Income tax withholding (ISR) in the Dominican Republic: employees and suppliers

The legal basis for tax withholdings in the Dominican Republic is established in the Tax Code (Law 11-92) and its amendments. This code authorizes the General Directorate of Internal Revenue (DGII) as the institution responsible for verifying, assessing, collecting, and enforcing the payment of taxes, as well as applying penalties in the event of non-compliance by taxpayers.

The following ISR withholdings apply:

In the case of employees under an employment relationship, the employer acts as the withholding agent for ISR on salaries and other taxable remunerations. The law provides a tax exemption up to a specific annual income threshold; that is, low-income wages may be fully exempt from ISR if they do not reach the taxable base threshold as outlined in the income tax brackets established by the DGII.

To apply ISR withholdings on wages, two conditions must be met:

Once these conditions are met, the employee’s monthly salary will be evaluated based on an annual progressive scale with three applicable tax rates: 15%, 20%, and a maximum of 25%, depending on the income range.

Annual Salary Scale

The following salary scale is the one in effect as of 2025; however, these amounts are adjusted annually based on the inflation index published by the Central Bank.

Annual Income range	applicable tax rate
Up to  RD$416,220.00	Exempt
From RD$416,220.01 to RD$624,329.00	15% of amount exceeding RD$416,220.01
From RD$624,329.01 to RD$867,123.00	RD$31,216.00 plus  20% of the amount exceeding RD$624,329.01
Above RD$867,123.01	RD$79,776.00 plus 25% of the amount exceeding RD$867,123.01

Any employee earning more than RD$34,685 per month, meaning they exceed the tax-exempt threshold, must pay Income Tax (ISR) to the State through monthly withholdings made by their employer. It is important to note that these withheld amounts accumulate toward future pension benefits or disability unemployment coverage through the Dominican Social Security Treasury (TSS).

What types of salary income are subject to ISR withholding?

In addition to the base salary, other employment-related income is also subject to Income Tax (ISR) withholding. This includes commissions, overtime, bonuses, and the portion of the 13th-month salary (Christmas bonus) that exceeds one-twelfth of the annual salary. Meal and fuel allowances are exempt from this withholding.

ISR Withholdings for Providers of Goods and Services

1. 10% for professional services (e.g., rental of any movable or immovable property, professional fees, commissions, and other payments for services rendered by individuals not under an employment relationship).
2. 2% for technical services (e.g., masonry, fumigation, cleaning, carpentry, painting, woodworking, plumbing, transportation).

In the case of unregistered providers

These withholdings also apply if the individual provider is not formalized with a tax receipt—i.e., an informal provider without registration. In this case, the company must issue a special purchase voucher and withhold the applicable taxes in the same manner.

In the case of legal entity providers (Companies) offering services

In transactions between companies involving the provision of services or the sale of goods, ISR withholding does not apply under normal circumstances. That is, if a company hires another company to provide a service, the service provider is responsible for declaring and paying its own income tax, and the paying company does not withhold ISR.

The main exception to this rule arises when the law explicitly designates special withholding cases, such as payments made abroad to non-residents, or payments made by the government to its suppliers.

Withholdings by the State

1. 10% for professional fees
2. 2% for technical services
3. If the State contracts a company, then the 5% withholding applies as normal.

Summary

Comparison of withholding angent obligations for income tax (ISR): employees vs. independent services providers

 

Aspect	Employees	Independent services providers
Calculation base and applicable rate	Calculated on accumulated salary, applying a progressive scale based on annual income.	A fixed rate is applied to each individual payment, depending on the type of service. No exemption amount.
Subject and context of the withholding	Applies to individuals under a direct employment relationship.	Applies to payments made to independent third parties (non-employees), generally for services.
Who acts as the withholding agent	Always the employer for their employees.	Any company, private or public entity that pays individuals for services.
Nature of the withheld tax	The withholding is the final payment of the employee’s income tax (ISR).	It is an advance on the income tax. The provider must file an annual tax return and settle the final tax.
Additional obligation of the taxpayer	The employee does not need to file an additional tax return if only receiving salary income.	The provider must report all income and expenses annually and either pay additional tax or request a refund.

In Case of Non-Compliance

Failure to comply with withholding obligations entails significant costs: the withholding agent may be required to pay the unwithheld tax, along with interest, penalties, and potential administrative sanctions such as temporary closure of the establishment, suspension of the issuance of tax receipts, among others, depending on the severity of the offense.

Conversely, fulfilling these obligations provides the company with legal and financial security, preventing tax contingencies.

Ultimately, understanding the difference between withholdings applicable to employees and those to service providers is not just a technical requirement—it is a key practice for maintaining accounting transparency and tax compliance. Proper interpretation and application of these rules allow companies to anticipate tax risks, strengthen internal management, and actively contribute to a fairer and more efficient tax system.

In an environment where regulations evolve and audits become more rigorous, staying up to date and acting responsibly with respect to tax withholdings is a competitive advantage and a sign of business maturity.