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TAX GUIDE OF THE DOMINICAN REPUBLIC

TAXATION GUIDE FOR THE DOMINICAN REPUBLIC Sources of Tax Law Dominican Republic taxes are contained primarily in the Dominican Tax Code, Law 11-92 of May 1992. This code has been submitted to several reforms during the years 2000 and 2001, by the Law 147-00 of December 2000 on Tax Reform, Law 11-01 of 17 January 2001 on Fiscal Amnesty, Law 12-01 of January 2001, which amended certain aspects of the Law 147-00; Tax Reform Law 288-04, September 28th, 2004. The Presidential Decree No. 1521 of 13 November 2004 on the Simplified Tax Estimation System, Rules 195-01 and 196-01 of February 2001, on the Application of the new income tax regulations and ITBIS (VAT), and General Rules Nos. 1-05 of RNC (National Register of the Contributor) , 2-05 of Withholdings Agents of ITBIS, and 3-05 of derogation of non using rules. The purpose of these reforms were to ensure adequate level of tax income for the performance of effective government action to eliminate fiscal deficit, reduce the poverty, improve the equitable distribution of income and modify tax figures and institutions to reduce tax evasion. Tax Departments: Taxes are collected in the Dominican Republic, by the “Direccion General de Impuestos Internos” (“General Agency of Taxes”), which is a dependency of the “Secretaria de Finanzas” (“Finance Secretariat”). This department is in charge of the collection of all internal taxes. In accordance with the tax code the tax administration has Regulatory powers, Inspection and auditing power, assessment power and penal power. The Finance Ministry, as the direct head of the department of the tax administration, oversees the correct application and collection of taxes and in this capacity must settle possible conflicts created by decisions from the tax administration. Enactment of Tax Legislation The legislative Power is compose by two chambers: The Senate composed of 32 members and the Chamber of Deputies, which at the moment is composed of 150 members, and has the exclusive authority to introduce proposed tax legislation. After both houses vote for the proposed tax legislation passage, the President of the Republic either sing the proposed legislation into a law or veto it. The assembly has the power to override the Presidential veto to enact proposed legislation by a vote. Principal taxes Principal taxes, classified by the agency of the Secretary of Finance enforcing them, are: 1. Customs Department (Dirección General de Aduanas): a) Export taxes - Taxes are imposed at customs on the export of major commodities, such as sugar, coffee, cocoa, and tobacco, etc. According to a new law 03-04 from January 2004, all exportations must be charge with a provisional rate of a 5% percent in all of them; this is a transitory disposition and in the present is not operating. b) Import taxes – The customs Code is contained in the Law 14-93 of august 26, 1993. It harmonized customs tariffs, adopting the international recognized System of Codification and Designation of Goods. The law 146-00 of December 27, 2000, changes some aspects of this code modifying also some importation tax rates. These rates are from 0%, 3%, 8%, 14% and 20% depending on the idem import. This law modified by 12-01 of January 2001 provides for the application of the article VII of the GATT a method of merchandise valuations from July 2001, on date on which the Dominican Republic is committed to start applying theses rules. Customs duties are calculated and paid in Dominican Pesos. The conversion into pesos of the value of the goods is made according to the official rate applicable at the time of the payment. Most goods are subject to duties and excise and other taxes imposed at customs upon entering the country. According to a new law 03-04 from January 2004, a provisional rate of 2% percent will be charge on all importations, this disposition is also transitory. 2. Internal Revenue Department (Dirección General de Impuestos Internos): a) Income tax. b) Inheritance and gift tax. c) Tax on transfers of industrialized goods and services (a kind of value added tax). d) Selective Tax on Consumption, Excise taxes on domestically produced alcohol, cigarettes, soft drinks, and matches. e) Documentary stamp taxes. f) License tax. g) Vehicle license plates and other taxes. a) Income Tax Filing Procedures and Tax Payments Tax systems within the Dominican Republic are based on the principle of self-assessment. That is, tax laws permit taxpayers to file annual returns to report their taxable income, determine their tax liability, compare this tax liability to any taxes withheld or estimated taxes paid, and reconcile any balance due or overpayment. The Tax Department employees make a limited review at the time of billing. Companies should file before the 20th of every month a form and make an advance payment of 1.5% of the gross income tax owed for the current year payable monthly on the basis of gross monthly income. From the year 2006 (Law 288-04) on forward all tax payers of the Income Tax considered as “Moral Persons” will pay their advances based on twelve monthly fees equal to 100% of the Income Tax liquidated on the previous period. Companies that earns less than $6,000,000.00 are exempt to pay this advance payment of 1.5% of the gross income tax but generally required to make at least three-estimated tax payments based on their previous year’s tax liability (at the end of the sixth, ninth and twelfth