The Dominican Republic has an attractive, growing economy, but the business environment can be challenging for those looking to expand in the country.
The International Monetary Fund (IMF) recently highlighted that the country's GDP grew by 4.6% in 2017, with a forecast of 5.5% in 2018. Meanwhile the unemployment rate has fallen to a near-historical low of 5.1%.
However, while the Dominican Republic is packed with potential, the World Bank ranks the country a lowly 99th for ease of doing business.
It is therefore important for companies operating in the Dominican Republic to keep up-to-date with the latest regulatory developments and make sure that they fully understand their obligations.
Having the right local support in place is crucial for those embarking on a business venture in the country.
Why has the New Law been introduced?
One of the newer requirements of the Dominican Republic tax system is Law No 155-17. On 1 June 2017, the Directorate General of Internal Revenue (DGII) put into effect the new Anti-Money Laundering and Terrorist Financing Act 155-17 ("New Law"), which overhauled the previous Anti-Money Laundering Act 72-02 from June 2002.
The New Law aims to regulate money laundering and terrorist financing activities more efficiently, and in line with the latest international guidelines. It will help the country to comply with international standards for fiscal transparency and the transmission of available information regarding economic agents, their activities and their beneficial owners.
It will also help the Dominican Republic to further open up access to foreign credit and fuel collaboration with international organisations. Companies operating in the country will have to evaluate and enhance their compliance efforts, reviewing their current programmes to make sure they include the right policies, procedures and controls.
What do you need to do?
It is now mandatory for all companies (both profit-making and not-for-profit organisations) to register their Ultimate Beneficial Owner (UBO).
A UBO is the person, or persons, who ultimately owns or controls a customer relationship, or the person on whose behalf a transaction is being conducted. UBO status also includes those persons who exercise ultimate effective control over a legal person or arrangement.
You will need to provide a copy of the ID – or a legalised copy of the passport if the UBO is a foreign person who is the UBO – along with the full name, address, and their contact telephone number.
You must also update the following documents.
- Form of sworn statement of record and update of information of legal persons (RC-02): You must add the identification of the UBO to be compliant.
- Form of sworn statement of record and update of separated heritages (RC-03): You must add the identification of the UBO to be compliant.
- Form of sworn statement of the income tax of companies (IR-2): Joins the annex H-1 and H-2 identification of the UBO and update of information.
- Form of informative declaration of income tax of institutions without ends of profit (ISFL): Joins the annex C identification of members, and of the UBO for institutions without ends of profit.
When do you need to make these changes by?
Companies whose fiscal year ends by 30 September must present this updated information by 1 October, or in their actual income tax filing.ompanies who are subject to different fiscal periods must present this information in their next income tax filing, or during their Annual General Meeting (AGM).
Mitigating tax abuse
The DGII will also be implementing measures to mitigate the abuse that some companies are committing with the deductions of minor expenses to reduce their tax base.
There has been a significant change to how companies are required to format tax receipts associated with invoices. In February 2018, the DGII submitted the 'Norma 6-2018 Tax Receipt', indicating that the structure will be changing. Companies operating in the country have until 1 May 2018 to update their systems as required.
In the previous structure of the 'Number Tax Receipt' - or NCF in Spanish - there were 19 digits (as per the illustration below).
(A = the series, 02 = the business division, 001 = the emission point, 021 = the print area, 01 = the type of receipt, 00000005 = the sequence)
The new structure is as follows.
(B = the series, 01 = the type of receipt, 00000005 = the sequence)
Taxpayers must request the sequences of NCFs to be used. Once the request is made, the DGII will authorise the amount and type of NCFs, taking into account the economic activity registered in the National Taxpayer Registry (RNC), operational volume, the taxpayer's compliance level, and the taxpayer's risk profile.
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The new requirements resulting from Law No 155-17, and the associated legal information, are now a core part of a company's annual tax return. T
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.