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Every country has their own tax system and code by which individuals and corporations must abide. The tax policy of individual countries is one of the main determining factors for whether it is considered viable for businesses and friendly to foreigners doing business in or relocating to that country. Let’s take a look at Dominican Republic’s tax overview in three main categories: Personal Taxes, Corporate Taxes, and VAT Taxes.
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Dominican Republic Personal Taxes
Here’s everything you need to know about personal taxes in Dominican Republic:
Who is Taxed?
Dominican Republic taxes residents and non-residents of the country. Individuals are labeled as residents if they’ve spent more than 182 days in the country for any fiscal year.
This doesn’t have to be a continuous time period. In other words, as long as the total days spent in the Dominican Republic is more than 182 days for the fiscal year, then the individual is considered a resident.
What is the Tax Rate?
The Dominican Republic has a progressive personal tax rate that ranges from 0% to 25%. There are four tax brackets (0%, 15%, 20% and 25%).
Overall, this puts the Dominican Republic on the low end for personal taxes in the region. In 2021, the average individual tax rate in Latin America is 31.89%.
National vs International Income
Residents are taxed on the income they generate worldwide. Non-residents are only taxed on the income they generate in the Dominican Republic. In the first three years of becoming a resident, individuals are only taxed on their income generated within the country.
Capital Gains, Exemptions & Other Considerations
The Dominican Republic has a progressive capital gains tax rate that also ranges up to 25%. This includes things such as machinery and equipment for entrepreneurs, bonds, patents, memberships, art and antiques.
The country also imposes a real estate tax of 1% if the value of the sale exceeds $6.5 million. Also taxed are non-cash compensation such as education reimbursement, clothing allowances, expenses for relocation, housing stipends, allowances for meals and memberships to clubs.
Dominican Republic Corporate Taxes
Here’s everything you need to know about corporate taxes in Dominican Republic:
Business Taxes
All resident companies, permanent establishments and local branches of businesses are subject to corporate taxes in Dominican Republic.
What is the Tax Rate?
Dominican Republic has a flat corporate tax rate of 27%. This puts the country on par with other countries in the region. For 2020, the average corporate tax rate for South America was 27.54%.
The country also has a rate assets tax of 1%. This is owed when the corporate income tax is lower than the tax on assets.
What is Taxable Income?
Dominical Republic follows what’s called a territorial concept of corporate taxes. This means that no matter what the type of company, and whether it’s a resident or non-resident company, the country only taxes income that’s generated within the country.
Tax Incentives & Deductions
The country recently decided to offer eligible companies the choice to select a tax incentive. This includes a 50% deduction on their VAT taxes, a 0% rate on the customs tariff, or reimbursement grants. These incentives are available for a specific period of time.
Dominican Republic VAT Taxes
Value-added taxes, better known as VAT taxes, are a common form of consumption tax. The value-added portion is the difference between a business’ sales and its cost of purchasing services or goods from another business. Here’s what you need to know about VAT taxes in Dominican Republic:
Who is Taxed?
The country applies a VAT tax to all movable industrialized goods. There are some products and services that are exempt from this VAT tax, though, including all exports.
Products that are also exempt include:
- Basic products such as live animals, eggs, milk, grains and frozen meats
- Planting seeds
- Vegetables and fruits
- Medicines
- Pesticides and insecticides
- Magazines and books
- Educational materials
- Prosthesis
- Wheelchairs
Services that are also exempt include:
- Educational
- Financial
- Health
- Insurance
- Ground transportation
- Water and waste pickup
- Housing rental
- Personal care
- Electricity
What is the Tax Rate?
Dominican Republic has a flat VAT tax rate of 18%, although there are exceptions, as noted above.
Is Dominican Republic Right for Your Business?
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