months). Individuals are subject to withholding taxes on their wages, and those with significant amounts of non-wage in¬come, such as investment income or capital gains, are required to make estimated tax payments at the end of the sixth, ninth and twelfth months, based on the last year tax liabilities. Fiscal Periods For corporations: January 1 to December 31 April 1 to March 1 July 1 to June 30 October 1 to September 30 The fiscal period for natural persons is between January 1 and December 31 Audits, Assessments and Appeals All D. R. tax returns filed with the tax administration are reviewed for mathematical accuracy, unreported income and completeness. The returns are then classified and some are selected for an examination (audit). Various penalties may be imposed by law for the late filing of returns and late payment of tax, negligence and fraud. A 10% penalty for the first month and 4% for subsequent months is imposed on any underpayment of tax. Tax Rates Corporations shall pay 25% of their net income. However, they are obliged to make advance tax payments relating to the progressive period equivalent to 1.5% of their monthly gross income, on a monthly basis. If at the end of the fiscal year, the 25% of net income is under the 1.5% of the gross income paid during the year; those advance payments will constitute the income tax payable. If the 1.5% advance payments of gross income are lower than the 25% of their year-end net income, the corporation shall pay only the difference between the 25% and the 1.5% advance payments given during the year. In the case of losses, the corporation will not receive compensation in future years and pays the 1.5% tax. Tax withholding for dividends In the Dominican Republic, taxable income of corporations is subject to two levels of taxation: at the corporate level and at the shareholder level when earnings are distributed. However, the tax paid when earnings are distributed may immediately be used as a credit against the tax liability of the distributor company. Determination of Taxable Income Taxable income is generally computed according to generally accepted accounting principles, but is adjusted for certain statutory tax provisions. As a result, the amount of taxable income frequently differs from the amount of income stated for financial reporting purposes. Territoriality Domestic corporations are subject to D. R. income tax on their Dominican source income only. Capital Gains and Losses Capital gains are taxable at a rate of 25%. The procedure to calculate the capital gain is by adjusting by inflation the Capital good and then the difference from the Fiscal Price and the Sale price will be imposed with the 25% rate. Inventory Valuation Inventory is valued for tax purposes at cost. In determining the cost of goods sold, the inventory flow assumption prescribed on the law is LIFO (last-in, first-out). Other assumptions can be adopted if permission is obtained from the tax authorities. Deductible Expenses Generally, all ordinary and necessary expenses incurred in carrying on a trade or business, or with respect to property held for the production of income, are deductible against gross income. Deductible business expenses generally include, but are not limited to, salaries and wages, bad debts, rents, property taxes, interest, business related meals and entertainment, pension fund contributions, depreciation and amortization. Some deductions are subject to statutory limitations, such as the 5% limitation for deductible pension plan contributions. Bad Debts A reserve or allowance for bad debts may be deducted for tax purposes if approved by the tax authorities and the tax return is accompanied by a bona fide list of delinquent accounts. In the absence of a reserve for bad debts delinquent accounts are deductible only when they become wholly or partially worthless under the specific charge-off method. Pensions Under the new law 87-01, which will took effect on 11/01/02, individuals are required to contribute to a pension plan in the private sector of their choice. Depreciation A depreciation deduction is available for most property, except land, used in a trade or business or held for rental. Under the law, depreciable assets are grouped into three classes of property. Each class is assigned a depreciation rate. The law prescribes a modified declining balance method. Category 1: Buildings and their structural components 5% Category 2: Automobile and light trucks every day use; Office furniture and equipment, computers, Information systems and data processing equipment 25% Category 3: Any other depreciable property 15% In addition, several types of intangible assets are amortizable over five years, on a straight-line basis, such as goodwill, going-concern value, information base, know-how, trademarks, and covenants not to compete. Net Operating Losses Net operating losses may generally be carried forward for three years to offset taxable income in those years, however, as minimum tax exists, these losses will be difficult to offset. (Carry backward is not permitted), This offset can be use by the tax payer only when the profits are in the current year higher than the 1.5% minimum tax payment. Treatment of Groups of Companies Consolidated Returns Domestic companies that are members of an affiliated group can generally elect to file a consolidated income tax return and determine their tax liability on a consolidated (group) basis if permission is obtained from the Tax Authorities. If this election