On February 2nd of this year, the General Directorate of Internal Taxes issued a General Norm for the determination of Income Tax for capital gain, which will be open for discussion until Friday, February 18th, 2022.
1. Coverage of the rule
It applies to individuals and legal entities, residents, and non-residents, who transfer goods or capital rights, located or used in the Dominican Republic.
2. Scope of application
The rule applies to direct and indirect transfers, total or partial, between independent or related parties, of real or movable, tangible or intangible capital goods, in exchange for a consideration in cash or kind, whether in goods, rights, credit, or quantifiable services, provided that the following conditions are met:
- By the tax jurisdiction of the transferor when this is a natural person, legal entity, or entity resident, incorporated or with a permanent establishment in the Dominican Republic that, directly or indirectly, transfers capital goods.
- By the origin or source of the benefits when the assets, goods, or rights transferred directly or indirectly, are considered capital goods or the income, values, or benefits derived therefrom can be totally or partially located, traced, or imputed to the tax jurisdiction of the Dominican Republic.
3. Withholding agent
National and foreign individuals, legal entities, and foreign corporations without a permanent establishment in the country that acquire assets or capital rights located or used in the Dominican Republic are designated as withholding agents for income tax on Capital Gains.
The applicable withholding will be 1% of the value paid to the seller of the capital asset, whether he/she is an individual, legal entity, national, or foreigner.
4. Payment on account
The withholding paid constitutes a payment on account of the capital gains tax to be paid by the seller of the capital good. The payable amount must be paid to the DGII no later than the 10th day of the month following the month in which the payment is made to the seller, in the form used for the liquidation and payment of Other Withholdings and Complementary Remunerations.
5. Obligation to file a report by the taxpayer
Individuals and legal entities that transfer or dispose of capital assets, if applicable, must complete the Capital Gains and Losses Tax Affidavit Form for Individuals (GC1) or the Capital Gains and Losses Tax Affidavit Form for Legal Entities (GC2), as well as its Annexes, which must be sent to the DGII through the virtual office or the channels enabled within a term of sixty (60) working days for shares, social quotas, or securities and ninety (90) days for real estate, counted from the date on which the sale/transfer agreement was signed.
For further details, please visit:
Source: Dirección General de Impuestos Internos 04/02/22