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Dominican Republic Consulting on Withholding Tax for Capital Gains — Orbitax Tax News & Alerts

The Dominican Republic's Directorate General of Internal Revenue (DGII) has launched a public consultation on a draft general standard (rules) to establish the forms and procedures for withholding tax on capital gains. Key points include:

  • The rules apply to resident and non-resident individual and legal entities that transfer goods or capital rights located or used in the Dominican Republic, including direct or indirect transfers between unrelated or related parties in exchange for consideration in cash or kind, subject to certain conditions and exemptions;
  • Resident and non-resident legal entities with no permanent establishment in the country that acquire (purchase) assets or capital rights located or used in the Dominican Republic, are designated as income tax withholding agents for capital gains;
  • In the event that a purchaser is a non-resident legal person, the withholding must be accredited through the Form IR-17, Sworn Declaration of Other Withholdings and Complementary Remuneration;
  • Natural persons acquiring property or capital rights are not designated as withholding agents but may need to submit related documentation for capital gains tax purposes;
  • The applicable withholding rate is 1% of the value paid to the seller of the capital asset, whether the seller is a resident or non-resident individual or legal entity;
  • The withholding paid constitutes a payment on account of the capital gains tax that must be paid by the seller of the capital asset;
  • The amount to be paid must be paid no later than the 10th day of the month following the payment to the seller, using Form IR-17;
  • Where the seller has documentation supporting that there will not be a capital gain, or that the application of a 1% withholding on the total income received from the sale of the capital assets would generate a capital loss, a release from withholding may be requested no later than 30 days prior to the expiration of the deadline for the payment of the withholding.

In addition to the above, the draft general standard also covers the determination of the value of capital assets, the supporting documentation requirements, and relevant forms. The draft general standard will enter into force once finalized and published.