Special Tax Incentives for Retirees and Investors

1. Introduction

In recent years, the Dominican Republic has grown significantly in the flow of foreign investments, mainly due lo tourism development and the consequent entry into the country of foreigners interested in settling permanently in the Dominican territory. The law No. 171-07 on Special Incentives for pensioners and foreign source Annuitants dated July 13. 2007. has joined the rules that encourage the flow of foreigners and foreign investments in the Dominican Republic.

2. Object of the law

The main purpose of Law No. 171-07 is to promote the appropriate legal framework for foreign retirees and annuitants who choose to reside in the Dominican Republic can enjoy special benefits. For these purposes. Pensioners or retirees are ‘”foreigners or Dominican citizens who are beneficiaries of a corresponding monthly pension or retirement plan of an official government
or agency or private company of foreign origin, who are interested in transferring their permanent residence into the country and receive their pension or retirement benefits in the Dominican Republic.” (Article 1, Law No. 171-07).

The annuitants are those people Who enjoy stable and permanent income, Whose capital comes from abroad, due to one of the following reasons:

  • Deposits or investments in banks established abroad;
  • Remittances from Banks or financial institutions established abroad;
  • Investments of entities established abroad;
  • Remittances originated by real estate properties;
  • Interests received of titles issued in foreign currency generated abroad;
  • Profits on investments in securities issued in foreign or national currency with the State or its Institutions, provided that the capital has been generated abroad and the currency exchange is made in the country;
  • Interest, income and dividends from real estate investments made in the country, whose principal has been generated abroad. (Artice 1, Law No. 171-07).

An Indispensable condition to take advantage of the benefits established in Law No. 171-07 is that the retiree receives a monthly income of not less than US S 1,500.00. and that the annuitant. meanwhile, receives no less than US S 2,000.00 or its equivalent in Dominican pesos. For each additional dependent, a monthly income of US $ 250.00 per person is required. These amounts declared as income are exempt from income tax.

Those who receive the income described in the preceding paragraph may obtain a residence for investors, under the conditions that were set out in Decree 950-01 and Law 98-03 which creates the CEI-RD.

3. Benefits and Scope of the Law

Law No. 171-07 benefits those foreigner pensioners and annuitants wishing to permanently reside in the country. subject to their compliance with certain requirements. The benefits and exemptions that qualified applicants are entitled to are as follows:

  • Possibility of rapidly obtaining residence through the process called “residence due investment”;
  • Tax exemption on home furnishings and personal property, under Law No. 14-93, as amended by Law No. 146-00 on Tax exemption
  • Partial tax exemption on used motor vehicles. The law allows each applicant to import a vehicle. In addition, vehicles purchased in the country will be exempt from tax transfer of industrialized
    goods and services (ITBIS) and excise tax (ISC);
  • Exemption from payment of taxes on real estate transfers (3% of the value of the property transferred) on the first property acquired;
  • 50% exemption of taxes on mortgages, when the creditors are financial institutions duly regulated by the Monetary and Financial Law (mortgages are taxed with a unified tax of 2% ad valorem on the value of the mortgage);
  • Exemption of 50% of Real Estate Property Tax (tax on real property is 1% of the value of the property when the value exceeds RD $ 7,019,383.00 This amount is adjusted annually for inflation.);
  • Exemption from taxes on the payment of dividends and interest generated in the country or abroad;
  • Exemption of 50% tax on capital gains, subject to the annuitant being the major shareholder of the company that has to pay this tax and that this company is not engaged in commercial or industrial activities (the gain is determined by deducting the price or value disposal of a respective good, the acquisition or production cost adjusted for inflation).

The benefits of this law applies equally to Dominican citizens pensioned or retired by institutions of foreign governments , and those who do not have that characteristics, evidencing perceiving incomes on the conditions laid down in Article 1 of the Law.

Articles 45 and 46 of Law No. 253-12 for Strengthening Tax Collection Capacity of the Sate for Fiscal Sustainability and Sustainable Development (Fiscal Reform) provide that government institutions that administer laws that provide for waivers or exemptions for certain sectors or social groups must submit to the Ministry of Finance, prior knowledge of classification application, the feasibility study having to identify the source of compensation of the tax expenditures that would represent the exemption. On this basis, the Ministry prepares a cost-benefit analysis of the incentives awarded. In this connection the Ministry of Finance will grant a no objection to the classification of the beneficiaries of incentives.

4. Sanctions

Persons who request the benefits of Law No 171-07 and that consciously provide false information to take advantage of the concessions granted by this legislation will be subject to penalties and be fined an amount equal to twice the corresponding amount of taxes that they must have to pay to the Dominican treasury.

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