Legislation, Administration and Collection

Taxation in the Dominican Republic is governed by Law 11-92, commonly referred to as the Tax Code, and its corresponding regulations. The administration and collection of taxes are the responsibility of the Dominican Internal Revenue Agency (Dirección General de Impuestos Internos), known by its Spanish acronym, DGII.

Customs duties, established under separate legislation, are administered and collected by the Customs Agency (Dirección General de Aduanas).

Territoriality

Dominican tax law is primarily territorial, meaning taxes are generally collected only on income derived from Dominican sources. Consequently, all income from work or business activities conducted within the Dominican Republic is taxable, regardless of whether the individual or entity is Dominican, a resident or nonresident foreigner, or a foreign company operating with or without a local branch. Conversely, income generated from work performed outside the Dominican Republic is not subject to local taxation, even if received by Dominican nationals, resident foreigners, or foreign companies with Dominican branches.

The only exception to this territorial principle pertains to financial income earned abroad by Dominicans or residents of the Dominican Republic. Such income is taxable locally. Typical sources of foreign financial income include stocks, bonds, mutual funds, and certificates of deposit. Dominicans who return after residing abroad and foreigners who become Dominican residents are exempt from paying taxes on their foreign-sourced financial income for the first three years following their return or establishment of residency. Additionally, pensions, social security benefits, and income received by investors who obtained residency under the provisions of Law 171-07 are expressly exempted.

For tax purposes, individuals residing in the Dominican Republic for more than 182
days within any continuous 12-month period are considered residents.

All taxpayers are required to register with the Internal Revenue Agency and obtain a taxpayer identification number.

Main Taxes

The principal taxes affecting businesses in the Dominican Republic include:

• Income tax
• Capital gains tax
• Goods and services tax (ITBIS)
• 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

All business entities are subject to a flat tax rate of 27%. Unlike in the United States and other countries, the Dominican Republic applies identical tax treatment to corporations, LLCs, and partnerships.

Determination of Corporate Net Taxable Income

Net taxable income is calculated by subtracting legally allowed deductions from gross income. Permitted deductions include expenses directly related to business operations, interest payments on debt, depreciation, amortization of intangible assets, charitable donations (up to 5% of net taxable income for the fiscal period), and research and development expenses unrelated to mineral extraction. Only expenses and losses incurred to generate local taxable income can be deducted. Net operating losses from any fiscal year may be carried forward for up to five years but cannot be carried back.

Corporate Income Tax Returns

All companies, including those without income or business activity, must file annual income tax returns with the DGII.

For companies operating on a calendar year, returns must be filed by April 30. Companies with a non-calendar fiscal year must file returns within 120 days of their fiscal year-end. Returns must be accompanied by financial statements for the corresponding fiscal year.

Payment in Advance of Corporate Income Tax

Corporate income tax is paid monthly in advanced installments of 1/12th of the total amount paid for the previous fiscal year. These advance payments are later compensated against the taxes due for the current fiscal year.

Income Tax Rates for Individuals

Natural persons who receive income from a Dominican source or from financial investments will pay taxes as follows:

Taxable Income (in DOP)                                      Tax (in DOP)
0 to 416,220.00                                                                          0
416,220.01 to 624,329.00                            15% of taxable income over 416,220.01
624,329.01 to 867,123.00                            31,216.00 plus 20% of taxable income over 624,329.01.
More than 867,123.01                                  79,776.00 plus 25% of taxable income over 867,123.01.

Taxable income brackets are adjusted annually for inflation.

Only educational expenses can be deducted for income tax purposes. Unlike in the United States, no deductions are allowed for dependents, mortgage interest or medical expenses. Married couples must file separate returns.

Individuals who receive an annual income of more than 416,220.00 DOP from non-wages sources must file a tax declaration every year, on or before March 31.

Capital Gains Tax

The Dominican Tax Code defines a capital gain as the difference between the sale price of a capital asset and its acquisition price or production cost, adjusted for inflation. For assets subject to depreciation, inflation adjustments are applied to the residual value. This adjustment prevents taxpayers from being unfairly taxed on price increases caused solely by inflation —a feature not typically available in the United States and many other countries. Unlike other jurisdictions, there are no exemptions from the payment of capital gains taxes, even if the proceeds of a sale are used for long-term investments.

Capital gains tax rates are identical to regular income tax rates: 27% for companies and a progressive scale ranging from 0% to 25% for individuals.

Capital gains calculations must be made exclusively in Dominican pesos.

