Are Free Zone Companies included in the new 5% tax on exports?
I've sent e-mail to Julio at your office to ask him this question as well.
I've sent e-mail to Julio at your office to ask him this question as well.
- Thread starter Chris
- Start date
5% Tax on Exports - for Fabio
Apparently, yes. But we will not know for sure until the regulation is enacted. The exporters and the Free Zone Associations are up in arms.
Chris:
NOBODY knows yet. We'll have to wait and bite our nails in the meantime.
I will keep you posted.
NOBODY knows yet. We'll have to wait and bite our nails in the meantime.
I will keep you posted.
Thanks Fabio, Thanks Pib - so now we wait.... Its going to be fun exporting on Monday. Luckily our real busy season only starts at the end of August.
Chris, take a look at Wednesday's News and yesterdays's
The whole industrial community is up in arms.
I talked to a lady friend last evening, she exports bananas. She seemed happy to have been at the JAD meeting with Hippo, but she had not read Despradel's comments: "We will 'revise' and 'review' the 5% tax in December, pending lower exchange rate..."
To me that is ominous to the nth degree.
I cannot trust these people.
HB
PS: the large textile people are worried sick. From the States there is incredible pressure to lower prices for work done here. and now the government is going to stick the 5% up......
Talk about a rock and a hard place!!... I wonder what Hippo and his loser economic team will do when 10,000 or 20,000 textile workers lose their jobs.
The whole industrial community is up in arms.
I talked to a lady friend last evening, she exports bananas. She seemed happy to have been at the JAD meeting with Hippo, but she had not read Despradel's comments: "We will 'revise' and 'review' the 5% tax in December, pending lower exchange rate..."
To me that is ominous to the nth degree.
I cannot trust these people.
HB
PS: the large textile people are worried sick. From the States there is incredible pressure to lower prices for work done here. and now the government is going to stick the 5% up......
Talk about a rock and a hard place!!... I wonder what Hippo and his loser economic team will do when 10,000 or 20,000 textile workers lose their jobs.
What I've picked up from people doing the footwork at Customs is that a decision is yet to be made. Meaning that, just as the new 2% tax on import or the tax on cheques, they will come up with something at the last possible minute, leave EVERYBODY ill-informed and confused.
I don't see ANY free zone company surviving a 5% tax. Let's be real, that is a 5% based on INVOICE (or worse if it was based on CIF). That is more than a 5% on profit, because as any idiot would know invoice does not equal profit. Furthermore, how many companies have a 5% profit?
I don't know. Who came up with this idea, Juan Bobo o Pedro Animal?
I don't see ANY free zone company surviving a 5% tax. Let's be real, that is a 5% based on INVOICE (or worse if it was based on CIF). That is more than a 5% on profit, because as any idiot would know invoice does not equal profit. Furthermore, how many companies have a 5% profit?
I don't know. Who came up with this idea, Juan Bobo o Pedro Animal?
I've never joined any industrial groups or associations. Looks like it is time for all of the business people here to join something - It could be very effective to "just say no!" Collective action is powerful.
Something small that I am going to do, is not to pay the Aduane their usual little bonus next week. It may be controversial but I do this as I get excellent, quick and helpful service, and never get held up on the paperwork side. So, to me it is a tip for good service rendered. But I'm going to tell the guys that their Government has asked for their tip - I'm saving it to give to the Government. Put the monkey where it belongs - on the shoulders of those that vote for these politicians.
We all know that price increase to our customers is not an option.
This cannot be allowed happen. Not for me, not for banana exports and not for other exporters. I cannot even think what this will do to the textile industry who runs on the slimmest of margins. I think His Baldness is now trying to scrape a barrel that does not want to be scraped. If they asked for half a percent or so, and it was transparent where the money was going to, people would accept it. This is unadulterated greed from people that have no idea how to manage resources.
Something small that I am going to do, is not to pay the Aduane their usual little bonus next week. It may be controversial but I do this as I get excellent, quick and helpful service, and never get held up on the paperwork side. So, to me it is a tip for good service rendered. But I'm going to tell the guys that their Government has asked for their tip - I'm saving it to give to the Government. Put the monkey where it belongs - on the shoulders of those that vote for these politicians.
We all know that price increase to our customers is not an option.
