By Jessica Barbieri, Associate, BaseFirma Venezuela
As they do every year, the Dominican Republic tax authority issued earlier this month Resolution No. DDG- AR1-2021-00002, announcing various tax issues, including new transfer pricing thresholds and updates to its tax haven list.
Transfer pricing documentation
For 2020, the transfer pricing documentation threshold was set at DOP 11,552,402 (USD 198,792), in 2021, it is now increased to DOP 12,193,982 (USD 209,832).
Entities that do not reach this threshold are not required to prepare a transfer pricing study and disclose the arm’s length range on the disclosure form.
If a controlled transaction is carried out with a low tax jurisdiction, however, this threshold does not apply.
Dominican Republic tax havens list
The resolution also provides an updated list of countries that the tax authority does not consider as having a preferential tax regime, with low/no taxation, or a tax haven (negative list).
Taxpayers resident in the Dominican Republic that carry out commercial or financial operations with residents of these states or territories will only be subject to transfer pricing obligations where the operations are with related parties.
However, the tax authority may partially consider a state and territory if it maintains a specific preferential or low/no tax regime, in which case, a specific notice will be issued.
Tax issues
The resolution informs that the inflation adjustment multiplier for the fiscal year ended on December 31, 2020, will be 1.0555.
Additionally, the resolution provides inflation adjustment for the amounts expressed in Dominican pesos (DOP), a bond applicable to the taxpayers of the selective tax on the consumption of alcohol and tobacco products, and the inflation adjustment of the exempt amount of the real estate destined for housing and urban plots buildings belonging to natural persons.
Regarding tax, the resolution establishes single payment of tax of lotteries and sports betting; provision of the monthly amount that taxpayers of casinos and slot machines must pay between February 2021 to January 2021; provision of the specific amounts applicable for the calculation corresponding to the period from January 1 to March 31, 2021, of the selective consumption tax on cigarettes and alcohols; and establishes that financial intermediation entities can use provisions for income tax purposes in the manner established in literal n of article 287 of the tax code.
Furthermore, the resolution establishes the individual income tax brackets and rates for 2021.
Exchange rates for the treatment of exchange differences
The exchange rate that should be used to make the exchange differences for the fiscal year ended December 31, 2020, will be DOP/USD: 58.1131, and DOP/EUR: 71.3977
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