Dominican Republic: Tax reform proposals affecting foreign services and e-commerce
Ministry of Finance presented to Congress the “Project of Fiscal Modernization”
The Dominican Republic's Ministry of Finance on October 8, 2024, presented to Congress legislation (Spanish) known in English as the “Project of Fiscal Modernization." Among other things, this proposal would apply income tax and value added tax (VAT) to services provided from abroad for consumption in the national territory. Although this appears to impact all foreign-supplied services, the proposal clarifies that it would apply to services delivered via internet-based technology platforms, when the user or consumer is based in the Dominican Republic. Exceptions will be made as specified by the law.
The proposal would further clarify that rentals of lodging spaces for commercial or tourist purposes will no longer be exempt from VAT, especially when these services are provided via internet-based platforms. This would apply regardless of the rental duration, unless the services are considered real estate rentals for housing purposes according to the Dominican Republic's Civil Code.
In addition, the proposal seeks to classify revenues from electronic commerce conducted via the internet or similar platforms as Dominican-sourced income. For foreign sellers, revenues from providing technical assistance or selling goods or services to consumers in the Dominican Republic would be considered Dominican-sourced. Payments made to Dominican residents by these foreign providers would also be classified as Dominican-sourced income.
Finally, the proposal includes provisions to apply VAT to the import of low value goods (LVG) (Envios de Poco Valor). This would apply to goods with a cost, insurance, and freight (CIF) value of US$200 or less. VAT would be calculated based on the CIF value of these products, including non-commercial items.
If enacted, the new provisions will become effective upon publication in the official gazette, except for the LVG provision. For this, the proposal grants tax authorities 120 days to prepare the necessary regulations for implementing the measure.
For further information, contact a KPMG tax professional:
Jose Manuel Romero | joseromero1@kpmg.com
Philippe Stephanny | philippestephanny@kpmg.com
Ramon Frias | ramonfrias@kpmg.com