I was privileged to be in Santo Domingo for last week’s Live and Invest in the Dominican Republic Conference. While...Read more
As with every country in the world, there are a whole range of taxes in the Dominican Republic.
The DR takes a jurisdictional approach to taxation, meaning it taxes residents only on income earned within the country… except for foreign residents, who are technically liable for tax on their foreign-sourced income from their third taxable year as a resident.
You’re considered a resident for tax purposes if you spend 183 days or more in the country in any given year.
However, obtain citizenship, and you’re no longer a foreign resident for tax purposes… you’re a citizen.
Income Taxes In The DR
If you are earning income in the DR, you’ll be liable for income tax on a scaled basis according to these four tax bands: 0%, 15%, 20%, and 25%. The zero rate applies up to 409,281 DR pesos, which is almost US$7,000 at today’s exchange rate. The 25% bracket kicks in at 852,667 DR pesos, or about US$15,000 today.
The taxation system is flexible, and few people pay tax—it is thought only about 8% of residents do so. The minimum you must earn within the country is 416,220 Dominican pesos a year or a monthly salary of 34,685 Dominican pesos.
In U.S. dollars that’s US$7,178 annually or US$598 a month. This means, given the wages in the Dominican Republic, that not many pay tax. The rate is 15% on any amount of income over the above amounts, and once it goes up to US$13,000 a year, you pay 20% on the amount over that.
Run a business in the DR and basically every expense you can prove with a factura fiscal is deductible.
Corporations and any other for-profit organizations pay a flat 27% income tax on net taxable income and they must file a tax declaration before April 30.
Capital Gains Taxes In The DR
The bad news regarding taxes in the DR is capital gains, which are taxed at 27%. If you invest in real estate and sell it for a profit, you’ll have a tax on the gains in the DR. Of course, if you’re an American, any tax paid in the DR can be used to offset your tax due on the U.S. side.
Real estate is exempt from property taxes up to a value of 6.7 million DR pesos, or about US$116,000 as of this writing. Property taxes are 1% of the amount over the exemption.
Tax On The Transfer Of Industrialized Goods And Services (ITBIS) Or Sales Tax
The ITBIS is a sales tax that is applied to most goods and services, currently at the rate of 18%. However, there are many exemptions including exported goods, some basic foodstuffs, medicine, fuels, fertilizers, books, educational materials, transport, home rentals, and utilities.
The final tax to be aware of in the DR is the inheritance tax, which is 3% of the value of the inherited estate. You can deduct outstanding debts and medical and funeral expenses. If you buy a car, there is a 2% tax payable for change of ownership.
Be Aware That…
Some countries such as Canada have a double-taxation agreement with the Dominican Republic, but the United States and the United Kingdom do not. For those who are from the United States, Dominican banks now report their assets to the U.S. tax authorities, so banks will ask for your Social Security number when you open an account.
All in all, the DR is a favorable tax jurisdiction, except for the capital gain tax, which is higher than in many countries. For Americans, again, though, this tax isn’t the end of the world, as you’ll be liable for taxes on any DR capital gains in the United States anyway.