Tax withholding in the Dominican Republic: A complete guide by tax type for businesses and professionals
Tax withholding or retention is a key tool in the Dominican tax system that allows the tax authority, General Directorate of Internal Taxes (DGII), to ensure the early collection of taxes, both in local and international transactions. Understanding how withholdings work is essential for businesses, independent professionals, and other taxpayers who want to comply with their tax obligations and avoid penalties.
In this updated guide, we present in a practical and organized manner the types of withholdings that must be applied based on the type of tax, including their rates, obligated entities, declaration forms, and deadlines, as well as useful recommendations for proper management.
What is tax withholding?
Tax withholding consists of the early deduction of a tax by a withholding agent—typically a company, public or private institution—when making payments to a third party for the provision of goods or services. The withheld amount must be remitted to the DGII within the corresponding deadline.
Who are withholding agents?
Withholding agents are legal entities, sole proprietorships, public or private entities, and in some cases, authorized taxpayers who, by legal or regulatory mandate, are required to withhold and report taxes.
It is important to note that individuals (except those operating as sole proprietorships) are not required to act as withholding agents for Income Tax (ISR).
Income Tax (ISR) Withholdings
Income Tax (ISR) is one of the main taxes levied on income earned by individuals and legal entities in the Dominican Republic. The DGII establishes that certain taxpayers must act as ISR withholding agents when making payments to third parties for various concepts to ensure the early collection of the tax.
a) Local Payments Subject to Withholding
Any private company, public institution, sole proprietorship, or legal entity that pays for professional services, rent, interest, or other income to resident individuals must determine if ISR withholding applies. These withholdings are considered an advance payment of the tax that the recipient must declare at the end of the fiscal period.
The most common cases include payments for professional fees, rent, commissions, technical services (such as repairs, cleaning, or plumbing), and dividends distributed to partners or shareholders.
Additionally, when the State makes payments for goods and services to suppliers, withholdings must also be applied, except in cases of payroll payments or to expressly exempt entities.
| Payment Type | Withholding Rate |
| Professional fees, commissions, and services to individuals | 10% |
| Technical services (plumbing, masonry, repairs, cleaning, etc.) | 2% |
| Rent and leases paid to individuals | 10% |
| Dividends | 10% |
| Interest paid to non-resident individuals | 10% |
| Lottery, raffle, and contest winnings | 25% |
| Capital gains | 1% |
| State payments to suppliers (not in employment relationships) | 5% |
| Property title transfers | 2% |
| Remittances abroad | 27% |
| Telephone gaming | 5% |
| Online gaming | 10% |
| Other income (Art. 309, Lit. F of the Tax Code) | 10% |
| Other income (Decree 139-98, Art. 70 Lit. a and b) | 2% |
| Other withholdings (Norm 07-2007) | 2% |
| Interest paid by financial institutions to legal entities | 1% |
| Interest paid by financial institutions to resident individuals | 10% |
Winnings from sports betting and lottery prizes are subject to the following withholding rates:
- RD$100,001.00 to RD$500,000.00: 10%
- RD$500,001.00 to RD$1,000,000.00: 15%
- Over RD$1,000,001.00: 25%
Withholdings must be reported using the IR-17 form within the first 10 days of the month following the payment to the service provider.
b) Payments abroad
Income derived from Dominican sources paid to non-resident entities or individuals is also subject to ISR withholding. These rates are typically higher to ensure that locally generated income remains within the national tax system.
| Foreign Payment Type | Withholding Rate |
| Services provided by non-residents | 27% |
| Royalties and technical assistance | 27% |
| Dividends | 10% |
| Interest paid to non-residents | 10% |
These payments must be declared using the IR-17 form within the first 10 days of the month following the payment. Additionally, prior authorization from the DGII or supporting documentation may be required in case of an audit.
c) Withholding for employees
Employers must withhold ISR monthly from employees based on the progressive scale in Article 296 of the Tax Code. The amount is calculated on gross income minus contributions to the Social Security Treasury (TSS).
The progressive scale is updated annually based on inflation adjustments, and the withheld tax is considered a final payment for the employee. These withholdings are reported using the IR-3 form within the first 10 days of the month following the withholding.
ITBIS withholdings
The Value-Added Tax (ITBIS) applies to the sale of goods and taxable services in the Dominican Republic. In certain cases, purchasers of goods or services—i.e., those making the payment—are required to withhold part or all of the ITBIS charged by the provider.
a) Withholding for Services Provided by Individuals
When a legal entity or sole proprietorship hires an individual to provide a taxable service, it must withhold 100% of the ITBIS on the invoice.
b) Withholding Between Companies
For certain inter-company transactions, partial or total ITBIS withholding applies.
| Service Type | ITBIS Withholding | Legal Basis |
| Professional services between companies | 30% | Norm 02-05 |
| Security or surveillance services | 100% | Norm 07-09 |
| Advertising services provided by NGOs to companies | 100% | Norm 01-11 |
All withheld amounts must be reported using the IT-1 form.
c) Withholding for Unregistered Suppliers
If a company purchases goods or services from an unregistered supplier, it must issue a purchase receipt and withhold 100% of the applicable ITBIS.
d) Withholding on Credit and Debit Card Payments
Companies that process credit and debit card payments must withhold 2% of the total sales value in each transaction.
e) ITBIS Withholding in Construction
- If the service is provided by an individual, 100% of the ITBIS is withheld.
- If provided by a company, 30% of the ITBIS is withheld.
All ITBIS withholdings must be reported using the IT-1 form within the first 20 days of the following month.
Obligations of withholding agents
Withholding agents play a crucial role in the Dominican tax system. Their main obligations include:
- Correctly applying withholdings according to tax regulations.
- Timely filing of declarations to the DGII.
- Issuing withholding certificates to affected taxpayers.
- Maintaining proper records for potential audits.
Consequences of non-compliance
Failure to comply with withholding obligations can lead to:
- Fines and surcharges for late or missing declarations.
- Enhanced penalties in case of persistent non-compliance.
- Administrative measures such as suspension of the taxpayer’s registration.
Ensuring proper tax withholding management is essential to avoid legal and financial risks.