Value-Added Tax (ITBIS) in the Dominican Republic: exemptions and reduced rates

The Tax on the Transfer of Industrialized Goods and Services (ITBIS) is a key levy in the Dominican Republic’s tax system, with a general rate of 18%, applied to the transfer and importation of goods and the provision of services. However, there are specific goods and services that are exempt or subject to reduced rates under current legislation. This article details which items qualify and how to access these benefits.

Goods exempt from ITBIS

• Basic food items: fresh meats, popular fish, fresh milk, honey, eggs, legumes, vegetables, tubers, unprocessed fruits, cereals, flours, bread, pasta, baby food.
• Agricultural products: planting plants, seeds, fertilizers, insecticides, fungicides, livestock inputs.
• Bottled natural and mineral water.
• Fuels.
• Medicines and medical products: medications, joint prostheses, wheelchairs, and vehicles for the disabled.
• Books, magazines, and pre-university educational material.

Services exempt from ITBIS

• Healthcare: hospital services, medical consultations, laboratories, diagnostic imaging, psychology, psychiatry, rehabilitation.
• Education: all educational levels, courses, workshops, technical and cultural training.
• Financial services: loans, bank accounts, insurance, credit cards, currency exchange, pension and retirement plans.
• Passenger and cargo ground transportation within the country.
• Funeral services directly related to death.
• Residential housing rental.
• Public services: electricity, potable water, garbage collection.
• Personal care services: hair salons, beauty salons, therapeutic massages, gyms.
• Cultural and artistic services: shows, concerts, theatrical performances, ballet, opera.
• Other: services provided by the State that cannot be offered by private entities, services to free zones, embassies and international organizations, and services from recognized chambers of commerce.

Goods and services with a reduced rate (16%)

• Yogurt and butter
• Roasted or decaffeinated coffee
• Edible animal and vegetable fats
• Sugars
• Cocoa and chocolate

These exemptions and reduced rates aim to protect access to essential goods and services and ease the tax burden on key sectors like food, health, education, and transportation.

Tax incentive laws that exempt from ITBIS

• Law 8-90 on Free Zone Development
• Law 158-01 on Tourism Development Incentives (CONFOTUR)
• Law 57-07 on Renewable Energy Incentives
• Law 392-07 on Industrial Competitiveness and Innovation
• Law 56-07 on the Textile and Footwear Chain
• Law 108-10 on the Promotion of the Film Industry
• Law 189-11 on Mortgage Market and Trust Development

Each law requires specific procedures, supporting documentation, and certifications issued by the relevant authorities to access these benefits.

Considerations on reduced rates and exemptions under incentive laws

The 16% reduced rates applicable to products like yogurt, butter, coffee, and cocoa are automatic and do not require any special application by the consumer or taxpayer. These rates are reflected directly on invoices or receipts from commercial establishments such as supermarkets.

In contrast, ITBIS exemptions granted under special tax incentive laws generally require a formal application process before the General Directorate of Internal Revenue (DGII) and the Ministry of Finance. However, companies operating in Free Zones under Law 8-90 can acquire goods and services exempt from ITBIS without submitting a request for each purchase, using a special card that grants direct access to this tax benefit.

Procedures to access exemptions

1. Register and log in: Access the DGII Virtual Office using your RNC or ID and corresponding password.
2. Online application: Select “Request Procedures” from the applications menu and choose “Request for ITBIS/ISC Tax Exemption.”
3. Complete the form: Fill in all required fields with detailed information about the beneficiary, type of tax, legal basis, supplier, and description of goods or services. Attach the signed proforma invoice and supporting documents.
4. Submit supporting documentation: Include the valid certificate or resolution classifying the applicant as a beneficiary under the applicable law, proforma invoice or signed quotation, proof of payment, and law-specific documents (sector resolutions, contracts, etc.).
5. Submission and tracking: Submit the application and track its status via the DGII portal or the Ministry of Finance’s front desk.

Final considerations

The process may involve payment of administrative fees and the submission of original and copy documents. In case of rejection, a corrected application may be resubmitted.

Consequences of non-compliance

Failure to follow these procedures may result in administrative and financial penalties. Proper legal advice is crucial to avoid potential issues.