To be a tax resident in the Dominican Republic, you must reside for more than 182 days in a year in the country, continuously or not.
Income tax is levied on a territorial basis. This means that only local-source income is subject to taxation, whereas foreign-source income is usually exempt, except certain foreign-source investment income and financial gains, which may be subject to taxation.
However, new residents are fully exempt on taxes on foreign-source investment income and gains for their first three years of residency.
Personal income tax is levied at progressive rates up to 25% on annual income exceeding DOP833,171. Capital gains are treated as ordinary income, and shares and cash dividends are exempt, provided that a final withholding tax of 10% was applied on source.
Interests from Dominican banks and financial institutions are also exempt from taxation. Rental Income is treated as ordinary income.
The real property tax rate is 1% and it applies on the exceeding value of residential properties over DOP7.019 million. Transfer of real property is subject to a 3% tax on the transfer value.
Inheritance tax is levied at 3%, whereas gifts are taxed at a 25% rate.
V.A.T. is levied at rates between 13% and 18%, although certain goods and services are exempt.
Regarding corporate taxation, resident entities are subject to income tax on their income derived from Dominican sources. Foreign-source income is usually tax-exempt. The corporate income tax rate is 27%.
Dividends received are tax exempt provided that they were taxed on source. Capital gains are included in taxable income and taxed at standard rates. However, those from the disposal of shares may not be subject to taxation.
This should not be construed as tax advice. We have access to a global network of qualified attorneys and accountants who can give you the proper advice for your particular circumstances. Contact us for further information.