is made, losses incurred by group members can generally be offset against profits earned by other group members. An affiliated group consists of a parent-subsidiary chain of companies connected by stock ownership representing at least 50% of the voting power and value of all classes of out¬standing stocks. Corporate Distributions In general, a company distributing property must recognize gain or loss as if it had sold the property at its fair market value in a taxable transaction. Dividends Received Deduction Dividends received from other D. R. companies generally qualify for a 100% dividend received deduction. Dividends, Interest and Royalties Paid to Foreign Affiliates Dividends and royalties paid by domestic companies to foreign affiliates are subject to a 25% withholding tax. Interests paid are also subject to the withholding tax but the rate is 15% if the recipient is a financial institution or 25% if it is not (art. 306). Non-resident Companies Non-resident foreign companies are generally subject to income tax at the same rate as domestic corporations. Determination of gross income and deductions follows the same rules followed as in the case of domestic companies. Branch Profits Tax Branch profits are subject to Dominican Republic income tax under the same basis of determination of gross income and deductions used by a domestic company. The Dominican Republic practice assumes that a branch has the same form of organization as that of the parent company. The tax rate is 25%, that is to say, the same rate that applies to a domestic corporation. Income from Imports Income earned by a foreign corporation on imports into the Dominican Republic is not considered effectively connected income and thus is not subject to D. R. income tax if: - Title to the goods passes overseas; and - The foreign corporation has no D. R. office or fixed place of business, including the facilities of dependent sales agents, to which such income is attributable. Real Property Income and Gains Foreign corporations not engaged in a D. R. trade or business that derive rental income from D. R. real estate are generally subject to D. R. tax on gross rental income (no deductions are permitted at a 25% rate. However, a "net election" may be made to treat such rental income as if it were effectively connected with the conduct of a D. R. trade or business. If this election is made, the rental income is taxable on a net basis, with allowance for deductions such as depreciation, interest and maintenance. Partnership For D. R. tax purposes, partnerships are entities subject to taxation at the entity level. The partners are not taxed currently on their distributive share of partnership taxable income when distributions are made. Taxation on Individuals Determination of Residence In general, foreign nationals who are considered resident aliens are taxed on their Dominican sources income in the same manner as D. R. citizens. A foreign national is considered resident in the Dominican Republic for income tax purposes, if during the fiscal year has resided in the country for at least 182 days. A foreign national who is considered a D. R. resident under the above national rule is taxed at the graduated rate prescribed by the law. A non-resident is taxed at a flat rate of 25%. Taxation of D. R. Citizens and Resident Aliens Gross Income D. R. citizens and resident aliens are taxable at graduated rates on all types of gross income derived from a Dominican source and from financial operations made abroad. For purposes of taxation of income from financial operations, a resident alien is not considered to be a Dominican resident during the first three years living in the country and, consequently, during that period such income is not taxed. Ordinary income is taxed at a maximum rate of 25%. Items excluded from gross income include donations and inheritances received, which are taxed under a separate law. Capital Gains and Losses Capital gains of D. R. citizens and resident aliens are taxable regardless of the purpose for entering into the transaction that results in the gain except if the property sold is the tax payer’s personal residence and its value is less than RD$644,636, in which case capital gain is tax free. Net capital gains income is taxed at ordinary rates. Calculation of the gain must be made taking into account the cost and rates of inflation for the years during which the property belonged to the taxpayer. Law 288-04 establishes that in any case can be compensated in current or future period, looses that proceeds from other entities with which the contributor had done some reorganizing process after the publication of law 288-04. Deductions No deductions of any kind are permitted for purposes of calculation of the taxable income, except a flat amount of RD$125,256. Rates The tax rates are set forth in the following table: Taxable income Tax on Rate on Exceeding Not exceeding lower amount excess RD$ RD$ RD$ % 0 125,256 EXEMPT EXEMPT 125,256 208,760 0 15 208,760 313,140 12,526 20 313,140 33,402 25 Taxation of Nonresident Alien Individuals Any individual who is not a D. R. citizen or resident alien is considered to be a nonresident alien for D. R. tax purposes. Nonresident aliens are generally taxed on the gross income and no allowances or deductions of any kind are permitted. Statutory Exemption In general, a nonresident alien who performs personal services as an employee in the Dominican Republic at any time during the tax year is subject to tax. Capital Gains