DOMINICAN REPUBLIC Law and Practice Contributed by: Sarah de León Perelló, Elizabeth Silfa Micheli and Naomi Rodríguez Manzueta, Headrick Rizik Álvarez & Fernández
of its employee payroll and the employee must pay 0.5% deductible from bonuses. 5.2 Taxes Applicable to Businesses Dominican tax laws are territorial. All natural and legal persons residing or domiciled in the Dominican Republic will pay income tax on rev - enue of Dominican source and on revenue of foreign source originating from financial investments, gains and technical assistance services. For these purpos - es, technical assistance services refer to the provision of independent management, technical, and consult - ing services involving the furnishing of non-patentable know-how. Companies incorporated in the Dominican Republic are considered resident for tax purposes as well as foreign entities’ branches registered locally and permanent establishments. If the individual or legal entity is not considered resident for tax purposes, then it would pay tax on each revenue of Dominican source and would be taxed on its gross income. A “permanent establishment” is defined as a fixed place of business in which a natural person, legal entity or foreign entity carries out all or part of its activities, such as: headquarters, offices, branches, commercial agencies, factories, workshops, mines, oil or gas wells, quarries or any other place of extrac - tion of natural resources, assembly projects, includ - ing supervision activities thereof. It also includes con - struction or supervision activities derived from the sale of machinery or equipment when their cost exceeds 10% of the sale price of said goods, business consult - ing services, provided they exceed six months within a fiscal year, and representatives or agents, when the representatives or agents of a legal entity would gen - erate a risk of a taxable presence for such legal entity when they carry out all or almost all of their activities in the Dominican Republic on behalf of the legal entity. The main applicable taxes to companies doing busi - ness, among other, are set out below. • Income tax: any earning or benefit obtained from a good or activity and all the benefits, prof - its received or accrued, and capital gains made by the taxpayer, whatever their nature, origin or denomination, shall be deemed as “income”. The
applicable annual income tax on the net income of legal entities, resident or with a registered perma - nent establishment in the Dominican Republic is 27%. Pursuant to Law No 30-26, on a transitional basis, taxpayers whose reported income equals or exceeds DOP1 billion shall be subject to an income tax rate of 30% for fiscal years 2026, 2027, and 2028. Beginning with fiscal year 2029, the rate will revert to 27%. • VAT: the transfer of industrial goods and services (ITBIS, which is the local VAT equivalent) tax rate applicable to the transfer of products, the import of industrialised goods and the provision of services to the local market is 18%. • Tax on assets: 1% tax on the value of its assets (not adjusted for inflation, and applying the deduc - tion for depreciation, amortisation and reserves for uncollectable accounts). Pursuant to Law No 30-26, companies operating in the agricultural sec - tor are fully exempt from the assets tax. • Capital gains tax: this tax must be paid by any individual or legal entity that transfers or disposes of capital assets subject to this tax. To determine the capital gain, the fiscal cost of the respective good or capital asset will be deducted from the sale price or disposal value. The rate is 27% for companies. Pursuant to Law No 30-26, capital gains derived from the transfer of real estate by individuals are subject to a flat 10% tax. Exemp - tions apply where: (i) the transferred property is the seller’s primary residence, and the full proceeds are reinvested in a new primary residence within six months (with a proportional exemption if only a portion of the proceeds is reinvested); or (ii) the seller is aged 65 or older, regardless of reinvest - ment. Law No 30-26 expressly incorporates digital assets and crypto-assets into the Tax Code as capital assets. • Real estate transfer tax: 3% tax on the greater of the acquired real estate property’s total value or its fiscal value, applicable to acts of real estate property transfer (purchase and sale agreements, exchanges, deeds in lieu, adjudications, contribu - tions to trusts, etc). • Transfer tax (motor vehicles): 2% tax on the greater of the acquired motor vehicle’s total value or its fiscal value.
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