Dominican Republic’s tax system is structured to balance the country’s need for revenue with the encouragement of foreign and local investment. It comprises various taxes, including Corporate and Personal Income Taxes, Inheritance and Gift Taxes, with the notable absence of a Wealth Tax. Underlying these taxes is the Territorial Tax Regime, which taxes income based on its source within the country, regardless of the taxpayer’s residence, domicile, or nationality. This system is designed to foster a favorable business environment while aligning with international standards and agreements, such as the OECD guidelines and Double Tax Treaties with countries like Canada and Spain.
Tax overview
| Corporate Income Tax: | 27% |
| Personal Income Tax: | 25%, progr. |
| Inheritance Tax: | 3% |
| Gift Tax: | 27% |
| Wealth Tax: | None |
Territorial Tax Regime
Corporate Income Tax
Corporations incorporated in the Dominican Republic are subject to tax on local source income, at a rate of 27%.
Personal Income Taxation
Residents of the Dominican Republic are subject to tax on local source income at progressive rates up to 25%. However, residents are subject to tax on foreign source investment and financial income. The Dominican Republic imposes gift tax at 27%, and inheritance tax at 3%. However, there is no wealth tax.
Anti-Avoidance Rules
The Dominican Republic applies the doctrine based on substance over form. Additionally, the Dominican Republic applies Transfer Pricing rules based on OECD guidelines, as well as Thin Capitalization rules. However, the Dominican Republic does not have Controlled Foreign Corporation (CFC) rules.
Trusts
Double Tax Treaties (DTTs)
Tax Information Exchange Agreement
OECD Multilateral Convention
Common Reporting Standard (CRS)
FATCA
In conclusion, the Dominican Republic’s tax system offers a clear framework for both individuals and corporations operating within its borders. By focusing on local source income and implementing anti-avoidance measures, the country ensures a fair taxation environment. Additionally, its engagement in international agreements and treaties, like the TIEA with the United States and the OECD Convention, demonstrates its commitment to global tax cooperation and transparency. Despite not participating in the CRS, the Dominican Republic’s tax regime remains a critical component of its economic infrastructure, promoting fiscal responsibility and attracting investment.
