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Discussion on Standard to determine Income Tax on Capital Gains

Discussion on Standard to determine Income Tax on Capital Gains

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The General Directorate of Internal Taxes opens a Digital Forum to discuss General Standard, notifying taxpayers and citizens regarding the discussion of the draft of the “General Standard to determine the Income Tax on Capital Gains.” Let’s see what the norm consists of:

1. Purpose of the general rule

The purpose of General Rule is to establish the forms and conditions to be complied with to determine the Income Tax on Capital Gains, stated in Article 289 of the Tax Code and as a complement to the provisions for the calculation of the deferred tax, stated in Article 41 of Decree No. 139-98, which establishes the Regulations for the Application of Title II of the referred Code.

For participating in the online forum, access the www.dgii.gov.do website, the “Publications” section, click on “Taxpayers’ Forum,” and follow the instructions by choosing the rule of your interest. The discussion will be open from Wednesday, December 22, 2021, until Friday, January 28, 2022.

2. Scope of the general rule

Individuals, legal entities, residents, and non-residents transferring assets or capital rights located or used in the Dominican Republic are subject to the provisions of General Standard.

3. Application to transfers

General Standard applies to direct, indirect, total, or partial transfers, between independent or related parties, whether the real, personal, tangible, or intangible property in exchange for consideration in cash, kind, goods, rights, credits, or quantifiable services, provided that at least one of the conditions established in the standard is met.

4. Withholding agent

National and foreign individuals, legal entities, and foreign companies without a permanent establishment in the country that acquire assets or capital rights located or used in the Dominican Republic are designated as Income Tax Withholding Agent for Capital Gains.

The applicable withholding will be 1% of the value paid to the seller of the capital asset, whether an individual, legal entity, national, or foreigner.

5. Obligation of the taxpayer to file a report

Individuals and legal entities that transfer or dispose of capital assets, as the case may be, 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 for such purposes, within a term of sixty (60) business 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.

6. Repeal of regulations

The General Regulation repeals and replaces General Regulation No. 07-2011, which designates legal entities, corporations, or companies acquiring shares or social quotas as withholding agents, as well as Article 2 of General Regulation No. 01-2021 for the Promotion and Tax Optimization of the Securities Market, and any other provision contrary to it.

Source: Dirección General de Impuestos Internos 22/12/21

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