Capital Gains Tax in the Dominican Republic

Capital gains tax in the Dominican Republic

  • By:Vianela Morillo
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Let’s talk about Capital Gains Tax in the Dominican Republic, establishing its application and when it needs to be paid. It is always important to be familiar with the taxation system in any given country, both for its residents/citizens, as well as anyone who plans to immigrate to the Dominican Republic.

We have stated previously that the Dominican Republic has a Territorial taxation system (with some rare exceptions), i.e., taxes are only paid based on what you do in the country.

That being said, the concept established in the Internal Revenue Code of the Dominican Republic is as follows:

“It is the tax that levies transfer of goods or rights located, placed or used in the Dominican Republic, provided that their property has been transferred in favor of a third party, related or not, free of charge or priced; even if the transfer of the property has occurred indirectly through the transfer of shares of the company holding said goods or rights, incorporated inside or outside the Dominican Republic.”

Capital Gain or Loss is the result generated by the sale, exchange, or other act of disposition or transfer between living persons, free of charge or for valuable consideration of a capital asset.

Capital Gain Tax rate:

– Foreign Natural Person: 27%

– Foreign legal entity: 27%

– National Physical Person: 25%

– National Legal Entity: 27%

Capital Assets

For capital gains tax purposes, the
term ‘capital asset’ means any good or right owned by
a taxpayer, in connection to their
business or otherwise. The following goods
are excluded from this definition:

– Accounts or notes receivable acquired in the
ordinary course of business for services rendered, or
from the sale of assets likely to be
inventoried or property held for to be sold in
the ordinary course of business.

– Commercial stocks that are likely to be
inventoried and property held primarily with the
purpose of being sold to customers in the ordinary course of
business.

– Depreciable or depletable goods are those goods
employed by the business that suffer loss of value
due to wear, deterioration, or disuse due to such
utilization. Depreciable assets such as land are excluded,
regardless of whether they are used in the course of business or not.

Capital Gains Tax in the Dominican Republic. ¿Which Assets generate it?

  • Land
  • Financial assets (including investments in bonds,
    shares and social quotas).
  • Intangible assets (trademarks, rights, patents, licences, intellectual property, among others).

Reminder

  • Taxes in the Dominican Republic are Territorial, i.e., they are only paid for activities performed in the country, whether the individual is residing or not in the Dominican Republic. The only exception applies when Capital Gain has been generated in a different legislation, even if the individual resides in the country, in which case the tax would not need to be paid.
  • If you have generated this Gain in the Dominican Republic and have Residency status by way of being Retired or living on investment income, you may be eligible for the exemption of 50% of the Capital Gains Tax, as long as the rentier is the majority shareholder of the company that is subject to the payment of this tax and that said company is not dedicated to commercial or industrial activities.

The latter is not automatic, you would need to request this exemption through the General Directorate of Internal Taxes (DGII in Spanish)  and Ministry of Finance – Dominican Republic.

In our law firm Morillo Suriel Attorneys at Law, we have a division specialized in Tax and Dominican Immigration Law. Through this division, we can assist you with any questions or concerns you may have regarding this tax and other obligations established in the Dominican Republic 

We are available

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Posted in: Tax Law, Foreigners in the Dominican Republic

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