DOMINICAN REPUBLIC Law and Practice Contributed by: Sarah de León Perelló, Elizabeth Silfa Micheli and Naomi Rodríguez Manzueta, Headrick Rizik Álvarez & Fernández
• Withholdings on dividends: dividends from Domini - can sources are subject to a single and definitive withholding of 10%. Those dividends from foreign sources are considered financial gains and are taxed at a rate of 27% for companies and 25% for individuals. Other withholding obligations include: • 27% on payments made abroad; with the excep - tion of: (i) royalties and rights paid to non-residents, which are subject to 15% on the gross amount as a final tax; and (ii) software licences, online adver - tising services and data storage rights paid to non- residents, which are subject to 15% on the gross amount as a final tax, unless the payment consti - tutes a genuine transfer of software ownership by the developer or owner of the programme, in which case it is exempt. • 10% on interest paid to non-resident individuals or companies; • withholding on employees’ salaries based on a progressive scale with a cap up to 27% effective 1 January 2027, and other contributions to the National Social Security System and INFOTEP; and • 15% on fees, commissions and other payments for the provision of services in general. Custom duties and tariffs apply to the importation of goods, with the exceptions and provisions established in different international treaties signed by the country. In connection to Pillar Two of the Global Anti-Base Erosion Model Rules (GloBE) published by the Organi - sation for Economic Co-operation and Development (OECD), the Dominican Republic’s income tax rate applicable to MNE (Multinational Enterprises) com - plies with the minimum global tax set forth by the OECD, ie, 15% (the Dominican Republic’s current rate for corporate income tax is 27%). Likewise, the current rate for taxes over the payment of interests, dividends and royalties is 10% (higher than the 9% proposed by the OECD for the same concept). In this context, since the Dominican Republic already com - plies with Pillar II of the GloBE rules, the introduction of domestic top-up tax is not required. Nevertheless, as explained in 5.8 Tariffs , there are certain special
tax regimes that grant an exemption from corporate income tax, such as the free trade zones regime. 5.3 Available Tax Credits/Incentives Tax Incentives The main tax incentive regimes are for: • free trade zones; • comprehensive border development; • tourism development; and • renewable energy. Free Zones Free zones are granted the following tax incentives and exemptions for legal entities classified as free zone companies according to the procedure estab - lished by law: • tax on the incorporation of companies and on capi - tal increases; • income tax; • import duties, tariffs, custom rights and other taxes affecting raw materials, equipment, parts of build - ings, etc, destined for construction, preparation or operation within free zones; • all existing export and re-export taxes, with certain exceptions those regarding import tariffs; • construction taxes, taxes on loan agreements and on registration and transfer of real estate property from the date of formation of the free zone opera - tor; • free zones are exempted from giving their employ - ees a yearly company bonus; however, free zones are still required to pay to their employees a Christ - mas bonus; • consular fees; and • taxes on assets and ITBIS. Comprehensive Border Development Law No 12-21 creates the special zone for compre - hensive border development (SBDZ) and an incen - tive regime, which covers the Dominican Repub - lic provinces of Pedernales, Independencia, Elías Piña, Dajabón, Montecristi, Santiago Rodríguez and Bahoruco, providing the following tax incentives and exemptions for legal entities classified according to the procedure established by law.
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