Dominican government pushes broad tax reform amid international crisis

The Dominican Republic government has unveiled a comprehensive tax reform aimed at bolstering national revenue and enhancing business competitiveness. The proposed package, set to be sent to Congress next week, seeks to generate an estimated $850 million annually.

Finance Minister Magín Díaz explained that a central component of the reform is an increase in the income tax rate for large corporations, raising it from 27% to 30% for companies reporting over 1 billion pesos in annual income. This measure is slated to be in effect for three years. Additionally, the reform proposes a 27% income tax rate for individuals earning 400,000 pesos or more monthly, a measure expected to affect only a small fraction of taxpayers.

The reform also includes adjustments to taxes on casinos and gambling, as well as an increase in the fee for bank transfers. A new $10 tax on airline tickets and a selective consumption tax on electronic cigarettes are also part of the proposal. Conversely, the government plans to phase out taxes on company formation and certain "anachronistic" laws, such as those related to mortgages and matches, which are seen as hindrances to competitiveness and formalization.

Notably, the reform will not alter the existing 18% tax on transfers, industrialized goods, and services (ITBIS), nor will it impose new taxes on fuels, vehicles, alcohol, conventional cigarettes, insurance, or telecommunications. Taxes on real estate, interest, dividends, and digital platforms will also remain unchanged. In the real estate sector, the tax on capital gains for individuals selling property will be reduced from 25% to 10%. The government stated the reform is intended to counteract the effects of the international crisis, particularly rising oil and transportation costs.