DOMINICAN REPUBLIC Law and Practice Contributed by: Sarah de León Perelló, Elizabeth Silfa Micheli and Naomi Rodríguez Manzueta, Headrick Rizik Álvarez & Fernández
ex-officio by the Tax Administration to prevent tax evasion or to clearly reflect the income of any of the organisations or companies of an eco - nomic 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 balance of all debts (D) of the taxpayer that accrue interest: 1×3 (C/D). 5.6 Transfer Pricing Transfer pricing rules are applicable, whereby transactions between related parties are regulat - ed. Transactions between a resident and a relat - ed natural person, legal person or entity must be carried out in accordance with the prices that would have been agreed between independent parties in comparable transactions and under the same or similar circumstances. Such rule also applies when a resident conducts commercial or financial transaction with: • a related resident; or • physical or legal persons or entities domi - ciled, incorporated or located in territories with preferential tax regimes, low or no taxa - tion, or tax havens, whether the latter are related or not. When the prices agreed for commercial or finan - cial transactions between companies in scope of this provision do not adjust to the values of
similar transactions between independent com - panies, the Dominican Tax Administration may challenge them and make the corresponding adjustments. Taxpayers must file a transfer pricing information return (DIOR) with respect to transactions with its related parties, which must be filed annually within 180 days after the fiscal closing date. When operations made with related parties exceed DOP12,193,981.70 in the fiscal year, the taxpayer must have prepared a transfer pricing study or report on the process of the assess - ment of prices agreed between the related par - ties at the time of filing the DIOR. 5.7 Anti-Evasion Rules Tax evasion is incurred by those who, through actions or omissions that do not constitute any of the infractions provided for in the Tax Code, produce or could produce an illegitimate decrease in tax revenue, the improper granting of exemptions or damage to the creditor of the tax obligation. Tax evasion is considered an infraction under the Dominican Tax Code and is sanctioned with a monetary penalty of up to two times the amount of the omitted tax, without detriment to the pos - sibility of the Tax Administration ordering the closing of the establishment of the offender, if
applicable. 5.8 Tariffs
The applicable tariff regimes in the Dominican Republic are established by Customs Law No 168-21. Ad valorem duties on imported goods are set forth under Law No 146-00 on Tariff Reform, as amended.
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