In the Dominican Republic, transfer pricing regulations are governed by Articles 281, 281 bis, 281 ter, and 281 quater of the Tax Code, and the Transfer Pricing Regulations, recently amended by Decree No. 256-21.
According to the General Directorate of Internal Taxes (DGII), transfer pricing can be defined as:
The value assigned to transactions between two related companies.
Transfer Pricing in the Dominican Republic:
Informative Declaration of Operations between Related Parties (DIOR)
This is the declaration used by taxpayers, subject to the Transfer Pricing Regulations, to report to the DGII the transactions they have had with their related or affiliated parties.
This declaration must be submitted annually when filing the Income Tax Return, with this unification being applicable starting from the 2022 fiscal year.
If you need advice on submitting the Informative Declaration of Operations between Related Parties (DIOR), at Contadores Dominicanos, we are ready to provide the necessary help for your company or corporation.
Required Documentation:
- Taxpayer identification.
- Foreign taxpayer identification number or RNC of the related party.
- Name or corporate name of the individual, legal entity, or foreign entity not domiciled in the Dominican Republic, when applicable.
- Country of domicile of the related party not domiciled in the Dominican Republic.
- Assumption of affiliation.
- Details of operations that constitute income, costs, and expenses.
- Valuation methods and price ranges or margins.
Who is required to submit the DIOR?
All taxpayers who meet at least one of the affiliation assumptions listed in Article 2 of the Regulation are required to submit the DIOR, whether or not they have conducted transactions with their affiliates.
Transfer Pricing Methods:
- Comparable Uncontrolled Price Method.
- Resale Price Method.
- Cost Plus Method.
- Profit Split Method.
- Transactional Net Margin Method.
Informative Declaration of Transfer Pricing:
Transfer pricing obligations must be submitted through the “Informative Declaration of Operations between Related Parties (DIOR)” to the General Directorate of Internal Taxes (DGII).
Local Report or Transfer Pricing Study:
Taxpayers subject to the transfer pricing regime must submit a Local Report or Transfer Pricing Study in electronic format within 180 days after the submission of the DIOR.
In this Report, they must explain the process of valuation or evaluation of transfer pricing, including information about the local entity, transactions with related parties, and financial information.
Country-by-Country Report:
According to Decree 256-21, the following taxpayers are required to submit this Report:
- Taxpayers who are part of a multinational group, have obtained consolidated income for accounting purposes equal to or greater than the threshold set by the DGII, are the Ultimate Parent Entity, and are fiscally resident in the Dominican Republic. The Country-by-Country Report for the 2022 fiscal year must be submitted starting in 2023.
- Any entity that is part of a multinational group, fiscally resident in the Dominican Republic, must also submit the Report if there is no regulation in the Ultimate Parent’s country of residence.
Master File:
Starting from the 2021 fiscal year, the Master File must be submitted by taxpayers who, with respect to the counterparties with whom they conduct transactions, meet the linkage criterion established in numeral 1 of Article 2 of the Regulations and are part of a multinational group.
This Report must be submitted through the DGII’s virtual office within 180 days following the submission of the DIOR.
Supporting Documentation and Information:
Taxpayers must have the following supporting information available upon request from the DGII:
- Invoices, purchase orders, payment methods, among others.
- Contracts, agreements, or arrangements between taxpayers and related parties.
- Documentation related to the nature of intangible assets, market value, property rights, usage rights, among others.
- Information related to business strategies.
- Accounting movements, transfer pricing policies, among others.
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