Fiscal reform overview on the table; Taxes on Coca Cola and a new name for the ITBIS

[Dolores]

The Presidency has placed its cards on the table regarding fiscal changes. This is the second tax proposal made by President Luis Abinader. A first in his previous term was rejected by public uproar.

During the La Semanal press conference on 7 October 2024, President Luis Abinader and Hacienda Minister Jose Manuel (Jochi) Vicente outlined the proposed Tax Modernization Law aimed at securing an additional RD$122 billion in funding for social spending, security transportation and other infrastructure projects. The first term of the Abinader government significantly increased current spending, mostly expenditures for staff, in detriment to capital spending.

The Abinader administration presented a National Budget for 2025 with RD$1.3 trillion in current spending, RD$298 billion for interest payments and RD$188 billion for capital spending.

The Abinader...

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[bob saunders]

notice he waited until after the election to make these moves.

 

[MariaRubia]

Gosh I have only just read this in detail. He is going to abolish Confotur, which is the tax incentive package that eliminates a number of taxes for most of the big hotels and resorts. This is huge news, Abinader is saying that tourism will grow without incentives, but I wonder how investors will feel who did their math based on not having to pay a certain amount of taxes and now being told that they have to pay them?

The 18% tax added to AirBnB and Uber will just put up their prices. Add to this the need to pay IPI and possibly the need to be registered with MITUR to operate an AirBnB and suddenly it seems a lot less attractive. In addition, AirBnB owners are going to have to pay personal income tax on their rental income, depending on how much it is per year. I can see a lot of apartments coming onto the market quite soon when people do the math.

I just wonder whether these two combined will have a real effect on the tourism industry. Both will hit the profits of accommodation providers for sure.

Similarly, the DR has quite a buoyant film industry and the elimination of all the tax incentives for that sector is also big news - I wonder whether some of the films which were shot here would have been without those incentives.

The reduction of the exemption for IPI will bring a lot of people into having to pay IPI - most apartment owners will have to pay it.

On the positive side, if there are new train lines to San Cristobal from the capital and the metropolitan train line is built, this will help to address traffic which is a huge problem for everyone.

 

[DrNoob]

Gosh I have only just read this in detail. He is going to abolish Confotur, which is the tax incentive package that eliminates a number of taxes for most of the big hotels and resorts. This is huge news, Abinader is saying that tourism will grow without incentives, but I wonder how investors will feel who did their math based on not having to pay a certain amount of taxes and now being told that they have to pay them?

The 18% tax added to AirBnB and Uber will just put up their prices. Add to this the need to pay IPI and possibly the need to be registered with MITUR to operate an AirBnB and suddenly it seems a lot less attractive. In addition, AirBnB owners are going to have to pay personal income tax on their rental income, depending on how much it is per year. I can see a lot of apartments coming onto the market quite soon when people do the math.

I just wonder whether these two combined will have a real effect on the tourism industry. Both will hit the profits of accommodation providers for sure.

Similarly, the DR has quite a buoyant film industry and the elimination of all the tax incentives for that sector is also big news - I wonder whether some of the films which were shot here would have been without those incentives.

The reduction of the exemption for IPI will bring a lot of people into having to pay IPI - most apartment owners will have to pay it.

On the positive side, if there are new train lines to San Cristobal from the capital and the metropolitan train line is built, this will help to address traffic which is a huge problem for everyone.

This is a type of risk in investing called Political Risk. At least this is done via enacting law with plenty of notice while China has pulled other types of 'actions' with no warning.
On the flip side, a flood of properties might mean lower prices for someone looking to buy (not me for the next few years).

I need to figure out the withholding tax thing on investments as my planned gains would less than the tax-free amount but I have not worked out if filing returns (as a foreigner with no residence) would give the withheld taxes back to me. If not, I would not bother buying their debt instruments.

 

[JD Jones]

"On the flip side, a flood of properties might mean lower prices for someone looking to buy (not me for the next few years)."

