to companies that are installed within the limits of the geographical areas defined as border territories of the Dominican Republic.
Film Industry: The Law No.108-10 on the promotion of the film industry and its amendments, establishes several tax exemptions for the development of the national cinematography, including 100% exemptions of income taxes and tax credits for the acquisition and import or machinery etc.
Treaties to avoid double taxation with Spain and Canada.
Are there any special tax regimes for intellectual property, such as patent box?
No, the Dominican Republic doesn’t have a special tax regime for intellectual property such as patent box.
Is fiscal consolidation permitted? Are groups of companies recognised for tax purposes and, if so, are there any jurisdictional limitations on what can constitute a tax group? Is there a group contribution system or can losses otherwise be relieved across group companies?
In accordance with the Dominican Tax Code when the transfer of interest/shares is part of a reorganisation of entities in the same economic group, the results that may arise as a consequence of the reorganisation will not be taxed.
Dominican Tax Code established that economic groups exists when a person or company, or group of people, whether or not they are domiciled in the Dominican Republic, carry out their activity through companies or companies and the operations of both are related and are controlled or financed by them.
Are there any withholding taxes?
Payment of Dividends – A 10% tax must be withheld on dividends paid to a resident or nonresident. Also, a permanent establishment of a foreign company must withhold 10% on cash dividends paid to its headquarters.
Payment of Interest – A 10% tax must be withheld on interest paid to a resident individual or nonresident entity and/or individual. Also, financial entities shall withhold 1% of the value paid or credited for interest payments of any nature to legal entities.
Payment of Royalties – Royalties paid to a nonresident are subject to a final withholding tax at a rate of 27% (based on the ISR rate).
Payment of Technical service fees – Technical service fees paid to a nonresident are subject to a withholding of 27% (based on the ISR rate), regardless of where the services are provided.
Transfer of Shares – buyer of shares shall withhold 1% of the value of the transfer of shares, as part of the capital gain tax that shall be paid by the seller, unless the seller can proof to the Tax Administration that the sale will not generate a capital gain no later than 30 days prior to withholding filing/payment’s due date, to be exempt from this obligation.
Other payments – A final withholding 27% may be levied on other payments (like management fees) made to nonresidents.
Are there any environmental taxes payable by businesses?
As of right now, taxes in effect that can be considered as environmental are the Excise Tax on the consumption of Hidrocarbons and more recently, the 2012 fiscal reform (Law 253-12) established a tax on the emission of CO2 for motor vehicles, applied to both new and used vehicles at the time of their registration.
Is dividend income received from resident and/or non-resident companies taxable?
Yes, a 10% withholding must be applied to the distribution of cash dividends regardless of whether they are paid in the country or abroad.
What are the advantages and disadvantages offered by your jurisdiction to an international group seeking to relocate activities?
I. With the General Law of Commercial Companies No. 479-08 and its modifications, companies in the country are assured of having a modern, up-to-date corporate regime in line with regulatory trends and international standards.
II. Companies benefit from a Foreign Investment Law and a broad system of incentives, aimed at developing important sectors for the national economy. Law 16-95 on Foreign Investment expressly recognises that foreign investment contributes to the economic growth and development of the country and, for that reason, eliminates all barriers that previously existed and since then, foreign investors have unlimited access to all sectors of the Dominican economy, except those related to national security issues. Foreign investors are granted the same rights as nationals and are held to the same duties.
III. Investment Residency Permit Program, with the prerequisite of a Certificate of Registration for Direct Foreign Investment issued by ProDominicana and a minimum investment amount of USD$200,000.00.
IV. There is preferential trade relations with the United States, the European Union, and the countries of the Caribbean and Central America region, through several free trade agreements, especially the Free Trade Agreement between the Dominican Republic, Central America, and the United States, known as DR-CAFTA (Dominican Republic-Central America Free Trade Agreement), and the Economic Association Agreement with the European Union (AAE). Both treaties stimulate the free flow of trade between their member states, significantly reducing existing tariffs and promoting the opening of new markets and regional integration. On the other hand, the country has begun talks to liberalise trade with Canada, Mexico, Mercosur, and Taiwan.
V. The Dominican Republic has implemented a comprehensive incentive system for investors, as mentioned in question 20.
I. While there have been reforms, the business and regulatory environment can still be challenging to navigate for foreign entities. In some public institutions, bureaucratic processes can sometimes be time-consuming.
II. The legal system can sometimes be perceived as slow, and the judicial processes can be time-consuming.
III. Businesses, especially those that depend largely on imports or exports, may be impacted by fluctuations in the value of the Dominican peso relative to other major currencies.
Estimated word count: 3966
Join our mailing list to receive updates on new Guides: