Taxation Overview in the Dominican Republic
Customs Duties
Tax Jurisdiction
The tax jurisdiction of the Dominican Republic is predominantly territorial. Taxes are generally levied on income generated within the country. This encompasses income from labor or business conducted within the Dominican Republic, regardless of the taxpayer’s nationality, residency status, or whether it’s a domestic or foreign entity operating locally. Conversely, income earned outside the Dominican Republic is not subject to taxation, with the exception of foreign financial income received by Dominican citizens or residents, which is taxable locally.
Residency and Tax Obligations
Individuals spending over 182 days within a 12-month period in the Dominican Republic are deemed tax residents. All tax residents must register with the DGII and acquire a tax identification number.
Principal Taxes
Businesses in the Dominican Republic are subject to several key taxes, including:
- Income tax
- Capital gains tax
- Value-added tax (goods and services tax)
- Excise tax
- Property tax
- Corporate assets tax
Income Tax Specifics
Both individuals and corporate entities are taxed on their net income.
Corporate Tax Rate
The corporate tax rate is uniformly set at 27% for all business structures.
Calculating Corporate Taxable Income
Corporate taxable income is calculated by subtracting allowable deductions from gross income. These deductions can include business-related expenses, debt interest, depreciation, amortization of intangible assets, charitable contributions (capped at 5% of net income), and R&D expenses unrelated to mineral extraction.
Carryover of Net Operating Losses
Net operating losses can be carried forward for up to five years but cannot be carried back.
Filing Corporate Tax Returns
All corporations must file annual tax returns with the DGII, regardless of income or activity levels. The deadline for filing depends on the company’s fiscal year structure.
Prepayment of Corporate Income Tax
Corporations make monthly advance payments on their income tax, equating to 1/12th of the previous year’s tax amount. These payments are credited against the current year’s tax liability.