Dominican Republic: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Residents are taxed on their worldwide income and some kinds of investment income derived from abroad. Foreign individuals who are residents won’t be taxed on their investment income derived from abroad until the third year (taxable period) in which they’ve become residents.
INCOME TAX
Income and capital gains are taxed at progressive rates. The scale is adjusted for inflation every January.
2008 INCOME TAX |
|
| TAXABLE INCOME, DOP (US$) | TAX RATE |
| Up to 316,017 (US$8,752) | nil |
| 316,017 – 474,024 (US$13,128) | 15% on band over US$8,752 |
| 474,024 – 658,367 (US$18,233) | 20% on band over US$13,128 |
| Over 658,367 (US$18,233) | 25% on all income over US$18,233 |
| Source: Global Property Guide | |
In addition to the progressive taxes mentioned above, a 1% flat rate is levied on the taxable income and a 3% surcharge applied to the income tax payable.
RENTAL INCOME
Rental income is taxed at progressive rates. Income-generating expenses are deductible when computing for taxable income. For residents who earn 80% of their income from entrepreneurial, professional or similar activities where income does not exceed US$100,000 annually may opt for a flat-rate deduction of 30% of the gross income instead of itemizing specific costs and expenses in order to determine the net taxable income.
Rental income is subject to 10% withholding tax, which is considered as advance payment and will be credited against the taxpayer’s income tax liability.
CAPITAL GAINS
Capital gains arising from the sale or transfer of property are considered as ordinary income and taxed at progressive rates. The taxable gain is computed by deducting the acquisition cost as adjusted for inflation from the gross selling price or the market value.
Net Wealth Tax (impuesto al activo)
The net wealth tax was introduced in 2006. This tax is levied at a flat rate of 1% on the property’s market value, without adjusting for inflation. The net wealth tax can be credited against income tax liability.
The net wealth tax is payable twice annually, every June and December.
PROPERTY TAX
Property Tax
Property tax is based on the value of the property as determined by the government, usually at much less than the market value. It is levied annually at a rate of 1% of the government-determined property value, exceeding DOP5 million (US$148,830). Below the threshold amount, the property is not taxed.
Dominican Republic - more data and information
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