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Dominican Rep

15 August 2019

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Dominican Republic Introduces New Simplified Tax Regime for Small Taxpayers

The Dominican Republic has published Presidential Decree No. 265-19 of 1 August 2019, which provides for the introduction of a new simplified tax regime (RST) for small taxpayers, including both legal and natural persons. Taxpayers qualifying for the RST regime are relieved from three main obligations, including the requirement to make certain declarations to the tax authority (DGII), the payment of advance income tax, and the payment of asset tax provided that they are related to the economic activity.

Two methods are applied for the RST regime, including a method based on annual gross income and a method based on annual purchases and imports.

For the regime based on annual gross income, taxpayers may qualify if gross income does not exceed DOP 8.7 million per year. For qualifying legal persons, the amount of tax due is determined by applying a flat rate of 7% on the annual gross income declared, which covers both income tax (ISR) and the tax on the transfer of industrialized goods and services (ITBIS). For natural persons, the personal income tax is applied on net annual business income, which is equal to the gross income reduced by 40%. For both natural and legal persons in the agricultural sector, an annual effective tax rate is applied to gross income, with the rate determined by the DGII based on annual effective rates in the sector.

The regime based on annual purchases applies for taxpayers involved in the trade of goods if total purchases do not exceed DOP 40 million per year. For both legal and natural persons, the amount of tax payable is determined by applying a gross marketing margin percentage determined by the DGII to the total purchases amount, which results in an estimated income amount on which the standard income tax (ISR) rate applies.

The method based on purchases also includes a simplified determination of the tax on the transfer of industrialized goods and services (ITBIS). For the determination of ITBIS payable, the general ITBIS rate will be applied to the estimated gross marketing margin amount determined for income tax. However, for pharmacies, ITBIS is paid based on 25% of the estimated gross marketing margin amount, and for merchants mainly selling food, ITBIS is paid based on 60% of the estimated gross marketing margin amount.

Taxpayers qualifying for the RST regime must submit their annual sworn statement (return) by the last business day of February of the following year. For legal persons under the RST regime based on income, tax payment is made in four installments due by the last working day of March, June, September, and December. For natural persons, tax payment is made in two installments due by the return due date and the last working day of August. For taxpayers under the RST regime based on purchases, tax payment is made in four installments due by the last working day of March, June, September, and December.

Tax withheld on taxpayers under the RST regime may be credited against the tax due if it is proven that the tax withheld corresponds to the same year. Tax withheld may not, however, generate a credit for future years.

The new RST regime applies from the 2019 fiscal year. The prior simplified regime introduced by Decree no. 758-08 of 24 November 2008 is canceled. Taxpayers under the prior regime may be included in the new regime if they meet the conditions and may also choose to opt out.

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