I wonder how it would affect prices. If folks have to start paying taxes on property, they may be encouraged to put more reasonable prices on their property.

 

[Northern Coast Diver]

"On the flip side, a flood of properties might mean lower prices for someone looking to buy (not me for the next few years)."

I wonder how it would affect prices. If folks have to start paying taxes on property, they may be encouraged to put more reasonable prices on their property.

If the sales market floods with former AirB&B apartments, values could take a hit, especially for folks in a hurry to sell. At the same time a decrease in AirB&B units will increase hotel occupancy.

 

[MariaRubia]

"On the flip side, a flood of properties might mean lower prices for someone looking to buy (not me for the next few years)."

I wonder how it would affect prices. If folks have to start paying taxes on property, they may be encouraged to put more reasonable prices on their property.

So many people have bought properties on the idea that they will use them for a few weeks a year and the rest of the year they will rent them out with AirBnB and make a profit. Often bought with a shedload of debt. Now that AirBnB is an oversaturated market, the maths isn't working anyway. Now, add on 18% to those prices and the number of people renting will go down, not up, so there will be even more mismatch between demand and supply. You can see this happening in places like Riviera Colonial, every other apartment has a For Sale sign on it.

Las Terrenas is going to be a real mess. 100's of new apartments being built by Haitians who are being deported. Air France no longer flying here so no direct route from Paris. All the apartments built on the promise of AirBnB which is now going to be seriously harder. My friend who was working in a bar there said this year's low season has been the lowest anyone can remember, way too much competition and too few tourists. And then add 18% tax and personal income tax to the mess and mix nicely.

 

[MariaRubia]

If the sales market floods with former AirB&B apartments, values could take a hit, especially for folks in a hurry to sell. At the same time a decrease in AirB&B units will increase hotel occupancy.

Which is exactly what the hotel owners, such as our president, want.

 

[rodrigito]

Continue reading...

Estamos viviendo tiempos que atentan con nuestra existencia como sociedad. Si el pueblo no se lanza a las calles a demandar la renuncia de ese pirata #LuisAbinader, estamos jodidos. Y debemos cobrar esa factura donde sea que se encuentre. Carcel.

 

[rodrigito]

Es decir que @luisabinader y los ricos van en coche. Es decir, no pagan impuestos (evasion fiscal), lavando dinero del narcotráfico, saquean fondos publicis via sobrevaloraciónes y préstamos sucios, regalan nuestros recursos en Pueblo Viejo a cambio de millones y bloquan auditoria de Ival Silva, y un sin número de diabluras. Ahora pretenden que la clase media y obrera les de un bailout para cubrir todo lo que se han robado.

LuisAbinader pertenece en la carcel y sus bienes incautados.

Eso sin mencionar que ha vendido nuestra soberanía a organismos internacionales que no tienen el más mínimo interés en los Dominicanos y Dominicanas.

Canallas!

 

[rodrigito]

This is a type of risk in investing called Political Risk. At least this is done via enacting law with plenty of notice while China has pulled other types of 'actions' with no warning.
On the flip side, a flood of properties might mean lower prices for someone looking to buy (not me for the next few years).

I need to figure out the withholding tax thing on investments as my planned gains would less than the tax-free amount but I have not worked out if filing returns (as a foreigner with no residence) would give the withheld taxes back to me. If not, I would not bother buying their debt instruments.

Yes. Must be eliminated.
Why the free ride?
Resorts have enjoyed tax exemption for decades now. Time to pay their fare share.

 

[rodrigito]

So many people have bought properties on the idea that they will use them for a few weeks a year and the rest of the year they will rent them out with AirBnB and make a profit. Often bought with a shedload of debt. Now that AirBnB is an oversaturated market, the maths isn't working anyway. Now, add on 18% to those prices and the number of people renting will go down, not up, so there will be even more mismatch between demand and supply. You can see this happening in places like Riviera Colonial, every other apartment has a For Sale sign on it.

