Employment income. Annual employment income is taxable. Employment income includes salary, bonuses, premiums, commissions and allowances (for example, housing and education allowances). Allowances are considered taxable compensation only if they are paid in cash to the employee. Benefits in kind are subject to fringe benefits tax, which is payable by the employer at a rate of 27%.
Self-employment and business income. Income derived from selfemployment or from a trade or business is subject to tax.
Investment income. Dividends paid in cash or credited by local companies or entities to resident and nonresident individuals are subject to a 10% withholding tax. This withholding tax is considered to be a final tax payment.
All interest paid from Dominican sources to nonresident individuals is subject to a 10% withholding tax. This tax is considered to be a final tax payment. Interest received from abroad is subject to tax in accordance with the tax rate schedule set forth in Rates.
Local interest payments to resident or domiciled individuals are also subject to a 10% withholding tax, which is considered a final tax payment.
Royalties, payments for technical assistance services and similar payments made or credited by local companies or individuals to nonresidents that are considered Dominican-source income are subject to a 27% withholding tax.
Directors’ fees. Dominican-source directors’ fees paid or credited to individuals who are not resident or domiciled in the Dominican Republic are subject to a 27% income withholding tax.
Capital gains. Capital gains derived from the sale of Dominican Republic capital assets (for example, shares of Dominican Republic companies) by residents or domiciled individuals are taxed at the individual progressive income tax rates, which range from 0% to 25%. The tax base for capital gains tax purposes is the difference between the transaction value (sale price) and the asset’s historical cost adjusted by local inflationary rules. Capital gains derived from the sale of Dominican Republic capital assets by nonresidents or non-domiciled individuals are subject to a flat 27% tax rate.
Capital assets do not include inventory to be sold in the ordinary course of a trade or business, depreciable assets used in the ordinary course of a trade or business, or accounts receivable corresponding to the ordinary course of a trade or business.
Deductions
Personal deductions and allowances Employee contributions to social security may be deducted for income tax purposes.
Individuals may deduct education expenses for themselves and their dependents up to a maximum of 10% of the individual’s taxable income. However, this deduction may not exceed the 25% of the minimum exempt amount established in Section 296 of the Dominican Tax Code. The deduction does not apply to selfemployed individuals.
Business deductions. Individuals may deduct all costs and expenses that are necessary to generate, maintain and conserve taxable income and protect investments.
Rates. Ordinary income derived by resident individuals is taxable at the following rates.
B. Other taxes
Real estate with a value exceeding DOP9,520,861 is subject to a 1% tax on the excess value. For the purposes of this tax, the value of all real estate owned by an individual is taken into account.
Donations are subject to a tax at a rate of 27%, which is payable by the recipient.
C. Social security
Retirement contribution. A social security retirement contribution is payable on salaries at a rate of 7.1% for employers and 2.87% for employees, with a cap of 20 legal wages per month. The monthly legal minimum wage is DOP17,250.
Health contribution. A health contribution is payable on salaries at a rate of 7.09% for employers and 3.04% for employees, with a cap of 10 legal minimum wages per month.
Labor risk contribution. Employers must pay a labor risk security contribution at rates ranging from 1% to 3%, depending on the classification of the activity of the employer. The social security law provides a cap of 10 legal minimum wages for this contribution.
Contribution to the Institute for the Development of Technical Professionals. A contribution of 1% of payroll is payable by employers to the Institute for the Development of Technical Professionals (Instituto de Formación Técnico Profesional, or INFOTEP). Employees contribute an additional 0.5% on annual profit-sharing compensation.
Totalization agreement. The Dominican Republic and Spain have entered into a totalization agreement regarding social security contributions.
D. Tax filing and payment procedures
Employers are responsible for withholding income taxes and social security contributions from employees’ salaries on a monthly basis.
Individuals must file an annual income tax return by 31 March. Employees are not required to file an annual income tax return if their only source of income is employment compensation unless they are deducting education expenses. In the event of excess