DOMINICAN REPUBLIC Law and Practice Contributed by: Sarah de León Perelló, Elizabeth Silfa Micheli and Naomi Rodríguez Manzueta, Headrick Rizik Álvarez & Fernández
Renewable Energy All projects of public, private or mixed facilities that generate energy from the following renewable sources may benefit from the incentives provided in Law No 57-07 on Incentives to the Development of Renewable Energy Sources and its Special Regimes, as amend - ed, upon prior approval, according to the procedure established by law: • wind farms with an initial installed capacity that does not exceed 50 MW; • hydroelectric facilities of which hydroelectric capacity does not exceed 5 MW; • electro-solar (photovoltaic) installations of any type and of any power level; • solar thermal installations (concentrated solar energy) of up to 120 MW of power per plant; and • facilities that produce energy from biomass up to a generated power capacity of 150 MW. The main applicable incentives for the renewable energy regime are: • an exemption from import taxes and VAT; and • a ten-year income tax exemption; and • a reduction of taxes on external financing: a 5% reduction of the tax for payment of interest from external financing, only in relation to interest pay - ments to financial institutions. 5.4 Tax Consolidation Tax consolidation is available and can be requested by the interested party or declared ex-officio by the Tax Administration to prevent tax evasion or to clearly reflect the income of any of the organisations or com - panies of an economic group. 5.5 Thin Capitalisation Rules and Other Limitations The Dominican Republic has thin capitalisation rules. The maximum debt-to-equity ratio for the purposes of deduction of interest is 3:1. Per the Dominican Tax Code, the amount for interest deduction may not exceed the value resulting from multiplying the total amount of interest accrued in the tax period (1) by three times the relationship between the average annual equity balance (C) and the annual average bal -
• Selective tax on consumption, applicable to tel - ecommunications and insurance services for the facilities of the project located in the SBDZ. • Tariffs and ITBIS on machinery and equipment imported or acquired in the local market, as appli - cable, required for the installation and start-up of the company. • ITBIS on the acquisition and import of inputs and raw materials used in the production of goods exempt from ITBIS in accordance with current tax legislation. • 50% of ITBIS on the acquisition and import of inputs and raw materials used in the production of goods which are not exempt from ITBIS in accord - ance with the current tax legislation. • Tariff on the import of inputs and raw materials used for the production of goods, only when they are not produced in the Dominican Republic. • Real estate transfer tax and other taxes related to real estate operations on the land and infrastruc - ture where the classified project will be developed. • Taxes, fees and registration rights related to the capital gain and transfer of shares in companies with registered offices within the SBDZ. • Exemption from the obligation to withhold and pay to the Tax Department payments abroad for technological innovation services required by the classified project exclusively during construction and start-up. Tourism Development Under Law No 158-01 for the Promotion of Tourism Development, companies domiciled in the Dominican Republic that qualify to benefit from the incentives of such law are exempt from paying: • income tax, as established under Law No 158-01; • national and municipal taxes charged for using and issuing construction permits, including the acts of land purchase, provided they are used as author - ised by Law No 158-01; and • import taxes and other taxes, such as rates, rights, surcharges, including ITBIS that are applicable to the equipment, materials and furniture that are nec - essary for the first equipment and commissioning and the tourist facility in question.
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