Important tax rules and tax incentives for foreign investors in the Dominican Republic
By Fabio J. Guzmán Ariza, Guzmán Ariza
Dominican tax law is mainly territorial: taxes are collected on income from Dominican sources or on income received by Dominican residents from sources abroad. The Dominican Constitution treats foreign and local investors equally under the law.
The main taxes affecting businesses in the Dominican Republic are:
- Income tax and capital gains tax: 27% flat rate for all business entities; 0-25% for all natural persons
- Dividends: 10% flat rate
- VAT: 18% on the sale and import of most goods and services.
- Real estate tax for natural persons: 1% per year, the first USD 150,000.00 are exe mpt
- Tax on company assets: 1% per year, constitutes a tax credit toward income tax
The most important anti-avoidance rules are a general provision based on the concept of substance over form as well as extensive transfer pricing rules modelled on guidelines issued by the OECD. There are only two double taxation treaties in place: one with Canada (for income tax) and one with Spain (for income and capital gains tax).
Companies operating in free zones function in a nearly free trade environment and benefit from considerable tax exemptions (income, dividends, value added tax, import duties, etc.) for renewable 15-year periods. Companies established and operating in free zones on the border with Haiti are entitled to additional benefits.
Investors in the tourism sector benefit from various tax exemptions, from import duty exemptions to 15 years general tax exemption (exempt dividends; applies to most taxes). Favourable tax treatment is also available for investments in the renewable energy sector and the film industry, as well as for foreign investors (minimum USD 200,000) and retirees.
Fabio J. Guzmán ArizaGuzmán Ariza, Santo Domingo, Dominican Republic
T: +1 80 9255 0980
Fabio J. Guzmán Ariza is the managing partner of Guzmán Ariza law firm. A graduate of MIT and the PUCMM law school in the Dominican Republic (summa cum laude, 1981) and a former professor of Civil Law and Dean of the Law Faculty at the Universidad Católica Nordestana, Mr Guzmán Ariza has assisted international corporations and individuals on Dominican legal issues for more than 35 years. He is presently one of the most important authors on the Dominican legal system, especially in the fields of real estate law, litigation, company law and legal drafting.
Published: October 2016 l Photo: Colourbox.de