DOMINICAN REPUBLIC Law and Practice Contributed by: Luis Miguel Pereyra, Pereyra & Asociados
additional payments in cash or in kind – although certain deductions apply. The upper limits for cal - culating the contributions are based on multiples of the minimum salary. • Stamp duty: Stamp duty is levied on most written contracts; the registration and renewal of trade - marks; documents evidencing loans, debts, shares and guarantees; and all documents prepared or registered by notaries and registrars. The rates vary depending on the taxable event. Transfer tax – The transfer of real property located in the Dominican Republic is subject to a transfer tax of 3% of the price of the property or the fiscal value of the same (whichever is higher). 2.9 Other Notable Taxes VAT (ITBIS) This is applicable to the transfer of industrialised goods and services. Exceptions and exemptions apply. The regular rate is 18%. On imported goods, VAT is liquidated alongside customs duties at cus - toms. VAT is charged for the transfer of industrialised goods or services rendered. It has to be declared and paid to the tax authority within the first 20 days of the month following the one in which the obligation to pay VAT arose. Selective Excise Tax (Impuesto Selectivo al Consumo – ISC) ISC is charged on the import or first sale of certain products. It can be set as a fixed amount or applied ad valorem. 3. Corporations and Non-Corporate Businesses 3.1 Form of Closely Held Local Businesses Closely held local businesses usually operate in a cor - porate form – mainly as limited liability entities or indi - vidual limited liability entities. However, more sophisti - cated structures are sometimes used, including trusts. 3.2 Individual and Corporate Rates Individual rates are lower than corporate rates, and they are established by income bracket – with 25%
being the higher rate (the corporate income tax rate is 27%). There are also rules and restrictions, such as deduc - tions to gross income to determine the individual tax - able income. Those whose sole source of income is payments from their employer (salary, commissions, bonus, etc) do not file tax returns, and the applica - ble taxes are deducted by the employer (and further conveyed to the tax authority) from the amounts paid to the employee based on the latter’s tax bracket (as determined by the annual income). The applicable rules are provided for in the regulations. 3.3 Restrictions on Retention of Earnings by Closely Held Corporations There are no rules applicable to accumulated earn - ings, except that the entity should document invest - ments and provide concrete evidence thereof. 3.4 Taxation of Individuals on Shares in Closely Held Corporations There is no difference between taxation on dividend distributions and capital gains for legal entities. 3.5 Taxation of Individuals on Shares in Public Corporations The general rule is that income and transactions car - ried out in the securities market are subject to the ordinary taxation regime established in the Tax Code, excepting exemptions explicitly established in law (which do not refer to dividends from or gains on the sale of publicly traded corporations). 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes The applicable withholding taxes are as follows. • Dividends: The withholding tax on dividends paid to a resident or non-resident is 10%. The same withholding tax applies to dividends and benefit remittances for free trade zone entities. • Interest: The withholding tax on interest paid to a resident individual or a non-resident (individual or entity) is 10%. No tax is withheld on interest paid to a resident legal entity.
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