Legislation, Administration And Collection

Author:Guzman Ariza Attorneys At Law
Profession:Guzman Ariza Attorneys At Law
 
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Taxation in the Dominican Republic is governed by Law 11-92, commonly known as the Tax Code, and its regulations. Taxes are administered and collected by the Dominican Internal Revenue Agency, known by its Spanish acronym of DGII.

Custom duties, established under a separate statute, are administered and collected by the Customs Agency.

Territoriality

Dominican tax law is primarily territorial. In principle, the Dominican Republic only collects taxes on income from Dominican sources. Thus, on the one hand, all income derived from work or business activities in the Dominican Republic is taxable, no matter if the person is Dominican, a resident or nonresident foreigner, a Dominican business entity or a foreign company with or without a branch office in the country. On the other hand, income derived from work done outside of the Dominican Republic is not taxable, even if received by Dominican nationals or companies, foreign individuals residing in the Dominican Republic or foreign companies with branches in the country.

The only exception to this principle concerns income received by Dominicans or residents in the Dominican Republic from financial sources abroad, which is subject to local taxation. The most common foreign financial sources are stocks and bonds, mutual funds, certificates of deposits, and the like. For Dominicans living abroad who return home and foreigners who become Dominican residents, the obligation to pay taxes on foreign-sourced financial income only starts three  years after the date of return or of obtaining residency.  Pensions and social security benefits are expressly exempted, as well as income received by investors who became residents under the special provisions of Law 171-07.

For tax purposes, any person residing in the Dominican Republic for more than 182 days in a continuous 12-month period is considered a resident.

It is mandatory for all taxpayers to register with the Internal Revenue Agency and obtain a tax number.

Main Taxes

The main taxes affecting businesses in the Dominican Republic are:

Income tax Capital gains tax Goods and services tax Excise tax Real estate tax Tax on company assets Income Tax

Both companies and individuals must pay taxes on their net taxable income.

Corporate Tax Rate

The rate for all business entities is a flat 27%. Unlike in the United States and other countries, in the Dominican Republic the tax treatment for corporations, LLC's and partnerships is exactly the same.

Determination of Corporate Net Taxable Income

Net taxable income is determined after deducting from gross income the deductions...

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