This tax applies to all commercial transactions conducted by companies and individuals engaged in any business activity in the Dominican Republic, except where there is a tax exemption for a specific activity or product. The ITBIS is levied at a rate of 18% on transfers and imports of industrial goods, as well as on services. Failure to comply with the deadlines established for this obligation under Articles 338 et seq. of the Tax Code can result in penalties of up to 11.73% on the unpaid amount.

Although it only comes into play once a year, this should be the focus of all tax policies of companies and individuals engaged in business activities, as it is the only tax levied on income earned during a fiscal year. Corporate income tax is currently set at 27%, and individual income tax is assessed on a sliding scale based on income. Since it is an annual tax, it is important to continually monitor companies’ financial projections in order to take advantage of the tax benefits offered by the Dominican tax system.

The fiscal year-end closing is a procedure established to account for profits and losses over a 12-month period and can vary according to the date set for each company. At the time of incorporation, companies can select from the following dates for their fiscal year-end: a) March 31; b) June 30; c) September 30; or d) December 31. Companies have 120 days after the respective deadline to file their IR-2 returns and make the corresponding payment.

This tax return presents different withholdings made to physical and legal persons, as established in the set of rules that establish the rates according to the service, concept and remuneration paid. Having knowledge of the correct filing and submission of withholdings as applicable, it directly impacts the fiscal strategy and avoids future challenges of expenses by the tax administration.

This taxi s comprised by the withholdings made in regards to the income tax that the companies must withhold to their employees, for the companies this payment does not generate any disbursement of funds, however it is the company’s responsibility in its condition as withholding agent to comply with the formalities of submission and payment of the aforementioned tax.

Salaries paid to employees generate the obligation to submit payrolls monthly to the Social Security Treasury. For employers, this tax represents 16.29% of the contributable salary, intended to cover medical insurance, pension fund, occupational risk and Infotep*, plus 5.91% that employees must contribute. The payment of these taxes is of the utmost importance, since it validates both the payroll and the taxes covered by the company as a deductible expense.

*Explanatory Note: INFOTEP stands for National Institute of Technical Vocational Training.