11
Nov

What are tax crimes? What are their consequences?

In this article we will learn a little more about tax crimes, common types of tax crimes, the penalties they can cause and when you should seek advice from a tax lawyer.

With the enactment and implementation of Law 155-17, Against Money Laundering and Financing of Terrorism in the Dominican Republic, Fiscal Crimes have gained greater relevance, given that this type of tax offenseis a significant infringement in this new law.

In order to mention the different Fiscal and Tax Offenses, that will become Crimes and trigger sanctions, we will speak about the scope of the matter.

As the word Offense implies in this context, it is nothing more than to “stop doing, avoiding or disregarding an obligation”.

Regarding the taxation issue in the Dominican Republic, an offense of this nature is concerning to any citizen due to their repercussions, which are:

1. The most significant repercussion is the deprivation of liberty. Any sanction that causes deprivation of liberty must be well known, to ensure that citizens are aware of the consequences of a given action.

2. Payments of fines. This will be determined by:

A) The offense itself; and

B) The amount involved.

3. Exclusion; both at a professional level and from being part of another company. This is enforced by the Tax Administration office (DGII) by means of not granting Tax Deductible Receipt Numbers, along with other actions.

4. Involuntary closure of business entities.

Our purpose is not to make people alarmed, but to make them aware of the issue and its consequences.

In the event of a tax infraction, there are measures that can be taken with the assistance of a Tax Attorney or Tax consultant who is familiar with tax crimes.

How does the process to certify the offense and apply the fine start?

• The DGII office confirms the offense and puts forward a verifying act, notifying the taxpayer and establishing the following:

A) The offense committed.

B) Applicable regulations.

Within the following five (5) days, if the taxpayer does not agree with the offense and the penalty established, they would need to write a letter disclosing their defense and expressing why it differs from what was stated by the administration.

• The DGII office verifies the allegations, and takes action based on their findings. Said actions are:

A) Issue a discharge act.

B) Apply sanctions.

• In the case that sanctions are applied, the taxpayer has two options:

A) To accept and comply with the sanctions.

B) Start a Contentious Tax Appeal process through the Superior Administrative Court against the resolution issued by the Administration, which is something that a lawyer specializing in Taxes and Tax Law in the Dominican Republic can assist you with.

In the Dominican Republic, there is a lack of information and substantial desire to pay taxes, for various reasons. Some of those are:

• Unawareness.
• Their returns to the people.
• How costly they are.
• Other factors.

The fulfillment of our obligations would allow us to have a better country, which is why we encourage compliance with with these obligations.

Tax offenses have their concept as well as their sanctions, which are all listed in the tax code. Rules and resolutions on the subject can also be found in that document.

As far as we are concerned, we will be listing the most relevant and prevalent offenses, which are as follows:

1. Tax Evasion.

This offense occurs when the taxpayer makes partial or total omission of the tax, as well as when a false or inaccurate statement is presented, which in turn causes damage to the administration, a decrease in the taxes that need to be paid and the so-called exemptions.

The most significant aspect is that it is still considered an offense, even if said wrongdoing was committed involuntarily or not, which is why monitoring our presentations and ensuring that they are carried out by a competent staff is very important.

The sanction

Pecuniary sanctions of up to twice the amount of the unpaid tax.

2. Failure to comply with the formal duties of taxpayers.

It is considered a breach of formal duties. Others examples are:

• Non-issuance of invoices with your authorized Tax Voucher Number (known as NCF).
• Report false information when registering as a taxpayer.
• Not keeping books or records as established by law.
• Not submitting the statements required for the determination of the tax.
• Not attaching the corresponding documents and reports.
• Refusing to provide information requested by the Tax Administration.
• Not submitting Form 606 along with other formats required by law.

The sanction

• Fine of five (5) to thirty (30) minimum wages.
• Collateral sanctions such as: the suspension of concessions, privileges, prerogatives and exercise of activities, depending on the severity of the case.
• In the event of noncompliance with the duty of remitting information to the Tax Administration, a penalty of zero point twenty-five percent (0.25%) of the income reported in the fiscal period may also be applied.

3. Tax fraud

The tax payer who perpetrates this crime is a person who:

1. Simulates.
2. Hides.
3. And performs any other form of deception, in order for the Tax Administration to determination taxes inaccurately. This crime may have the purpose of achieving or facilitating their total or partial evasion.

The sanction

• A fine of two (2) to ten (10) times the amount of the defrauded tax, without prejudice to the custodial penalties that may apply.
• Prison from six days to two years.
• Confiscation of the material assets that are the object of the infraction or were used to commit it.
• Involuntary closure of establishment.
• Suspension and dismissal from public office.
• Disqualification to exercise trades and professions.
• Losses of concessions, privileges, franchises and incentives.
• Cancellation of licenses, permits and registration in public records.
• When the amount of the fraud cannot be determined, a fine of five (5) to thirty (30) minimum wages will be applied.

This is one of the most sensitive infractions. Its sanctions include, deprivation of liberty and many other things of relevance, which is why caution needs to be exercised to prevent infractions of this nature.

4. Fraudulent development and trade of products subject to taxes.

This crime is committed when the following events occur:

• Manufacture taxable products without obtaining the permits required to do so.
• Manufacture products with the required permits, but with equipment that has not been reported to the Tax Administration or whose modification has been made without their authorization.
• Manufacture products with raw materials other than those authorized.
• To manufacture, commercialize, put in circulation or transport products or merchandise illicitly in the country that have not paid the corresponding taxes.
• Modifying, destroying or adulterating products, or modifying the characteristics of goods or taxed effects, as well as their concealment, improper withdrawal, change of destination or false indication of their origin.
• Destroy, break or open a lock or seal placed in a warehouse, alembic or in any way to reach the content without authorization.

The sanction

• Fine ranging from twenty (20) to two hundred (200) minimum wages.
• Prison from six (6) days to two (2) years, or both penalties at the same time.
• Confiscation of the material assets which are the subject of the infraction in question or that were used to commit it.
• Closure of the premises or establishment for a period not exceeding two (2) months.
• Cancellation of licenses, permits and registration in public records.

5. Manufacture and falsification of species or tax fiscal values.

This infraction can be common and the misconception is that it is not considered a crime. However, it is one of the most delicate infractions contemplated in the legislation. This crime is committed by individuals who while trying to partially or entirely avoid paying taxes, or wanting to take advantage any other way, perform the following actions:

• Forge, misuse:
•  Tax receipts.
• Stamps.
• Seals.
• Bells.
• Stamped paper.
• Registration tags
• Decals or their production without the corresponding legal authorization.

Print, record or manufacture without legal authorization:

• Molds,
• Stencils.
• Plates.
• Cards.
• Among others.

Alter or modify its value or characteristics, legend or class:

• Stamps.
• Stamps.
• Registration tags.
• Decals or other forms valued or listed.

The sanction

• Fine of thirty (30) up to one hundred (100) minimum wages.
• Prison from six days to two years.
• Confiscation of the material assets that are the object of the infraction or were used to commit it.
• Involuntary closure of establishment.
• Suspension and dismissal from public office.
• Disqualification to exercise trades and professions.
• Losses of concessions, privileges, franchises and incentives.
• Cancellation of licenses, permits and registration in public records.

Our Morillo Suriel Attorneys at Law firm has a division specialized in Fiscal and Tax Law. This division can assist you with any concerns you might have in the matter.