11
Nov

Taxes are mandatory contributions that individuals and companies in the Dominican Republic must pay to government entities, such as the Tax Administration (DGII) office. Through them, the State obtains sufficient resources to carry out administration, provision of public services and perform necessary infrastructure, etc.

In its portal, the DGII office defines the term taxes as follows: “Taxes are unilateral obligations established by a law, whose compliance does not result in a direct remuneration in favor of the taxpayer by the State, but through actions thereof, provides general benefits one way or another. ”

https://dgii.gov.do/informacionTributaria/principalesImpuestos/Paginas/default.aspx

Taxes are the single most important contributions, since they generate the majority of public revenue.

The main taxes in the Dominican Republic and the ones paid through the DGII office, are the following:

• Tax on the Transfer of Industrialized Goods and Services (also known as ITBIS)
• Income Tax
• Sale selective tax
• Inheritance and donation Tax
• Real Estate Tax
• Motor Vehicle Taxes

Tax on the Transfer of Industrialized Goods and Services (also known as ITBIS)

The Tax on the Transfer of Industrialized Goods and Services, is the tax pertaining to all transfers and imports of industrialized goods, as well as provision of services.

The Tax Code (Law 11-92) is what determines the ITBIS amount and Law 253-12 (Law for the Strengthening of the State’s Collection Capacity for Fiscal Sustainability and Sustainable Development) establishes that this tax will be paid at a rate of 16% of the Tax on the Transfer of Industrialized Goods and Services (ITBIS) for goods derived from dairy, edible animal or vegetable fats, sugars derivatives, cocoa and chocolate as cited in the chart of paragraph II of said article. 23.

All individuals (liberal professionals, sole proprietors) and national or international legal entities (LLC, PLC and private nonprofits), who make transfers, imports or provision of any type of services pertaining to ITBIS are required to report and pay this tax.

INCOME TAX

Income tax taxes the income and profits of individuals and businesses.

Every individual or company residing in the Dominican Republic and the undivided inheritance of individuals domiciled in the country, have the obligation to pay the income tax originated in the country or from sources outside the Dominican Republic by investments and financial gains.

Income from the state, the countries’ capital, municipalities, municipal districts, chambers of commerce and production, religious institutions, civil entities of social assistance along with centers for charity, arts, politics, social, union, science and sports associations are exempt from the payment of Income Tax, as long as these associations do not pursue profit.

EXCISE TAX

As the name implies, it is a tax that applies to transfers of only some goods and services. Some examples are:

• Alcohol.
• Tobacco.
• Telecommunication services.
• Insurance.
• Wire transfers.

TAX SUCCESSIONS AND DONATIONS

Inheritance and donation tax applies to the transfer of inheritance assets due to death (inheritance or legacy) and donations.

When it comes to the matter of inheritance, this tax corresponds to a 3% of the entire inheritance received from movable and immovable property. This tax has to be paid by the heirs, successors and beneficiaries of a will.

On the other hand, when it comes to donations, this tax corresponds to a rate of 27%, as established by Law 253-12, and the beneficiaries would need to pay the same, based on the value of the donated goods.

REAL ESTATE HERITAGE TAX

Real estate heritage tax is an annual contribution based on the total amount of Trusts assets. In the case of Individuals, it taxes the total assets exceeding seven million four hundred thirty-eight thousand one hundred ninety-seven (RD $ 7,438,197.00), in relation to the Properties destined for housing or commercial, professional, industrial and urban plot activities.

Some individuals are exempt from contributing towards this tax, some of these individuals are:

• The dwellings of owners who are sixty-five (65) years of age or older, provided that said property is the sole property of the owner.
• Properties located in rural areas, dedicated to agricultural work.
• Those Under Law 158-01 on Tourism Development, pertaining to the first acquirers (Individuals Entities).
• Low Cost Housing Trust and Public Offering Trust.

The tax payable determined by the Real state heritage tax IS ONE percent (1%) over the surplus of the total sum of real estate, provided that it exceeds seven million four hundred thirty-eight thousand one hundred ninety-seven (7,438,197.00). For Trusts, 1% is applied on the value of the properties.

MOTOR VEHICLE TAXES

These taxes are generated by the registration, allocation of license plate, circulation, modifications in the registration, etc.,

The main services offered by the DGII office for motor vehicles are:

• Registration of the First Plate
• Transfers
• Data correction
• Lost Registration Duplicate
• Opposition
• Lifting of Opposition
• Cessation of Exemption by Order
• Cessation of Exemption by Law 168-67
• Cessation of Non-Transferability
• Loss of Plate
• Right to Circulation (Registration Tag)
• Loss of Registration Tag
• Plate Change from Private to Public
• Plate Change from Public to Private
• Plate Change from Official to Private
• Plate Change from Private to Taxi

In our Morillo Suriel – Attorneys at Law law firm, we have a division specialized in Tax Law, with which we can assist you with any questions or concerns you may have regarding taxes in the Dominican Republic.