In the Dominican Republic, there are several types of taxes, but at least five are considered the main taxes. What are the types of taxes in the Dominican Republic? What are the main taxes in the Dominican Republic? We explain it all here.
What are they, and why do we pay them? According to the Directorate General of Internal Revenue (DGII):
“Taxes are unilateral obligations imposed by law, where compliance does not result in direct compensation for the taxpayer by the State, but through the State’s actions, it indirectly benefits the general public.”
Thus, these taxes collected in the Dominican Republic are of great importance, as they finance a large part of public spending.
If you’re wondering how much tax is paid in the Dominican Republic, this article will introduce you to the main types of taxes in the country.
Tax Classification in the Dominican Republic:
- ITBIS.
- Income tax.
- Selective consumption tax.
- Property tax.
- Motor vehicle tax.
At Contadores Dominicanos, we can advise you on all tax matters in the Dominican Republic.
Taxes in the Dominican Republic
1. What is ITBIS?
It is one of the most important taxes paid to the state: the Tax on the Transfer of Industrialized Goods and Services (ITBIS).
This tax applies to the final consumption of goods and services within national and foreign territory, increasing the final price of the product or service.
ITBIS is known in other countries as VAT (Value Added Tax), the name by which it is recognized in most countries.
Who must pay ITBIS?
Every individual or legal entity, whether national or foreign, that performs taxable transfers or services, as well as public or private companies, regardless of whether they carry out taxable activities. It is mandatory for all citizens, regardless of their purchasing power.
ITBIS Tax Rate:
Law 253-12 sets a rate of 18% starting from 2012.
2. What is income tax?
Income tax (ISR) is determined annually and levies all income and profits of individuals, companies, and undivided estates.
It excludes income from the state, the National District, municipalities, chambers of commerce and production, religious institutions, civil assistance entities, charitable organizations, non-profit social centers, literary, artistic, social, political, professional, and sports associations.
Who must pay income tax?
Every national or foreign individual, as well as any company resident in the Dominican Republic, and undivided estates of deceased persons domiciled in the country.
Income Tax Rate:
For legal entities, the rate is 27%. Individuals will pay based on the net taxable income for the fiscal year.
3. What is the selective consumption tax?
This is a specific tax levied on certain goods. Its purpose is to discourage the consumption of products that may have a negative social or environmental impact and to prevent smuggling and counterfeiting. It also applies to certain specific services.
Some of these products and services include:
- Telecommunications services.
- Electronic transfers.
- Tobacco.
- Alcohol.
Who must pay the selective consumption tax?
- Companies that produce or manufacture taxable goods.
- Importers of taxable goods.
- Providers or lessors of taxable services.
Selective Consumption Tax Rates:
- Alcoholic beverages: 10%.
- Tobacco: 20%.
- Telecommunications services: 10%.
- Insurance services: 16%.
- Electronic transfers: (1.5 per thousand) on the value of each check paid.
4. Property Tax (IPI):
This is an annual tax levied on the total value of taxable real estate owned by individuals and trusts.
Some exemptions from this tax include:
- Any home owned by a person over 65 years old, provided it is the owner’s only real estate.
- Rural land used for agricultural purposes.
- Rural land.
- Properties exempted by Law 158-01.
- Properties that could be taxed but have a combined value equal to or less than RD$ 7,110,158.20.
Who must pay the property tax?
Individuals and trusts.
Property Tax Rate:
- Individuals: 1% on the excess value of RD$ 7,110,158.20 of the taxable property.
- Trusts: 1% on the total value of the taxable property.
5. Motor Vehicle Tax:
There are several taxes on vehicles, such as the Vehicle Circulation Tax (marbete), duplicate registration for loss, first plate assignment, among others.
One of the most common is the Vehicle Circulation Tax (marbete). This tax is paid annually and consists of a sticker with a numeric sequence, used as a control for the payment of the vehicle’s circulation tax.
Cost of the marbete:
- Vehicles manufactured up to 2015: RD$ 1,500.
- Vehicles manufactured from 2016 onward: RD$ 3,000.
- Marbetes renewed after January 30, 2021, will incur a surcharge of RD$ 2,000 in addition to the renewal cost.
