August 18, 2023
Dominican Republic establishes special transitional treatment for audit, management and recovery of tax debt
On 10 August 2023, the President of the Dominican Republic enacted Law No. 51-23 to temporarily establish special treatment that allows the automatic declaration of the statute of limitations and extinction of tax debts that meet certain requirements. The new law will also establish an expedited tax audit procedure and debt payment facilities for tax debts, and grant amnesty for certain state tax debts. This law will be applicable until 20 December 2023.
The new law applies throughout the Dominican national territory to individuals, legal entities, state institutions, entities without legal personality, and undivided estates with tax debts that meet the following characteristics: (i) related exclusively to declarative obligations prior to the year 2015; (ii) generated under desk audits at the time of the law's entry into force; (iii) related to declarative or obligations filing from year 2016 to the year 2021; or (iv) owed by state institutions that withheld amounts in compliance with their role as withholding agents for income tax (ISR) and value added tax (VAT) but did not remit to the Tax Administration.
Automatic application of statute of limitations for debts up to 2015
This law includes the automatic application of the statute of limitations for tax debts corresponding to fiscal periods prior to 2015 (inclusive) for income tax, VAT, excise tax, asset tax, real estate property tax, taxes on free zones, and lotteries, betting, and sports gaming businesses. To benefit from the automatic application of the statute of limitation of tax debts, the taxpayer must meet certain conditions, including being up to date with all tax returns and tax payments from 2016 onward. Additionally, taxpayers cannot qualify if they are subject to a criminal tax process or an ongoing tax audit or investigation.
Expedited audit procedure
This law also establishes an expedited audit procedure for income tax and VAT, upon the taxpayer's request, for those under an ongoing desk audit. The amount to be paid under this procedure for income tax — the Expedited Procedure Rate (EPR) — will be determined based on an Effective Taxation Rate (ETR) as stipulated in General Regulation 07-14, which establishes the procedure for tax assessments for the years 2019, 2021, and 2022, or an average of the tax declared for these fiscal years. For VAT, the payable amount will be determined by applying 70% of the applicable EPR for income tax, following the previously mentioned procedure.
Debt payment facilities
Tax debts related to fiscal years and periods from 2016 to 2021, depending on the case, can be settled as follows. Debts resulting from Tax Administration assessments that are under reconsideration or on appeal before the Tax Court may be settled by making a one-time payment of 70% of the assessed taxes and without incurring late payment penalties or indemnity interest. Debts arising from ordinary filings, self-assessments or voluntary amendments not timely paid can be settled by paying 100% of the taxes and up to six months' worth of interest, without considering late payment penalties. If the taxpayer opts to make installment payments, corresponding indemnity interest must be paid.
Amnesty for state institutions
A tax amnesty is declared for state institutions, excluding public companies or companies with state participation, for tax debts resulting from withheld amounts not remitted to the Tax Administration as of 1 August 2020. The tax amnesty exclusively covers withholdings that state institutions were responsible for carrying out in compliance with their role as withholding agents for income tax and VAT.
Process to benefit from the law
The new law sets forth several procedures to be followed by taxpayers, depending on the nature of the facility, to avail its advantages. Nonetheless, it is specified that the Tax Administration must issue a regulation for executing the law's provisions.
For additional information with respect to this Alert, please contact the following:
EY República Dominicana
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor