The project restructures the Property Tax (IPI) so that properties valued at RD$5 million or less are exempt. Properties valued below RD$8,138,353.3 will be taxed at a rate of 0.5%. Properties exceeding this amount will be taxed at 1% of the value of properties owned by legal entities. The exemption from income and dividend taxes established by the Real Estate Trust and Development Law is repealed (the ITBIS bonus remains). The valuation of housing prices will be transferred to the DGII (General Directorate of Internal Revenue).
SANTO DOMINGO.- The tax reform project planned by the Government would increase the current ceiling for the Housing Tax and would tax the value of properties owned by legal entities at 1%.
The project restructures the property tax (IPI) so that properties valued at RD$5 million or less are exempt, while properties valued between RD$5 million and RD$8,138,353.3 will be taxed at a rate of 0.5%. If the value exceeds RD$8,138,353.3, taxpayers will be charged a rate of 1%.
For tax simplification, it is proposed to eliminate the advance payment for individuals and SMEs, restructure the advance payment scheme for legal entities, and exempt the hotel sector (new projects) from paying taxes for three years and the other sectors for one year.
The reform, which seeks to raise RD$104,742.1 million, would also create a Property Tax, which will tax the value of properties owned by legal entities at 1%.
The exemption from income tax and dividend payments established by the Trust and Real Estate Development Law is repealed (ITBIS bonus is maintained).
The proposals, which are in a document circulating on social media since Saturday, seek to generate additional resources to sustain and stabilize public debt, which in 2020 closed at 56.6% of GDP.
It is part of five lines of action: tax simplification, corporate income, personal income, wealth and consumption taxes.
Other
Regarding corporate income tax, this reform would temporarily increase the Income Tax (ISR) rate to 30% for the first three years after its approval, returning it to 27% in the fourth year. It also proposes raising the withholding tax levied by third parties on corporate income from 2% to 10%.
It indicates that compensation for work accidents, notice and severance pay above the upper bracket of the salary scale, equivalent to RD$867,123.01, will be subject to the payment of ISR.
In the medium term, the text indicates, greater resources can be freed up and invested in expanding spending levels in other priority areas of the State, such as social subsidies, water, health, housing, electricity, municipalities, the National Police, and the recapitalization of the Central Bank.
To meet these demands, the project indicates, RD$284,388 million (5.3% of GDP) is required.
For individuals, a 35% income tax rate is established for the highest income bracket. The other income brackets remain unchanged. Salaried employees earning up to RD$416,220 are exempt from income tax, while those earning between RD$416,220.01 and RD$624,329 pay 15%; those earning between RD$624,329.01 and RD$867,123 pay 20%, and all those whose income exceeds RD$867,123.01 will pay 35% of their income.
While taxpayers with incomes above RD$1,050,500 annually would be taxed according to the criteria for individuals.
Among the things being introduced is the category of "entrepreneurship" within the definition of legal entities, which would be exempt from the payment of ISR and asset tax in the first two years of the company.
As a step toward dismantling the country's highly regressive tax system, the government would propose reducing the general ITBIS (Value Added Tax) rate from 18% to 16% over a three-year period. This would be a single rate, as currently two rates are applied: 18% and 16%. The latter applies to a range of food products, such as coffee, sugar, edible fats, chocolate, and yogurt, which were included in the 2012 tax reform. That reform, approved through Law 253-13, increased the general ITBIS rate to 18% and stipulated a unified rate of 16% starting in 2016, contingent upon the country achieving a tax burden of 16% by then. This goal has not been met, and goods and services taxed at the general rate continue to be taxed at 18%.
Likewise, it is contemplated to apply the license plate tax based on 1% of the value of the vehicle, when the market value is greater than US$10,000, and a minimum fixed tax of RD$2,500 for units whose valuation does not exceed US$10,000.
They will temporarily tax the wealthiest
It also proposes creating a temporary 1% tax on the net worth of individuals exceeding RD$60 million. For the Vehicle Circulation Tax, more commonly known as the license plate renewal tax, it proposes a mixed tax system: one ad valorem and one specific. It assumes that 71% of the Dominican vehicle fleet has a market value of less than US$10,000, and a minimum annual circulation tax of RD$2,500, indexed to the Consumer Price Index (CPI), would be applied to this group. Vehicles exceeding this "market" value would be subject to a 1% tax on their value. An annual revenue from the new
