The Tax Reform Bill signed into law by President Fernandez last week is the most important tax legislation in the Dominican Republic since the enactment of the Tax Code in 1992. I have summarized its most important provisions below. I'll open independent new threads for many of these provisions in order to focus future discussion.
1. The ITBIS (value added tax) rate was increased from 12 to 16%.
2. Alcohol and tobacco taxes were increased.
3. A 25% tax was levied on the sale of soft drinks using corn syrup as a sweetener. This provision has been highly criticized by certain sectors asa violation of the Free Trade Treaty negotiated with the United States. President Fern?ndez has stated his intention to submit a new bill to Congress to revoke it.
4. A tax of 1.5 per thousand (0.15%) will be levied on every check or electronic transfer. Only cash withdrawals and payments to the Social Security Admnistration and the Dominican Government will be exempted from this tax.
5. Income taxes for individuals will now start at annual incomes of RD$240,000 pesos per year up from RD$197,472 pesos. The new income tax schedule for individuals will be as follows:
Up to RD$RD$240,000.00 - exempt
RD$240,000.01 to RD$360,000.00- 15%
RD$360,000.01 to RD$500,000.00 - 20%
Above RD$500,000.01 - 25%
The flat tax rate of 25% for corporations stayed the same.
6. Corporate entities and businesses must now withhold 10% of all rental payments, down from 20% before. Rentals withheld should be paid directly to Internal Revenue.
7. The IVSS or residential property tax which only applied before to residential properties was extended to include commercial, industrial and professional buildings. The rate stayed the same at 1% of appraised value but now the first RD$5,000,000 in value are exempt. For example, a home or building appraised at RD$8,000,000 pesos will pay RD$30,000 pesos annually (RD$8,000,000 - RD$5,000,000 x 1%).
8. Estate taxes were reduced from an effective tax schedule ranging from 20 to 35% to a fixed rate of 3%. Gifts will pay a 25% tax. Estates existing before the enactment of the Law may benefit from the new rate of 3% if payment is made before December 31, 2004.
9. Property transfers will be subject to a 3% tax, a considerable reduction from the previous 5.5%. However, ?aportes en naturaleza? (contributions in kind to corporations), and transfers made through savings and loan institutions, which before were exempt from transfer taxes, will now also pay 3%.
10. Incorporation taxes were raised to 0.5% of authorized capital. Total incorporation costs, excluding legal fees, will now be approximately 1.5% of authorized capital.
11. Individuals or corporations repatriating funds from abroad within 12 months of the enactment of the Law may record those funds in their books by paying a one-time 1% tax. Individuals or corporations who did not apply for the benefits of the Tax Amnesty Law of 2001, have another chance to make corrections in their balance sheets, by paying 1% of adjusted assets before December 31, 2004.
1. The ITBIS (value added tax) rate was increased from 12 to 16%.
2. Alcohol and tobacco taxes were increased.
3. A 25% tax was levied on the sale of soft drinks using corn syrup as a sweetener. This provision has been highly criticized by certain sectors asa violation of the Free Trade Treaty negotiated with the United States. President Fern?ndez has stated his intention to submit a new bill to Congress to revoke it.
4. A tax of 1.5 per thousand (0.15%) will be levied on every check or electronic transfer. Only cash withdrawals and payments to the Social Security Admnistration and the Dominican Government will be exempted from this tax.
5. Income taxes for individuals will now start at annual incomes of RD$240,000 pesos per year up from RD$197,472 pesos. The new income tax schedule for individuals will be as follows:
Up to RD$RD$240,000.00 - exempt
RD$240,000.01 to RD$360,000.00- 15%
RD$360,000.01 to RD$500,000.00 - 20%
Above RD$500,000.01 - 25%
The flat tax rate of 25% for corporations stayed the same.
6. Corporate entities and businesses must now withhold 10% of all rental payments, down from 20% before. Rentals withheld should be paid directly to Internal Revenue.
7. The IVSS or residential property tax which only applied before to residential properties was extended to include commercial, industrial and professional buildings. The rate stayed the same at 1% of appraised value but now the first RD$5,000,000 in value are exempt. For example, a home or building appraised at RD$8,000,000 pesos will pay RD$30,000 pesos annually (RD$8,000,000 - RD$5,000,000 x 1%).
8. Estate taxes were reduced from an effective tax schedule ranging from 20 to 35% to a fixed rate of 3%. Gifts will pay a 25% tax. Estates existing before the enactment of the Law may benefit from the new rate of 3% if payment is made before December 31, 2004.
9. Property transfers will be subject to a 3% tax, a considerable reduction from the previous 5.5%. However, ?aportes en naturaleza? (contributions in kind to corporations), and transfers made through savings and loan institutions, which before were exempt from transfer taxes, will now also pay 3%.
10. Incorporation taxes were raised to 0.5% of authorized capital. Total incorporation costs, excluding legal fees, will now be approximately 1.5% of authorized capital.
11. Individuals or corporations repatriating funds from abroad within 12 months of the enactment of the Law may record those funds in their books by paying a one-time 1% tax. Individuals or corporations who did not apply for the benefits of the Tax Amnesty Law of 2001, have another chance to make corrections in their balance sheets, by paying 1% of adjusted assets before December 31, 2004.