Simplified Tax procedure in the Dominican RepublicPublished on:
The Dominican State issued, on November 24 2008, Presidential Decree No. 758-08, which implemented a Simplified Tax Procedure (STP) for Reporting and Paying Income Tax and Value Added Tax (ITBIS), to help small local taxpayers, lacking an organized accounting system, to comply with their tax obligations.
This procedure is intended to benefit:
a) The individual or juridical tax payers whose annual purchases do not exceed Eight Hundred and Forty One Thousand American Dollars (USD$841,000.00) this amount will be annually adjusted to reflect the inflation rate.
b) The individual or wholly owned business with no organized accounting, whose annual income do not exceed One Hundred Seventy Eight Thousand American Dollars (USD$178,000.00), such as: beauty parlors, professionals (lawyers, doctors, accountants, engineers and others). This amount will be annually adjusted to reflect the inflation rate.
c) Taxpayers that are currently under a Simple Estimate Regime that must choose one of the two modalities of the STP or the ordinary regime.
The main benefits of the STP are:
-Organized book keeping is not required
-No advance payment of Income Tax
-No payment of tax on Assets
-Automatic payment agreement on Income Tax (3 installments for Purchases and 2 installments for Income)
-No payment of Income Tax is required for the first six (6) months of the year
-No need to report on the Tax Certificates on purchases and sales from the previous year (Purchases)
The Purchase Method
Every year, before July 1st the Direccion General de Impuestos Internos (DGII) will supply the taxpayer, with an estimated tax return, which the taxpayer must accept or reject by June 31.
The estimated tax return is determined by applying an established rate, based on commercial activity, to the gross income (gross sales) and a margin of profitability is factored in, according to commercial activity. This amount is the taxable net income over which the income tax is applied.
Payment can be made in three (3) installments: the first one, consisting of 50% of the established amount by no later than July 31; and the second and third installments, each one consisting of 25%, by no later than October 15 and December 15 of the same year.
Accordingly, for the liquidation and payment of the ITBIS, taxpayers using this method must pay the amount that results from applying an established rate, based on commercial activity, to the gross income and subtracting the purchases to determine the taxable amount (Gross Added Value) An exemption rate is applied, according to type of business. Payment is split in twelve (12) equal and consecutive installments that expire the 20th of each month.
The Income Method
The annual tax return must be paid in two (2) equal installments: the first, paid by the last working day of the month of February and the second the last working day of the month of August, of the subsequent year to the declared tax period.
The Income Tax in this method is calculated by applying the rate of Net Taxable Income that results from reducing by 40% the taxed income. In addition to this reduction, tax payers will benefit from an annual exemption in which to apply the tax rate.