As a general rule, D. R. -source capital gains of a nonresident alien is subject to D. R. tax at a rate of 25%. Deductions Nonresident aliens may not use the standard deduction available to D. R. citizens and resident aliens. When a physical person (Law 288-04) uses the deductions of article 287 of the Tax Code because of business activities the person can not use the tax exemption of the article 296. Recharges, fines and interests are not going to be considered as deductible expenses as consequence of violating any tax law. Income Taxation The Unitary Business Concept The unitary business concept is used to help determine which members of a controlled group of companies may elect, or may be required, to file a consolidated return. A "unitary" business is one in which there is a high degree of interrelationship and interdependence among the activities of related corporations. Factors typically examined to evaluate whether such a situation exists include: ­ Unity of ownership; ­ The degree of centralized management and decision making; ­ The flow of value among the divisions or corporate entities, including inter company sales and financing; and ­ Common external support services, such as legal counsel, accountants and investment bankers. Tax Treaties The Dominican Republic has only concluded a tax treaty with Canada. This treaty to avoid double taxation takes the form of mutual reduction or elimination of tax on specified items of income, including special provisions for industrial and commercial profits, investment income, dividend, interest, rental and royalty income, real property income and personal service income, etc. G Financial Reporting and Auditing G.1 Statutory Requirements Books and Records Under the Commercial Code of the Dominican Republic all companies, partnership and sole proprietorship must keep, basically, a journal to register operations, and an inventory book. Each company subject to D. R. taxation is required to keep the books of account and records necessary as supporting documentation for the amount of gross income, deductions and credits stated in the company's D. R. tax return. The form that these records take is left to the discretion of the individual taxpayer. Method of Accounting For D. R. tax purposes, companies are generally required to use the accrual method of accounting. Financial Statements Laws usually do not require a company to publish or file financial statements with authorities, except the tax authorities and regulatory bodies like the Bank Superintendent and the Insurance Superintendent. G.2 Accounting Principles and Practices The following is a summary of significant D. R. financial accounting principles and practices: General An entity is usually deemed to be a going concern. Assets are usually carried at the lower of original cost or net realizable value although certain assets, such as marketable debt and equity securities, are generally marked to market. Companies use the accrual method, recognizing revenues when they are earned and expenses when they are incurred. Accounting principles should be applied consistently from one period to another, but a change to a preferable principle is acceptable. Consolidation and Equity Accounting If one company holds a voting interest of more than 50% in another company, the financial statements of the two companies are generally consolidated, even thought not required by the law. An investor company that owns a voting interest of 50% or less but is able to exercise significant influence over the investee must use the equity method of accounting, under which the investor's share of the investee's net income is included as a separate item in the investor's statement of income. Significant influence is presumed if the investor owns between 20% and 50% of the vot¬ing stock of the invested. Asset Valuation A company may not ordinarily increase the cost basis of assets, other than marketable securities, to reflect appraisal value or market values. Recently, however, the Dominican Institute of CPAs approved Bulletin No. 7, which permits the revaluation of fixed assets. This bulletin, in general, has not been applied, nor is a provision stated in the income tax law, which prescribed that the financial statements of the taxpayers must be re-expressed to reflect the current market level of prices for income tax purposes, applied. Inventory Inventory comprises raw materials and purchased components, work in process, and finished products or merchandise held for sale in the ordinary course of business. Inventory is accounted for at the lower of cost or market value. Cost includes both direct and indirect costs. The acceptable accounting method to determine the cost of inventory is LIFO but other methods can be used if approval is obtained from the tax authorities. Property, Plant and Equipment Property, plant and equipment is carried at original cost less accumulated depreciation, depletion, and amortization, which are charged to income on a systematic and rational basis over the estimated useful lives of the assets. For financial reporting, straight-line depreciation or amortization, which allocates costs equally over the estimated useful life of an asset, is the most frequently used depreciation method. Accelerated depreciation methods, which allocate greater portions of cost to earlier years, are also acceptable, as is the unit-of-production method, which is commonly used for amortizing the cost of an investment in natural resources. For tax purposes, a