This cannot be allowed happen. Not for me, not for banana exports and not for other exporters. I cannot even think what this will do to the textile industry who runs on the slimmest of margins. I think His Baldness is now trying to scrape a barrel that does not want to be scraped. If they asked for half a percent or so, and it was transparent where the money was going to, people would accept it. This is unadulterated greed from people that have no idea how to manage resources.
What, Tweedledum and Tweedledee? Nah, I'm afraid they're too smart to be members of this government!:angry:Pib said:
My "sources",.ME,.Say that it will NEVER HAPPEN!
Just more of the "PRDs" system of governing" Throw a lot of "SHIT" on the wall,and see what sticks!!!!
Just more of the "PRDs" system of governing" Throw a lot of "SHIT" on the wall,and see what sticks!!!!
I also thought initially it will never happen. But this ball seems to be gaining speed as it rolls downhill. So, I'll simply force myself to be very calm until we know one way or the other.
I hope your sources 'you' turn out to be on the button!
I hope your sources 'you' turn out to be on the button!
NO 5% Export Tax on Free Zones!
It seems like Zonas Francas were kept out of the 5% export tax.
Just read what Sonia Guzman said on a Cadena de Noticias.com article:
http://www.cdn.com.do/economicas.htm
" Indico que debido a las condiciones de las zonas francas y su aporte a la econom?a no fue incluida en el decreto que dispone cobrar el 5 por ciento a las exportaciones"
AG
It seems like Zonas Francas were kept out of the 5% export tax.
Just read what Sonia Guzman said on a Cadena de Noticias.com article:
http://www.cdn.com.do/economicas.htm
" Indico que debido a las condiciones de las zonas francas y su aporte a la econom?a no fue incluida en el decreto que dispone cobrar el 5 por ciento a las exportaciones"
AG
Decree 727-03 was published today in the newspapers. It establishes a "temporary contribution" of 5% on gross income derived from the export of goods and services. Nowhere in the text of the decree are free zones exempted. Perhaps the government is just not going to enforce its own decree with regards to zonas francas but wants to keep its options open.
Since the Constitution only allows Congress to enact taxes, the Executive labeled the measure as a "temporary contribution" instead of a ?tax?, hoping to fool the Supreme Court into not declaring the decree unconstitutional.
Since the Constitution only allows Congress to enact taxes, the Executive labeled the measure as a "temporary contribution" instead of a ?tax?, hoping to fool the Supreme Court into not declaring the decree unconstitutional.
As I posted before
I watched the dog and pony show on TV.
The Zona Francas are going to do the following:
they will exchange the dollars they receive at their favorite banks at a rate RD$3.00 pesos less than the going rate for that day. If the exchange rate that day is RD$35 to 1 then they will exchange their dollars at RD$32 to 1.
That was one of the main claims from the audience!!
Marisol Vicens, the head of the young businessmens association asked: "If you were so cautious to respect the "Law" and the constitutionality regarding the Zona Francas, the why didn't you all have the same '?are' regarding all the other industries?? Hummm??"
Or words to that effect.
the answer from Sonia Guzm?s was: "What would you prefer? A decree that states the temporary 5% tax, for a stated 6 months? Or a Law that established a 5% tax?"
They are between a rock and a hard place.
HB
I watched the dog and pony show on TV.
The Zona Francas are going to do the following:
they will exchange the dollars they receive at their favorite banks at a rate RD$3.00 pesos less than the going rate for that day. If the exchange rate that day is RD$35 to 1 then they will exchange their dollars at RD$32 to 1.
That was one of the main claims from the audience!!
Marisol Vicens, the head of the young businessmens association asked: "If you were so cautious to respect the "Law" and the constitutionality regarding the Zona Francas, the why didn't you all have the same '?are' regarding all the other industries?? Hummm??"
Or words to that effect.
the answer from Sonia Guzm?s was: "What would you prefer? A decree that states the temporary 5% tax, for a stated 6 months? Or a Law that established a 5% tax?"
They are between a rock and a hard place.
HB
Packed and shipped and exported yesterday - no-one asked me for 5%.
Aha! I've just got around to reading today's news, so now I understand Hillbilly's post. Zona Franca businesses will have to pay RD$3 on each US$1 they generate through exports.
