Residency and Tax

You have to be kidding??? Maybe you are mixing the D.R. up with the U.S?

Tor said:

No, I 'm just reffering to this, which I found here on DR1:

Disadvantages:
A resident is subject to income tax on worldwide income from investments abroad after the third year of residency in the country. However, this applies only to income from financial investments, not to income from other sources such as personal work. Of course, the resident will also pay income tax on Dominican income.

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YES, there are laws on the statute books elating to income taxes due by Ex-Pats - it is just that they have not been enforced & therefor not too many Ex-Pats pay them. I look forward to the legal response of Favio & hope he explains at the same time how the Presidents bill sent to Congress yesterday might effect the Ex-Pat community! (See seperate thread on President Leonels bill to assist retirees). ~ GWB.

Income taxes are 25% of net income after the first $17,500 (approx.)

All residents with taxable incomes must file their tax declarations to the Dominican tax authorities every year before March 31. Few foreign residents comply with this obligation, however. Enforcement has been very weak.

one ought not bite the hand that feeds one

Fabio J. Guzman said:

Income taxes are 25% of net income after the first $17,500 (approx.)

All residents with taxable incomes must file their tax declarations to the Dominican tax authorities every year before March 31. Few foreign residents comply with this obligation, however. Enforcement has been very weak.

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Enforcement has indeed been weak. Leonel's new executive measure will go a long way toward rationalizing the current situation of many foreigners. In practical terms, one of the more severe penalties for evasion would be deportation. What does anyone imagine the effect would be on the local economy?

what the hell is going on....?

arturo said:

Enforcement has indeed been weak. Leonel's new executive measure will go a long way toward rationalizing the current situation of many foreigners. In practical terms, one of the more severe penalties for evasion would be deportation. What does anyone imagine the effect would be on the local economy?

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Yes the effect should be terrible on the economy as these expat brings a lot of money in consuming and investing here.So clearly said it means people having working all their lives,having been taxed on their activities abroad ,having sold their home or business,receiving inh?ritances will have again to be taxed here on the money they bring in Dr to cover their expenses...
How can it be?
wow.....
Should this happen we could see long files of people queuing at the airports...exiting DR

Is it a nightmare or not?

Most countries tax income based on residency, this is not unique to the DR. If you live in a country for more than 183 days a year, usually you are taxable in that country, most cases on worldwide income. This is completely normal.

The US is an exception - they also impose their laws on citizens living abroad, and US citizens must file in their country of residency AND the US, but are allowed quite a few exemptions while having foreign residency.

Reality looks a bit different. Many expats avoid paying taxes (intentionally or by coincidence) because the collection system in their country of residency is weak to non-existant. In the US, you can't get a job (on the books) without giving a social security number, and then you and the IRS get your W-2 at the end of the year. In Germany you need a "Lohnsteuerkarte" so the employer can withhold tax, other countries you need a work permit (and tax number) before you can open a bank account, etc. As far as I know, it is quite easy to have work in the DR where the employer doesn't withhold tax and pays in cash, and I believe it would be quite cumbersome for the Dominican Tax Authority to search for every expat's income generating assets in other countries. Please correct me if I'm wrong. You certainly don't need any proof of residency or provide a SSN to any bank when opening an account.

Even if this is somehow enforced in the future there is one thing to remember - if you don't come to the DR (to live), you will be (again, theoretically) taxable in the country where you reside. Then one would have to check out the tax rate there and see if the 25% is a better deal. I would much rather pay this than German taxes (or most European countries for that matter). At the end of the day there are as many ways around the system as there are individuals wanting to get around it.