The corporate income tax is a levy on the income of companies, corporations, and other legal entities in the Dominican Republic. Learn about the main aspects of this tax by reading this article.
We explain what the corporate income tax is, how it should be filed, when it should be paid, who is obligated, and who is exempt from paying this tax.
What is the Corporate Income Tax (IS)?
The corporate income tax, referred to here as the corporate tax, is a levy on the income of legal entities and corporations for a specific fiscal period, usually one year.
It is an obligatory tax imposed on the profits earned by corporations.
This tax is independent of personal income tax, meaning that corporations have the capacity to contract, assuming both rights and tax obligations.
If you need assistance in filing this important tax, at Contadores Dominicanos, we have professionals and advisors who can help you with everything you need to ensure your company or corporation is up to date with its Corporate Income Tax filing.
Who must pay and who is exempt from it?
This tax applies to all legal entities, whether they are corporations, companies, or foundations with a commercial purpose, including public or commercial institutions.
According to Law 479-08 of the Dominican Republic, commercial companies are defined as:
When two or more individuals or legal entities agree to contribute assets to carry out commercial acts or operate an organized commercial activity, with the aim of sharing in the profits and bearing the losses generated.
The following types of companies are recognized:
- General partnerships.
- Limited partnerships.
- Partnerships limited by shares.
- Limited liability companies.
- Public or private stock companies.
The following are exempt from paying this tax: the income of the State, the National District, municipalities, municipal districts, chambers of commerce and production, religious institutions, civil assistance entities, charitable organizations, social centers, literary, artistic, social, political, union, scientific centers, and non-profit sports associations.
When and how should the Corporate Income Tax be filed?
The Corporate Income Tax Return (IR-2) must be filed no later than 120 days after the company’s fiscal year-end.
Corporations pay the tax based on their income, meaning on their profits, which are calculated by adding the fiscal period’s income and subtracting the expenses incurred.
The corporate tax rate is 27% of profits. All companies pay the same percentage, but the higher the profits, the higher the payment will be.
Characteristics of the Corporate Income Tax:
- It is an obligatory tax, which means it corresponds to the economic activity of the company and cannot exceed 12 months.
- It is direct, as it is levied on a direct and immediate expression of the taxpayer’s ability to pay.
- It is periodic, requiring payments to be made recurrently at times determined by law.
- It is general, as it taxes the entirety of the taxpayer’s income.
It is important to note that the fiscal year-end must be determined in the company’s bylaws, or by default, it is considered to end on December 31 of each year.
Every company and corporation in the Dominican Republic, whether its source of investment is national or foreign, must be aware of all that is involved with this tax and pay it by the established deadlines to avoid potential penalties.
