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Dominican Republic Publishes Updated Guidance on Transfer Pricing, Capital Gains Tax, Withholding Tax, and Industrialized Goods and Services Tax

The Dominican Republic’s Directorate General of Internal Revenue (DGII) has published updated guidance on capital gains tax, industrialized goods and services tax, transfer pricing, and withholding tax:

Tax on Capital Gains

This guidance provides an overview of:

  • Capital gains subject to tax, which includes gains from the transfer of assets or rights in the Dominican Republic, including indirect transfers through the transfer of shares in resident or non-resident companies;
  • The capital gains tax rates, which are 27% for non-resident individuals and companies and resident companies, and 25% for resident individuals;
  • The requirements for 1% capital gains tax withholding by sellers in the Dominican Republic; and
  • Other matters, including calculation of gains/losses, filing requirements, etc.

Tax on the Transfer of Industrialized Goods and Services (ITBIS)

This guidance provides an overview of:

  • The general scope of the tax, which is a value added tax;
  • Who is subject to the tax, which includes both resident and non-resident companies;
  • The goods and services that are exempt;
  • The tax rates, which include a standard 18% rate and a reduced 16% rate for certain goods;
  • Tax returns (declarations) and payment, which are required by the 20th of each month in respect of the previous month; and
  • Other aspects of the tax, including withholding requirements in certain cases, related penalties, etc.

Transfer Pricing

This guidance provides an overview of:

  • Who is subject to the transfer pricing requirements;
  • The information and documentation required, including annual declaration (DIOR) and transfer pricing study;
  • The determination of transfer prices, including the comparability factors and selection of comparables, as well as the acceptable methods (standard OECD methods, plus a sixth method for import/export of goods); and
  • Advance pricing agreements, which taxpayers can request and requires submission of supporting documentation.

Withholding Income Tax

This guidance provides an overview of:

  • Withholding agents, including public entities, legal entities, civil associations, and cooperative societies;
  • Taxpayers subject to withholding, including individuals and resident and non-resident entities;
  • Types of income subject to withholding and applicable rates, which for non-resident entities includes a general 10% withholding tax rate on dividend and interest income and a 27% rate on other income;
  • Other aspects of withholding, including settlement procedures, penalties for failing to comply, etc.

For additional guidance on various tax matters (in Spanish), click the following links for the DGII's taxpayer guidelines webpage and tax manuals webpage.

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