DOMINICAN REPUBLIC Law and Practice Contributed by: Luis Miguel Pereyra, Pereyra & Asociados
When the form is manifestly inappropriate with respect to the reality of the taxable event, resulting in a reduc - tion in the obligation, the tax authority may recharac - terise the transaction to make it consistent with reality and impose the appropriate taxes. The application of the criterion of qualification and/or determination of any abuse of form is made by the tax authorities within the framework of its powers of inspection and deter - mination of the tax obligation.
may lay the groundwork for identifying multinational enterprises (MNEs) within the scope of the OECD’s Pillar 2 Rules (Global Anti-Base Erosion (GloBE) Rules. 9.2 Government Policy and Objectives Approach The Dominican Republic is a party to the inclusive framework for the implementation of BEPS (as of 2018). As such, it has taken on a series of minimum standard obligations. These are currently being imple - mented and relate to documentation and information obligations with respect to transfer pricing and the activities of MNEs (either headquartered locally or through related entities). The recently introduced reporting obligations, includ - ing the master report and country-by-country report, serve as the groundwork for identifying MNEs within the scope of the OECD’s GloBE Rules, as noted in 9.1 Adoption of BEPS Recommendations , although Pil - lar 1 and Pillar 2 actions have yet to be implemented (as they require the passing of a law adjusting the Tax Code in the context of the currently unpopular tax overhaul). 9.3 International Tax As indicated in 9.2 Government Policy and Objec- tives Approach , the Dominican Republic committed to the implementation of BEPS in 2018, and although it does not necessarily have a high public profile, the Dominican Republic has taken steps towards imple - mentation at the pace, and in the manner, permitted given the current economic environment. Most of the BEPS actions require the passing of laws and/or a shift in the status quo, where in some cases there has been resistance considering that the Dominican Republic policies implemented in 1996 were geared towards the attraction of foreign investment. Current incentive laws and special tax regimes will need to be adjusted and/or discarded. 9.4 Competitive Tax Policy Objectives As the Dominican Republic has committed to the implementation of the BEPS actions (at least to some degree), it will have to revise its tax incentives and regimes – which in certain cases (and circumstanc - es) provide for 100% general tax exemption, among other benefits. This is apparently no longer sustain -
8. Audit Cycles 8.1 Regular Routine Audit Cycle
There is no routine audit cycle, although for certain sectors in the “major contributors” category of tax - payer, periodical audits might be agreed with the administration or may even be usual. Typically, audits are conducted at random or triggered by consist - ent failure to abide by monthly reporting or payment obligations. The tax authority may undertake direct assessments based solely on information or reports available from the taxpayer. They may also request additional information or adjustments, or even assert breach of tax obligations and impose the applicable penalties. The taxpayer has the opportunity to contest or accept such assessments, which may or may not trigger a formal audit. 9. BEPS 9.1 Adoption of BEPS Recommendations BEPS-recommended changes already implemented mostly relate to transfer pricing (Actions 8–10), albeit that they have not yet been fully implemented. There have been efforts with respect to the taxation of digi - tal services (Action 1), but the most recent overture towards the same was withdrawn for congressional consideration, as the tax overhaul proposed by the government including such provision was rejected by most economic sectors – and by the public. Limits to interest deductions consistent with BEPs Action 4 were also introduced, albeit that they are subject to further adjustments. Reporting obligations consistent with BEPs Action 13 have also been imposed – most notably the ones recently introduced regarding the master report and country-by-country report, which
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