But who will pay the ITBIS: the company or the consumer? Montás explains that the tax will be paid by the supplier or the user, depending on how the DGII calculates the proportion of what it will tax.
SANTO DOMINGO.- Users and companies that manage properties for short-term rentals should be aware that if the ITBIS ( Value Added Tax) levied by the Government on digital platforms is applied to all transactions carried out through this mechanism, the service providers will increase the cost of their service, which will therefore be passed on to consumers and the commission of intermediaries.
"In the case of rentals through platforms like Airbnb, if the ITBIS (Value Added Tax) is applied to all transactions carried out through this mechanism, the percentage to be taxed will be applied to the short-term tenant, because the supplier companies will increase the cost of their service," warned Germania Montás, economist and former deputy director of the General Directorate of Internal Taxes (DGII), yesterday.
In an interview published today by Diario Libre, the expert argues that the commission earned by the company for providing the service should be taxed "because, if they tax the entire payment, they would be taxing the rent, which is exempt from that type of tax.".
Montás asserts that "consumers of transportation, entertainment, and housing rental services, among others, through digital platforms must be prepared to assume an increase in the cost of their bill, because the Government will tax with the tax on the transfer of industrialized goods and services (ITBIS) foreign companies that act as intermediaries to channel these services through digital platforms.".
But who will pay the ITBIS: the company or the consumer? Montás explains that the tax will be paid by the supplier or the user, depending on how the DGII calculates the proportion of what it will tax.
It indicates that what is proposed to tax is the use of digital platforms to provide the service; in that case the tax should be applied to foreign companies, as indicated in the draft of the project of “Regulation for the application of the ITBIS to digital services of foreign providers” such as Netflix, Google, Uber, Airbnb and Facebook, among other applications.
But, if the proportion is calculated based on the total service provided, then that ITBIS will be paid by the consumer or user who uses the services because "all consumption taxes, without exception, are added to the bill for the consumer to pay," Montás observes.
The former official clarifies that if the Government approves a regulation to tax all transactions, then it will be an additional burden for users of digital platform services who pay for the service and also for the internet they consume to use them.
Diario Libre contacted the transportation services technology company DiDi, which reported that it has maintained an “open and frank” dialogue with the authorities during the last few months.
“We held a series of working sessions and made observations on the text that has been submitted for public consultation by the DGII. We respect the legal framework, and therefore we await the publication of the final text for the application of the ITBIS (Value Added Tax) on the commission for the use of technological platforms, in accordance with international best practices,” specified the transportation intermediary company, originally from China.
Exemptions
Article 344 of the Tax Code highlights that the following are exempt from ITBIS: financial services, including insurance; pension and retirement plan services; land transport of people and cargo; electricity, water and garbage collection; housing rental; health; educational and cultural; funeral services and beauty salons and hairdressers.
In that sense, digital services are not exempt from taxes, so if the special regulation of the DGII is approved, the provisions will apply with which taxes will be charged to foreign companies based on the Tax Code and regulation number 293-11 that is in transition to go to the Executive Branch.
Airbnb
One of the services that has caught the attention of the productive sectors in the country is the rental of properties on a short-term basis, known as short rental, which has increased significantly, according to the Association of Hotels and Tourism of the Dominican Republic (Asonahores), which supports its regulation.
The Dominican Republic has an estimated 80,000 rooms dedicated to the short-term rental model, which has experienced a boom in the real estate sector, sparking interest from investors and individuals due to the possibility this modality offers of generating income through property rentals.
The post-pandemic period further reinforced the Airbnb phenomenon, with its unique catalog of house categories, which allows the user an infinite variety of options to vacation in diverse places, with the ease it offers of multiple homes where families and people can share in the same space and live their daily lives, just by changing location.
Source: Diario Libre, with modifications to the text.
