Lets talk about accounting...

Chip

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Jul 25, 2007
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I would like to know other DR1'ers opinion's that have businesses here about doing their own taxes and reporting them. From what I've heard and seen in class the Dominican tax law is complicated and vigorous.

I've heard the going rate for a corporation is RD7000 a month for an accountant which is basically the same I pay my accountant in Florida for doing my Federal taxes for my business.

I'd like to discuss the feasibility and legality of one learning how to do their own taxes as I plan on getting incorporated and am trying to limit overhead. I expect my business could make RD500k to 1M a year. TIA.
 

dv8

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chip, our accountant is from santiago, he charges 5.000 pesos per month (but we are in POP). why don't you give him a call and check his current rates? anulfo: 809 864 8992, anulfocontabilidad@hotmail.com.

maybe you could start off with the accountant until you learn the ropes?
 

Chip

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chip, our accountant is from santiago, he charges 5.000 pesos per month (but we are in POP). why don't you give him a call and check his current rates? anulfo: 809 864 8992, anulfocontabilidad@hotmail.com.

maybe you could start off with the accountant until you learn the ropes?
Thanks dv8. I'm going to try to learn it because I've had two accounting classes and we covered some of the basics of the laws here so I thought I'd give it a whack - but if I can't I'll get an accountant of course. What's impressive is for all the "supposed" ineptitude and backwardness of the DR they have a pretty high tech system of accounting as I understand it.
 

dv8

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how about that: you could do the accountancy yourself and have a contable on call checking your paperwork once or twice a month. should be cheaper that way. but you will need one for closing the year (final papers have to be authorized by a professional).
 

Chip

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how about that: you could do the accountancy yourself and have a contable on call checking your paperwork once or twice a month. should be cheaper that way. but you will need one for closing the year (final papers have to be authorized by a professional).
From what I understand that's all you get for the standard RD7000 a month. I talked with an engineer friend in class and he told me this. I was hoping to learn the specifics of reporting and the available software out there. I believe rubio higuey does his own so maybe he will chime in.
 

Expat-in-Cabarete

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Jan 17, 2009
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If you are talking about reporting the ITBIS, you do it on your own, online, in a horribly designed spreadsheet.
 

rubio_higuey

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Feb 7, 2007
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Form 606 - expenses -
Form 607 - invoices -
Uploaded as "text file" (output from the same spreadsheet)
ITBIS, done once per month, via online form IT-1.

Income tax, once per year, IR-2.
A bit complicated in the beginning, but if you know accounting basics, doable on your own. Some exhibits won't apply to you, some I was straightforwardly suggested by a DR CPA to just "leave blank", that "for a small company nobody cares about them".

I do my own taxes for my two companies.
The biggest hassle is filling out 606 spreadsheet. The more receipts you get (invoices) from others, the more lines you have to fill out.

Also, I have had my own dose of "rectificacion" (corrections) dating back 18 months, and redoing all ITBIS declarations (all because of one incorrectly reported invoice in the beginning, when I was just learning the ropes).

Also beware that DR accounting is on ACCRUAL BASIS only, NO CASH BASIS. Your payment of ITBIS from your-issued invoices is due on the 20th of the next month REGARDLESS if you got the money from the client or not. Many decide not to pay and run the penalties and pay after they get paid from their clients.

The penalty is 12.58% for the first month and 6.58% for each additional month. This includes the penalty and 2.58% interest.

I found a way to "save" if you decide to run a penalty (e.g. the client didn't pay you and you have no money to pay ITBIS on time) - DO NOT report that invoice in that month (on IT-1). Rather, submit IT-1 without that invoice and once you get paid, do a RECTIFICACION (correction). You will only be liable for a penalty of 7.58% the first month and 4.58% each additional month *. A bit of work (you have to bring corrected IT-1 to the DGII, cannot be done online) but you can save some %% off.
* It's 50% of penalty (5% out of 10% and 2% out of 4%) plus 2.58% interest. You have to pay the lump sum of balance owed that was generated by that rectificacion to qualify.

Also, you should start building an ITBIS cushion. After you incorporate and get RNC#, you can start "collecting" your expenses and accruing ITBIS in your favor as a credit. This credit does not expire (no cash back either as they give you in Europe though). In a month when you owe a balance of ITBIS to DGII, from that balance will be deducted the balance of ITBIS you get in your favor that month, plus any balance you have in your favor from previous months.

Also, the penalty is only from the "net balance" of ITBIS you owe to DGII, not from the whole balance you generated that month.

P.S. I have RNC, NCF and ITBIS manuals form DGII. If your PM me your email, I can send them to you.
 
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Bronxboy

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Jul 11, 2007
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Interesting read for me since I am an Accountant in NY.
 

cobraboy

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Jul 24, 2004
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I would like to know other DR1'ers opinion's that have businesses here about doing their own taxes and reporting them. From what I've heard and seen in class the Dominican tax law is complicated and vigorous.

I've heard the going rate for a corporation is RD7000 a month for an accountant which is basically the same I pay my accountant in Florida for doing my Federal taxes for my business.

I'd like to discuss the feasibility and legality of one learning how to do their own taxes as I plan on getting incorporated and am trying to limit overhead. I expect my business could make RD500k to 1M a year. TIA.
I have one for RD$3000/month here in Jarabacoa.
 

rubio_higuey

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Feb 7, 2007
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Example to the above:

e.g.
You sell 2x 50.000 pesos for a total of 100.000 pesos (2 invoices).
ITBIS you generate (owe to DGII) is 16.000 pesos.
You already have balance of 5.000 pesos in your favor from the previous months.
You generate balance of 3.000 pesos in your favor from the given month.
Your net balance owed to DGII is 8.000 pesos.
Your client paid you only 50k yet (one invoice) and did not pay you the other 50k yet so you decide to report only first 50k.
Your balance due of ITBIS is therefore 8.000 pesos. Ypu don't pay nothing, it evens out.
IF THE CLIENT AND YOU WORK OUT AN ARRANGEMENT THAT THE CLIENT DOES NOT REPORT YOUR (YET UNPAID) INVOICE (TO YOU) ON HIS 606 SHEET, YOU ARE OK, AND YOU REPORT IT WHEN HE PAYS YOU (AND HE REPORTS IT AT THAT TIME AS WELL).

