DOMINICAN REPUBLIC Law and Practice Contributed by: Luis Miguel Pereyra, Pereyra & Asociados
Individual limited liability entities pay similar taxes, except that they do not pay assets tax or capital duty tax.
Particular rules apply to certain other expenses, including but not limited to loss carryovers and inter - est deductions. 2.2 Technology Investments There are no incentives geared specifically towards technological investments; however, there are tax pro - visions and regimes that may incentivise (apply to) such investments, as follows. • Costs of investment in research and experimenta - tion are deducted from gross income when assess - ing taxable income. • The free zone regime (under Law 8-90) provides a custom-designed sterile environment wherein man - ufacturing and services could take place for export purposes. Entities located within free zone parks, and authorised to operate as such, are generally exempted from income tas, VAT ( Impuesto a la Transferencia de Bienes Industrializados y Servicios ITBIS) and import duties related to machinery and the inputs required for its operation, among other exemptions and benefits. • The border integral development zone (Law 12-21) provides incentives to companies located in specially designated areas (Dominican provinces located on the Haiti border). This law provides simi - lar incentives to those of the free zone under Law 8-90; however, they are available only for a limited time and provide 100% exemption from the with - holding taxes applicable to the technology inno - vation services required for projects only during construction and the initiation of operation. There is also 100% exemption from the taxes applicable to the transfer of corporate shares to other com - mercial corporations domiciled within the special Aside from the incentives described in 2.2 Technol- ogy Investments , the Dominican Republic has grant - ed certain incentives to various sectors, ranging from investment credits to tax exemptions. Among the most important tax incentives relate to: • promotion of cinematographic activity; • international financial zones in the Dominican Republic; border development zone. 2.3 Special Incentives
2. Corporate Tax Regime 2.1 Taxable Profits
Corporate tax is levied on the net aggregate of various sources of business income, including capital gains derived from the transfer of capital assets (generally land and shares). Certain forms of investment income derived by resident corporate taxpayers from foreign sources also are subject to Dominican tax, including: • dividends; • interest on loans and bank savings; and • income from banking or financial operations, bonds, shares in capital companies, bills of exchange and other movable capital or securities on the capital markets. To determine the taxable income, the necessary expenses incurred to obtain, maintain and conserve the gross income will be subtracted from the same, as provided by the Tax Code. In the event of a loss, it can be used against the profits generated in the next five years. The following are included in the deductible expenses of income from business activities: • interest; • taxes and fees on insurance premiums; • extraordinary damage; • depreciation; • depletion; • amortisation of intangible assets;. • uncollectible accounts; • donations to institutions of public welfare; • research and experimentation; • losses; and • contributions to pension and retirement plans, among other things. Non-deductible personal expenses include with - drawals or salaries of shareholders charged to profit accounts, losses from illicit operations, income tax, surcharges, fines and interest on any tax debt, and inheritance and gift taxes, among other expenses.
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