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Other Taxation

Dominican Republic - Other Taxation



VAT is known as ITBIS in this country which stands for “Impuestos de transferencias bienes industrializados y servicios” and that means taxes for transferring industrial goods and services. It is currently at 16% and is applied to almost everything with exceptions for pharmaceuticals and basic foods and utilities. It works in exactly the same way as VAT in the UK in that if you own a business you have to make a return every month. In order to claim back ITBIS you need to ask for a comprobante fiscal when you purchase something which is business related.

Often ITBIS is not included in the price and you have to pay it on top. This often happens in some supermarkets, restaurants, hotels, so it is always worth checking. In hotels and restaurants not only is ITBIS put on top of the bill, but so is a 10% service charge, making an additional 26% on top of the bill. Sometimes offering to pay with cash as opposed to credit card can relieve the need to pay this tax. Corporation tax is currently at 27% on all income.

Property tax is only payable on property worth above RD$5 million which equates to roughly US$135,000. It is payable annually at a rate of 1% of the value above RD$5 million. Previously many people would undervalue the property in the purchase contract to avoid paying the tax, however now properties have to be officially valued prior to a sale. When properties are purchased there is purchase tax payable at a rate of 3% of the value of the property plus 1.3% stamp duty. Inheritance tax is covered by law number 288-04 and is 3% of the value of the estate after deductions. For non legal residents the rate is 4.5%. Gifts are charged at 25%. Capital gains tax is taxed as regular income with the original acquisition value adjusted for inflation.

The whole area of taxation in the Dominican Republic is not well policed as in the UK and the USA. On the one hand it is sometimes possible to avoid paying tax, especially for those who work freelance, but on the other hand the tax authorities will often think that they can charge foreigners more, especially those who neither speak Spanish nor know the system well. It is always advisable to have a trustworthy accountant before setting up any business.


Useful Resources

A great book with excellent information on taxation, accompanied by a website which keeps the key information updated.

Expat FAQs: Moving to and Living in the Dominican Republic. By Ginnie Bedggood and Ilana Benady
www.expatfaqsdr.wordpress.com

Direccion General de Impuestos Internos
http://www.dgii.gov.do

This guide was compiled with the help of Lindsay de Feliz, a British expat blogger living in the Dominican Republic. Visit her blog at yoursaucepans.blogspot.com.




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