On February 19, 2020, by means of Law No. 46-20 of Transparency and Equity Revaluation, as amended (the “Law”), a transitory tax regime is created so that taxpayers, paying a single 2% tax, declare and revalue their assets, while granting more favorable conditions to taxpayers who choose to rectify or settle tax debts recognized before the DGII.
Object of the Regulation:
Establish the requirements, forms and procedures that must be met by taxpayers to benefit from the special tax regime provided by law.
The term to receive the benefits of the special tax regime is 180 calendar days
Deadline to submit application:
Within 180 days from the date of publication of the Regulation, taxpayers must complete the corresponding form before the Virtual Office (VO) or in person before the Local Administration.
Documents that taxpayers must provide[1]:
| Cash | Duly signed and stamped certification of the depository entity of the funds |
| Nominees Shares | Share certificate or meeting minutes |
| Bonds | Investment certificate issued by the intermediary entity, through which the financial instrument is acquired |
| Receivables | Contract, promissory note or certification of credit issued by the debtor |
| Trust Rights | Document that consents the credit with the trust whether as settlor or beneficiary |
| Other Rights | Intangible commercial or industrial rights, such as intellectual property that can support the value to be declared |
| Real Estate | Notarized Purchase and Sale Agreement, copy of the Title Deed and identity documents of the Parties |
| Assets | For companies, the document that supports the accounting record and declared value; and, for individuals, the documents that guarantee the acquisition and value of the goods |
| Assets subject to registration | Registration document of the competent entity |
| Inventory | Documents that evidences acquisition values (invoice and means of payment). In addition, evidence of quantity, cost and expiration date, along with a certification issued by a certified public accountant (CPA). |
| Decreased Assets | Documentation with its corresponding accounting record certified by a CPA |
Taxpayers are obliged to provide the documentation that accredits them as the owner of the assets that are part of the application
[1] Not a limited list
Forms:
- Declaration and revaluation of assets or rights: Request Form Transparency and Equity Revaluation Law
Rectification and balance of tax debt: Request Form for Payment Facilities Law of Transparency and Equity Revaluation
Valuation criteria
- Real Estate:
- Declared or revalued according to market value if it is greater than the book value
- Value supported by documents that evidence acquisition cost or, lacking that, by an appraisal carried out within the previous 6 months by an appraiser accredited to the Dominican Institute of Appraisers (ITADO).
- Appraised value can be objected by the DGII.
- Real Estate located abroad, taxpayer will provide a valuation arising from a real estate broker, appraiser or insurance or banking entity of the corresponding jurisdiction.
In absence of a document that evidences the acquisition cost, an appraisal of the last 6 months is allowed by an appraiser accredited in the ITADO
- Assets:
- The requested revaluation must coincide with reliable documentation that proves the acquisition, including the amount paid in the transaction.
- Value will be reduced by the depreciation that has benefited according to the Tax Code.
The Regulation provides that taxpayers’ accounting records must be updated to reflect the real costs of the assets
- Increase due to revaluation and / or declaration of assets:
- As a counterpart it shall include the supported assets of the declarant as established above (reliable documentation evidencing acquisition cost or, lacking that, required documents).
Future transfers:
- Once the assets have been declared or revalued, the declared value will be the reference worth for future transactions.
- In the case of capital assets transferred in a period not exceeding 1 year from the declaration, the amount will be reduced in a 20% as adjusted fiscal cost to determine ISR.
- When it involves a real estate or a vehicle transfer, the payment of 2% remedies the transfer tax and the increase in assets.
In the event that the DGII, for the first time, notifies a rejection of an application after the 180 days granted for the taxpayer to submit an application, the latter has 10 calendar days to submit a new application. The DGII will have 15 days to approve or reject the second request
Tax debts:
- Single payment or installment payment of up to 12 installments. Both scenarios should not exceed 365 days.
- In the event that the debt is the subject of a tax appeal, the taxpayer will provide documentation that proves a pure and simple withdrawal of any current appeal.
- The partial withdrawal will be admitted as long as it refers to a specific tax and period and that it does not take effect with respect to the other taxes and periods pending resolution.
This document contains general information on the subject of reference. Its purpose is merely informative and therefore does not constitute a legal opinion of Franco. It is recommended to seek legal advice for each particular case.