CORPORATE TAXES
GENERAL NOTE
The information in this entry is current a of Janurary 1998. For subsequent developments consult the contact listed above.
TAXES ON CORPORATE INCOME
The Dominican Tax Code provides for a 25% corporate tax rate.
CORPORTE RESIDENCE
A company is resident when it is incorporated in the Dominican Republic and when its central management and control are exercised in the country.
However, a company not incorporated in the Dominican Republic is subject to tax when it has a permanent establishment in the Dominican Republic.
OTHER TAXES
Internal and consumption taxes collected at Customs upon importation/These taxes are assessed at various rates in addition to customhouse duties.
Selective consumption tax/The selective consumption tax ranges from 5% to 80% and is applied on the consumption of domestic manufactures (alcohol products and cigars), on imported goods that are considered to be nonessential and on certain types of services, such as insurance, international air transportation, long-distance telephone calls, and hotel rooms.
Value-added tax/VAT is applied to industrialized goods and certain services, such as hotels, motels, cables, telexes, cable television,radio, pagers, flower shops, bars, restaurants, boites, rental cars, and rental equipment. The rate is 8%. A zero rate applies to exports.
Exemptions include living essential and goods already subject to similar taxes.
Real estate transfer tax/This tax is assessed at a basic rate of 4% (4.48% overall, including 12% surcharge).
Stamp taxes/Stamp taxes are imposed on most government-related documents.
BRANCH INCOME
Branch profits are taxed at the same rates as corporate profits. There is no withholding tax on branch profit remittances to the home office.
INCOME DETERMINATION
Inventory valuation/LIFO is the method of inventory valuation accepted for fiscal purposes. Exceptionally, other methods may be authorized upon request.
Conformity between book and tax reporting is not required.
Cqpital gains/Capital gains are taxable. Ordinary (taxable) income embraces the sale of assets used in the conduct of a business.
Intercompany dividends/Dividends are tax exempt. There is a 25%
withholding imposed on cash dividends that serves as an advance tax payment or as a credit against future tax payable for the company distributing the dividends.
Foreign income/Dominican resident companies are subject to taxation on income from Dominican sources and on foreign dividends and interest.
Stock dividends/Stock dividends are not subject to taxation.
DEDUCTIONS
Depreciation and depletion/Depreciation allowances on fixed assets are determined by the diminishing-balance method at the following rates.
CLASS
%
Buildings………………………… 5
Furniture, fixtures, computers, vehicles, ect. …… 25
Other assets not specified………………………… 15
Depletion of mines is based on units produced.
Net operating losses/Losses may be carried forward for a maximum of three tax periods.
Payments to foreign affiliates/Payments to foreign affiliates for royalties, interest or service fees are deductible, subject to 25% withholding tax rate.
Taxes/Except for tax on income, inheritances and donations and
compensation-in-kind, all taxes are deductible.
Other significant items/For tax purposes the following significant items should be considered.
1.Bad debts are deductible only in the year the loss is suffered.
Authorization may be obtained to follow an alternate method allowing deduction only in the year charges qualify as doubtful, up to 4% of the balance of the accounts receivable at year-end.
2.Amortization of intangible assets, such as patents, author's rights,drawings, franchises, and contracts without set expiration date, is not deductible.
3.Changes in method are not allowed without advance approval.
4.Bonuses to employees are deductible within the year if paid between 90 and 120 days after year-end.
GROUP TAXATION
Group taxation is not permitted.
TAX
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