This is equally as ill conceived and it makes me laugh. To use simple numbers, if I invoice US$10,000, I will have to pay around US$850.00 to raise funds "to cover the increasing debts of the electrical power sector". Say my net profit is 10%, i.e., $1,000, less the US$850 off the bottom, I now make a cool US$150.00. I am still laughing.
Say the 3 pesos rule is applied to profit (as this is what a business generates, not the value of a sales invoice), it works out to 3000 pesos, at an exchange of 35, it is around US$86 that I have to pay. Now my profit is US$914 and my profit margin is eroded by 1%.
This is stupid - Now it is in the business sector's best interest to promote even further erosion of the peso, as this will increase the business profit margin...
Oh Man! I think I can forgive all this stupidity if somebody .. anybody .. conceives a process that makes sense.
Here is a legitimate and legal way to circumvent all this if anyone is interested. Create a second business structure in Panama or some other stable tax free jurisdiction - Buy raw material under this business umbrella and sell to the DR company at cost. On the sales side, sell back to the second company at a very low sales price and invoice the customer from the second company.
Aha! I've just got around to reading today's news, so now I understand Hillbilly's post. Zona Franca businesses will have to pay RD$3 on each US$1 they generate through exports.
This is equally as ill conceived and it makes me laugh. To use simple numbers, if I invoice US$10,000, I will have to pay around US$850.00 to raise funds "to cover the increasing debts of the electrical power sector". Say my net profit is 10%, i.e., $1,000, less the US$850 off the bottom, I now make a cool US$150.00. I am still laughing.
Say the 3 pesos rule is applied to profit (as this is what a business generates, not the value of a sales invoice), it works out to 3000 pesos, at an exchange of 35, it is around US$86 that I have to pay. Now my profit is US$914 and my profit margin is eroded by 1%.
This is stupid - Now it is in the business sector's best interest to promote even further erosion of the peso, as this will increase the business profit margin...
Oh Man! I think I can forgive all this stupidity if somebody .. anybody .. conceives a process that makes sense.
Here is a legitimate and legal way to circumvent all this if anyone is interested. Create a second business structure in Panama or some other stable tax free jurisdiction - Buy raw material under this business umbrella and sell to the DR company at cost. On the sales side, sell back to the second company at a very low sales price and invoice the customer from the second company.
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I am sure that there are a lot of people doing this.
The terrible thing is that those RD$3.00 pesos are on GROSS, not net. But they did say that they were adjusting some of the mechanisms. And mentioned the fact that in many free zones, thefactories might just add a little bit to the value of the piece...
Since these are bureaucrats, not businessmen, they don't have a clue.
HB
The terrible thing is that those RD$3.00 pesos are on GROSS, not net. But they did say that they were adjusting some of the mechanisms. And mentioned the fact that in many free zones, thefactories might just add a little bit to the value of the piece...
Since these are bureaucrats, not businessmen, they don't have a clue.
HB
On gross eh! If I use GAP (General Accounting Practice) gross profit is revenue minus cost of goods sold. So, If I calculate roughly very quickly in my head, using the initial example, this means about 40% of my net profit goes to the government. So, of my original US$1000 net profit, I have US$573.00 left. I'm still laughing.
It is even more ironic if one thinks that we've been running the generator non-stop for three days -- Now they want this new 'levy' for paying the debts of the electrical power sector.
HB, did you hear anything about collection mechanisms? How are they planning to collect this?
Btw, I visited our mutual farmer friend this last Wednesday and the farmers are hurting under the 5%.
It is even more ironic if one thinks that we've been running the generator non-stop for three days -- Now they want this new 'levy' for paying the debts of the electrical power sector.
HB, did you hear anything about collection mechanisms? How are they planning to collect this?
Btw, I visited our mutual farmer friend this last Wednesday and the farmers are hurting under the 5%.
You bet they are hurting!
This is especially true of those markets that are not controlled by the producers such as coffee, sugar, bananas and other commodities.
There is a very low ceiling for these folks...5? can take them out of the market!!
I said in another thread that 10-15,ooo workers asking for help from the government will be interesting to see...
HB
This is especially true of those markets that are not controlled by the producers such as coffee, sugar, bananas and other commodities.
There is a very low ceiling for these folks...5? can take them out of the market!!
I said in another thread that 10-15,ooo workers asking for help from the government will be interesting to see...
HB