Goods and Services Tax (ITBIS)

The Goods and Services Tax (GST), known locally by its Spanish acronym ITBIS, is a value-added tax of 18% applied to the sale and importation of most goods and services. For imports, the GST is calculated based on the CIF (cost, insurance, and freight) value plus any applicable customs duties. A reduced GST rate of 16% applies to specific food products.

The 18% GST must be explicitly added to each invoice issued for goods and services. Individuals or business entities that collect GST are required to remit it to the DGII within the first 20 days of the subsequent month. Noncompliance results in a 10% surcharge for the first month overdue, an additional 4% for each following month, and a monthly penalty of 1.1% for each month or fraction thereof.

Taxpayers may deduct from the total GST collected any GST amounts paid to suppliers, vendors, customs, and similar entities.

Certain goods and services are exempt from GST, including basic foodstuffs, medicines, fuels, fertilizers, books, magazines, educational materials, financial services, transportation, residential rentals, utilities, educational and cultural services, and goods intended for export.

Excise Tax

Excise taxes apply to the purchase or importation of certain goods and services, including motor vehicles, firearms, tobacco products, alcoholic beverages, jewelry, electronics, telecommunication services, insurance, and payments made by check. Rates vary depending on the item or service. For example, telecommunication services are taxed at 10%, insurance at 16%, and payments by check or wire transfers at 0.15%.

Real Estate Tax (IPI)

An annual real estate tax of 1% is imposed on properties owned by individuals and trusts, calculated based on the total value of all properties owned by each individual, as appraised by government authorities. The valuation excludes furniture and equipment.

For individuals, the tax applies only to values exceeding 10,190,833.00 DOP (approximately $160,000.00). For trusts, the tax is calculated based on the full appraised value, without any exemption.

Real estate tax payments are due annually by March 11 or can be divided into two equal installments, with the first due by March 11 and the second by September 11.

The exemption threshold is adjusted annually for inflation.

The following types of properties are exempt from real estate tax:

• Agricultural properties.
• Primary residences owned by individuals aged 65 or older who have no other property.
• Properties owned by companies, as these entities pay a separate tax on company
  assets.

Tax on Company Assets

Companies pay an annual tax equal to 1% of their total assets. This tax is credited against the company’s income tax obligations, provided such obligations exist due to profits earned.

Tax Incentives

Various tax incentives are available for specific industries and investment scenarios, as outlined previously in the section “Investing in the Dominican Republic.” Please refer to that section for detailed information.

Withholdings at the Source

Companies must apply withholdings in the following scenarios:

• Employee salaries. Employers must withhold income taxes from employees’ salaries and remit them to the DGII within the first ten days of the following month.
• Payments abroad. Payments made to non-resident individuals or entities are generally subject to a 27% withholding tax, considered final and without deductions. Exceptions include payments to residents of Canada (18%) and interest payments to financial institutions or payments by Dominican branches to their foreign headquarters (10%).
• Dividends. Companies must withhold 10% on dividends distributed to shareholders.
• Rentals. Payments made to individuals (not companies) for rentals are subject to a 10% withholding tax.
• Fees for services and commissions. Payments to individuals (not companies) for services or commissions incur a 10% withholding tax.

Anti Avoidance Rule

Based on the substance-over-form principle, the Dominican Tax Code contains a general anti-avoidance provision allowing the DGII to disregard certain legal entities or transactions intended primarily to secure unjustified tax advantages.

Transfer Pricing Rules

The Dominican Republic has implemented transfer pricing regulations aligned with OECD guidelines. These rules apply to transactions involving resident companies or individuals that engage commercially or financially with related entities or with parties domiciled in jurisdictions featuring preferential (low or zero) tax regimes or blacklisted territories, irrespective of their relationship status. Companies must file an annual transfer pricing information return with the DGII.

Double Taxation Treaties

The Dominican Republic has double taxation treaties in force with Canada (since 1977, covering only income taxes) and Spain (since March 2014, covering income and capital gains taxes).

Foreign Accounts Tax Compliance Act (FATCA)

The Dominican Republic’s DGII and the U.S. Internal Revenue Service (IRS) have established a bilateral financial and tax information exchange agreement under the Foreign Account Tax Compliance Act (FATCA) of 2010. FATCA mandates financial institutions in participating countries to provide information regarding the accounts of U.S. citizens, residents, corporations, estates, and trusts to ensure compliance with U.S. tax laws.

Under the intergovernmental agreement (IGA), Dominican financial institutions report FATCA-related data to the DGII, which subsequently transfers this information to the IRS. This reciprocal agreement also requires the United States to provide relevant financial information about Dominican residents to the DGII.