DOMINICAN REPUBLIC Law and Practice Contributed by: Luis Miguel Pereyra, Pereyra & Asociados
able; thus, such incentives and regimes should be overhauled accordingly. Far from incentivising invest - ment, such policies may adversely affect the interna - tional corporations currently operating (through local
profits might be tax exempt, for a CFC the control - ling entity may nonetheless pay taxes on such profits (albeit not distributed). Nonetheless, as already explained, the recent intro - duction of reporting obligations in the Dominican Republic, including the master report and the country- by-country report, provide the groundwork for iden - tifying MNEs within the scope of the OECD’s GloBE Rules, which foresee the possibility of a minimum global tax. 9.9 Anti-Avoidance Rules There are no double taxation convention-related limi - tations on benefit or anti-avoidance rules that may have an impact on investors. 9.10 Transfer Pricing and IP Taxation As transfer pricing regulations have gradually been introduced, adjusted and implemented since 2012, they are not currently having a major impact on the Dominican Republic’s tax regime, although changes in enforcement efforts (which vary from time to time) create momentary disturbances. However, intellectual property is a source of controversy, as local trans - fer pricing regulations do not foresee a definition of “intangible asset”, although regulations referring to VAT offer some guidance, and it must be concluded that there is a vacuum in intellectual property-related taxation and the associated implementation of BEPS actions. 9.11 Country-by-Country Reporting and Transparency Provisions The Dominican Republic has already taken steps towards transparency and country-by-country report - ing as part of its commitment under the inclusive framework for the implementation of BEPS. Currently, the issue is the way such information shall be utilised. There is concern about the type of information to be provided, whether it should be public, mechanisms to protect it and what impact it may have on MNEs in the country. Although public information may increase transparency through increased scrutiny by the media and civil society, technical information disclosed with - out the appropriate context may damage the position
branches or subsidiaries) in the country. 9.5 The Competitive Tax System
Special tax regimes that have been set up to incentiv - ise investments, such as free zones and the Tourism Development Inventive Law, which provide for general tax exemptions, among other things, are among the most vulnerable as they will require substantial over - haul – and some may have to disappear altogether. This is currently subject to ongoing discussion among policymakers and representatives of the affected sec - tors, and in the short-to-medium term it is expected that measures will be taken to at least adjust such regimes. 9.6 Hybrid Instruments and BEPS Implementation In the Dominican Republic, there are no specific reg - ulations regarding taxation related to hybrid instru - ments, and their impact might not be substantial as the local regulations and tax system do not recognise transparent entities. Thus, the utility of such hybrid instruments in tax avoidance schemes should not be significant. 9.7 Interest Deductibility and Territorial Tax Regime The Dominican Republic has a territorial tax regime. Individuals and corporations are taxed on their income from Dominican sources, and on some income from foreign sources (investments and financial gains). Non-local individuals and corporations are only taxed on income from Dominican sources (via withholdings). Thus, interest deductibility restrictions are mostly tai - lored to the territorial tax regime. 9.8 Controlled Foreign Corporation Reform In principle, CFC rules seem to generate taxable events locally and may prevent, among other things, the accumulation of profits locally payable to foreign shareholders, or deferral of payment for goods and services to a foreign related party, among other things. However, they also affect foreign investment incentive regimes and competitive tax policies; although local
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