However, if your client REPORTS THE 100K total (Which they can legally do) and you REPORTED and paid only ITBIS on 50k (8.000 pesos, or 8.000 in your favor minus 8.000 generated you paid zero), DGII will have "inconsistencia" in your file.

So after the client pays you the other 50k, ASK THEM whether they already reported that invoice on 606 or not. if they did, do a rectificacion and pay the other 8.000 pesos plus 7.58% penalty and interest of the 8.000 pesos (606.40 pesos).

If your client did not yet report the other 50k, report it in the month the client pays you, on IT-1 and forget about the previous IT-1. You have a good-behaving and responsible client who reports its expense when they pay it, instead of reporting it when they receive invoice from you in order to generate their own benefit resulting from their ITBIS credit they receive.

Had you reported the whole 100k on IT-1 in the month you issued your 2 invoices, you would be liable for 12.58% penalty (10% penalty + 2.58% interest) of the other 8.000 pesos ITBIS (RD 1006.40 penalty)/
 

rubio_higuey

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Also another tax thing - starting your 2nd year of operations, every month (I think it's by the 10th) you pay 1/12 of 1% of your last year turnover as Adelanto de ISR (Impuesto Sobre la Renta) which is then applied as credit towards your year-end income tax. You print out autorizacion de pago from DGII website and pay either in DGII, Banco de Reservas or PagoFacil (Vimenca).
 

cobraboy

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Also another tax thing - starting your 2nd year of operations, every month (I think it's by the 10th) you pay 1/12 of 1% of your last year turnover as Adelanto de ISR (Impuesto Sobre la Renta) which is then applied as credit towards your year-end income tax. You print out autorizacion de pago from DGII website and pay either in DGII, Banco de Reservas or PagoFacil (Vimenca).
I found out the hard way. You have to pay even if you don't have any business.
 

peet

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A simple rule to avoid mistakes and problems with the forms 606 & 607 : you issue only an outgoing invoice after you received the complete payment and you only pay incoming invoices after receipt of a complete and correct issued invoice.

I think it is also important that the seller and the buyer report both the same transaction in the same month. So be carefull with the invoices dated in the last days of the month. (cut off)

Is there special Dominican accounting software which allows you to generate the fill out of the 606 & 607 automaticly ?
Forms 606 & 607 are basic worksheets who contain again the same data as an accounting software uses. When you use both I assume you have to do the same input twice. Normally a pro CPA hasn't the time to waste for this.

How do they do it?
 

rubio_higuey

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Feb 7, 2007
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A simple rule to avoid mistakes and problems with the forms 606 & 607 : you issue only an outgoing invoice after you received the complete payment and you only pay incoming invoices after receipt of a complete and correct issued invoice.

I think it is also important that the seller and the buyer report both the same transaction in the same month. So be carefull with the invoices dated in the last days of the month. (cut off)

Is there special Dominican accounting software which allows you to generate the fill out of the 606 & 607 automaticly ?
Forms 606 & 607 are basic worksheets who contain again the same data as an accounting software uses. When you use both I assume you have to do the same input twice. Normally a pro CPA hasn't the time to waste for this.

How do they do it?
Peten what you say is to pay after getting the full invoice, but not to send full invoice to customers before a payment is made in full. You are advosing one bahvior towards customers and one bahavior towards suppliers.

I have tried to go proforma invoice path, but most customers would not make payment till the full invoice, so we ement that full invoice will be when they say they are ready to make payment. But I had one customer who was always late in payments and they refused to enter the invoice into their accounts payable system if it was not a full invoice.
 

Chip

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Jul 25, 2007
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Thanks rubio this is the info I really need.

Another, question: in the event I do construction for a homeowner that doesn't have a NCF (N?mero de Comprobante Fiscal) what are my options for recording income?
 

rubio_higuey

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Feb 7, 2007
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Thanks rubio this is the info I really need.

Another, question: in the event I do construction for a homeowner that doesn't have a NCF (N?mero de Comprobante Fiscal) what are my options for recording income?
You've got it reversed. If you are business giving services it's YOU who has to have NCF. You get that after you have RNC. An inspection of your place (can be home office) will be done by DGII prior to authorizing you NCF's.

It doesn't matter if the client is a business or a physical person. If it is a physical person, you will do NCF "consumidor final" and issue invoice accordingly. If the customer is business you will issue NCF "credito fiscal" and issue invoice accordingly.

You have to worry about only if your SUPPLIERS do not have RNC and cannot issue invoices with NCF to YOU. In that case, you cannot deduct (those) expenses. There is one option, issuing yourself an invoice with NCF "proveedores informales" but you have to pay 10% tax (YOU have to withhold it from payment) on behalf of this informal supplier. BUT good luck telling your informal supplier that you will pay him 45.000 pesos instead of 50.000 pesos because you will withhold 10% to pay it to government as taxes on his behalf. You most likely won't get away with it. So if you will want this cost deducted legally, you will have to issue the NCF proveedor informal but fork out the 10% yourself (so the total cost to you will be 55.000 instead of 50.000 pesos). SOME suppliers, especially if they have to BID for your business (and THEY need YOU more than you need them), may be willing to go for paying the 10% themselves (in the form of your witholding it).