Las Terrenas is going to be a real mess. 100's of new apartments being built by Haitians who are being deported. Air France no longer flying here so no direct route from Paris. All the apartments built on the promise of AirBnB which is now going to be seriously harder. My friend who was working in a bar there said this year's low season has been the lowest anyone can remember, way too much competition and too few tourists. And then add 18% tax and personal income tax to the mess and mix nicely.

You said it. Built by foreign workers who entered the country illegally and whose employers (constructoras) also broke the law and are subject to hefty penalties.

Dominican Republic is in dire need of immigration reform and ilegal labor reform of corporations such as construction companies, developers etc.

 

[chicagoan14]

Which is exactly what the hotel owners, such as our president, want.

100%
They lobbied for tougher restrictions on Airbnb due to reduced occupancy instead of doing better to compete on price point.

Similar to the taxi drivers when Uber came.

 

[MariaRubia]

100%
They lobbied for tougher restrictions on Airbnb due to reduced occupancy instead of doing better to compete on price point.

Similar to the taxi drivers when Uber came.

I don't agree to be honest. When you can book an all-inclusive at under $60 per person per night, they are definitely selling at below cost. So it can't be said that hotels aren't trying to be keen on price.

The issue with hotels is that in addition to the 18% ITBIS, they also have to pay their employees a 10% service charge (propina legal). In addition the booking agency fees are charged to the hotel, whereas with AirBnB these are charged to the guest as a "service fee".

 

[NanSanPedro]

You said it. Built by foreign workers who entered the country illegally and whose employers (constructoras) also broke the law and are subject to hefty penalties.

Dominican Republic is in dire need of immigration reform and ilegal labor reform of corporations such as construction companies, developers etc.

...and will never pay a peso.

 

[CristoRey]

100%
They lobbied for tougher restrictions on Airbnb due to reduced occupancy instead of doing better to compete on price point.

Similar to the taxi drivers when Uber came.

Taxi drivers and hotels pay exorbitante license and registration fees.
Uber and Airbnb should be required to pay the same fees as they are both providing the exact same services.

 

[Ian Revis]

As someone looking to buy their own place at some point in the near future, any flood of properties on the market and a dip in prices is welcome.

 

[chico bill]

Proposing taxes and actually collecting them are two different animals.
But making things even more expensive in light of the horrific past 3.5 years of inflation, which also had the Covid limitations to travel has the potential to kill the Golden Goose of tourism.
Here on the North Coast I see many business open without customers.
I honestly don't see how they can keep the doors open.

 

[Buffness]

" ...outlined the proposed Tax Modernization Law aimed at securing an additional RD$122 billion in funding for social spending, security transportation and other infrastructure projects"

All well and good ..but ...

Mexico, 🇲🇽in the early 2000s, created the CFDI (Comprobante Fiscal Digital por Internet) to improve tax compliance and transparency , so they don't have to keep introducing new taxes. The result? Huge success! 🎉 It helped reduce tax evasion and improved tax collection, especially from foreign multinationals whose profits don't often remain in the country, with a 30% increase in tax revenue on average. 📈

The DR 🇩🇴recently introduced Comprobantes Fiscales Electrónicos (e-CF), similar to Mexico, I'm guessing for the same reasons, and is already planning to introduce new taxes? 🤔Is e- CF not working enough to generate the 'billions in funding' or is it highlight the loopholes in DR's tax laws ? 🤔

 

[windeguy]

Gosh I have only just read this in detail. He is going to abolish Confotur, which is the tax incentive package that eliminates a number of taxes for most of the big hotels and resorts. This is huge news, Abinader is saying that tourism will grow without incentives, but I wonder how investors will feel who did their math based on not having to pay a certain amount of taxes and now being told that they have to pay them?

Confotur – Consejo de Fomento Turístico

confotur.mitur.gob.do

I had no idea CONFOTUR was about taxes/hotels, but I have an additional question on CONFOTUR:

Would not the elimination of CONFOTUR also mean that it would eliminate a path to legal residency that currently exisits by purchasing a CONFOTUR property?