Inheritance Tax
Inheritance and Gift Taxes Dominican Republic
The estate of any person, Dominican or foreign, whose last domicile was in the Dominican Republic is subject to Dominican inheritance taxes. The inheritance of property located in the Dominican Republic is subject to Dominican inheritance taxes, irrespective of the nationality or domicile of the deceased (Art. 1 of Law #2569 of 1950).
Law #288-04 lowered inheritance taxes to 3% of the value of the estate, after deductions, as determined by the tax authorities. Medical and funeral expenses, as well as outstanding debts and mortgages, are some of the allowed deductions. The rate is increased to 4.5% for beneficiaries who do not reside in the Dominican Republic (Art. 7 of Law #2569).
Beneficiaries must file a declaration with the tax authorities within 90 days of the death of the decedent. An extension of an additional three and a half months is possible in complex cases (Art. 26 of Law #2569). Delays in filing are subject to a 2% per month penalty, up to a maximum of 50% of the tax owed (Art. 9 of Law #2569).
Gifts are taxed at a 25% rate (Art. 6 of Law #2569) except the following, which are exempt;
* Gifts for less than RD$500
* Gifts to government institutions or recognized nonprofit organizations
* Gifts to the family homestead (“bien de familia”).
Withholding or Retentions at the Source
The Tax Code establishes the following retentions:
* Payments abroad to persons or entities not domiciled or resident in the Dominican Republic are subject to a 25% retention on the amount paid (Art. 305). This retention is considered as final and definitive payment of the taxes owed for the operation. No deductions are allowed. The only exceptions to this provision are interest payments to financial institutions abroad which are subject to a 10% retention instead (Art. 306).
* Payments to workers. Employers must retain income taxes as per the table published by the DGII (Art. 307)
* Dividends. Corporations must retain 25% of the dividends paid to shareholders (Art. 308). The amount retained becomes a credit against the income tax of said corporations.
* Rentals. Payments to individuals (not corporations) are subject to a 10% retention (Art. 309).
* Fees for services and commissions. Payments to individuals (not corporations) are subject to a 10% retention (Art. 309).
* Prizes. All payments are subject to a 15% retention.
* Government payments to suppliers are subject to a 5% retention.
Dividends and interests paid by financial institutions regulated by the government are not subject to retentions (Art. 309).
(Article “Inheritance Tax in the Dominican Republic” by Fabio J. Guzman Ariza from Attorneys at Law at www.drlawyer.com).
Note: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.