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Dominican Republic: Tax Law Amended

(Dec. 11, 2012) On November 9, 2012, the <?Dominican Republic adopted a law that provides several amendments to the country's tax regime. The changes will become effective on January 1, 2013. (Law No. 253-12,Ley para el Fortalecimiento de la Capacidad Recaudatoria del Estado para la Sostenibilidad Fiscal y el Desarrollo Sostenible [Act to Strengthen State Revenue Capacity for Fiscal Sustainability and Sustainable Development], cited byMaría Alejandra Muñoz, Dominican Republic: Taxes on Capital – Amendments, TAX NEWS SERVICE (Dec. 7, 2012), International Bureau of Fiscal Documentation online subscription database.)

The changes include an increase in the threshold for payment of a real estate tax on property owned by individuals, from DOP5 million to DOP6.5 million (about US$123,500 to $160,600). The property value is calculated on dwellings, commercial properties, and urban lots considered to be vacant (that is, less than 30% occupied). The value is calculated to include the value of the urban lots on which structures are built. The tax rate will be 1% of the value over DOP6.5 million. Property owners who are over 65 years of age are exempt from this real estate tax if they own just one piece of real estate. (Id.)

The law also reduces the net worth tax from the current 1% rate to 0.5% for the 2015 tax year and to zero for the 2016 tax year and beyond. However, beginning in 2016, companies will become subject to the real estate tax. (Id.)

There were a number of other changes as well. The tax on vehicles in circulation will be assessed on the value of vehicles, at a rate of 1%, with a minimum of DOP1,200 (about US$30). The tax authorities will establish the values of various vehicles each year. Also, the vehicle registration tax is calculated as a percentage of the cost, insurance, and freight (CIF) charges for the vehicles, based on the grams of carbon dioxide (CO2) emitted by the vehicle per kilometer traveled, as follows: owners of vehicles emitting 120 grams per kilometer or less are untaxed, those emiting 120 to 220 grams are taxed at 1% of CIF, those emitting 220-380 are taxed 2% of CIF, and those emitting a greater quantity of CO2 are taxed 3% of CIF. However, no registration fee is assessed on vehicles that can carry more than 16 passengers or on cargo trucks. (Id.)

The value-added tax will increase from 16% to 18%, and duties on gasoline, alcohol, and cigarettes will also increase. These changes in particular have not been universally popular, and protests have been taking place over the last few weeks. (Rocia Gonzales, Dominican Republic Approved Tax Increases Spur Protests, VOXXI (Nov. 26, 2012).) While the government attributes the increased taxes to budget needs, others argued that money could be saved by cutting non-essential personnel from government rolls. (Id.)

At one demonstration, tax protesters blamed official corruption for the country’s budget problems, shouting such slogans as, “[i]t’s not a lack of money, it’s an excess of thieves.” They called for a repeal of the tax increases and an investigation into the cause of the budget deficit. (“It’s Not a Lack of Money, It’s an Excess of Thieves,” Protesters Yell, DOMINICAN TODAY (Nov. 12, 2012).)