modified declining-balance method must be used. Reserves Valuation reserves to reduce the carrying amount of assets to market value or net realizable value are deducted from the related asset on the balance sheet. Examples of such reserves are allowances for uncollectible receivables and for inventory that cannot be sold or is slow moving. Reserves for contingent losses are permitted only to the extent that it is probable that a loss has been incurred and its amount can be reasonably estimated. Capitalization of Interest Interest costs are capitalized as part of the cost of acquiring certain assets that require a period of time to be constructed or otherwise readied for their intended use. The term "intended use" refers to use in the business or for sale or leasing, and the capitalization period ends when an asset is ready for this use. Interest costs are not capitalized for inventories that are routinely manufactured in large quantities on a repetitive basis or for assets being held for future development or sale. Accounting for Income Taxes Comprehensive income tax allocation is required for differences between financial (book) accounting and tax accounting. Foreign-Currency Translation Generally, financial statements denominated in a foreign currency are either translated or re-measured into D. R. pesos, depending on the nature of the foreign operation. Assets and liabilities of operations that are self-contained and integrated within a foreign country are first measured in local currency and then translated into pesos. The year-end exchange rate is used to translate assets and liabilities; average exchange rates for the period are used to translate the income statement. Translation adjustments are excluded from the current year's net income; they are carried in the balance sheet as an adjustment to shareholders' equity. Related-Party Transactions Companies are required to disclose the nature and financial impact of any significant transactions with a related party during an accounting period, including transactions made in the ordinary course of business. The phrase "related party" is defined broadly to include the following: - Parties to a parent-affiliate relationship; - Principal owners and managers and members of their immediate families; and - Any other party with which the company may deal in a situation in which one party has the ability to influence significantly the management or operating policies of the other, or in which a third entity has the ability to influence significantly the management or operating policies of the transacting parties. b) Inheritance and Gift taxes D. R. estate and gift taxes are imposed on the decedent's estate or the donor based on the value of property transferred by death or gift. Gift Taxes Residents In general, D. R. residents are subject to gift tax on the fair market value of transfers of all property, tangible or intangible, regardless of the location of the property. Nonresidents In general, foreign nationals not domiciled in the Dominican Republic are subject to D. R. gift tax only on transfers of D. R. real property and tangible personal property located in the Dominican Republic. Estate Taxes Residents The taxable estate of a D. R. citizen or resident includes all property, tangible or intangible. If real estate, the tax is applicable only if the property is located in the Dominican Republic. If not real estate, tax is applicable regardless of the location of the property. Nonresidents For D. R. tax purposes, the estate of a nonresident includes only tangible, intangible and real property located within the Dominican Republic at the time of death. Shares of stock in D. R. corporations and certain debt obligations of D. R. obligors are considered to be property located in the Dominican Republic. Heritage and Gift Taxes In addition to estate tax, estates are also subject to income tax on income earned during administration and settlement. Estates determine taxable income by subtracting allowable deductions and personal exemptions from gross income. In general, estates are entitled to the same deductions and credits as individuals. Tax rates for estates and gifts range from 1% to 32% as follows: Category From To % % Spouse, ascendants and descendants 1 17 Brother, sisters, nephews and nieces 3 21 Other relatives 6 27 Others 8 32 In addition, a 50% surcharge is levied on nonresident beneficiaries. c) Tax on the transfer of industrialized goods and services (ITBIS) ITBIS (Value Added Tax) are levied on the majority of the domestic and imported industrialized goods and services. Applies to: a) The Transfer of industrialized goods, calculated on the net transfer price plus accessory service, b) The importation of industrialized goods, calculated on the CIF value of the goods plus customs duties, c) The rendering of services, d) The leasing of tangible personal property Tax Rate: ITBIS (Value Added Tax) rate is 16%. (reformed by the 288-04 law.) Registration and tax returns The tax payer will register at the national tax payer Registry and must file a tax return of their activities on a monthly basis. Time Limit A tax return must be filed in the course of the first 20 days of each month, even when is not tax to be paid. Delay Charges In case the tax payer doesn’t pay the ITBIS taxes in time, it will be charge with a 10% delay charges for the first month and a 4% next months. Interest In case the tax payer doesn’t pay the ITBIS taxes in time, it will be also charge with a legal interest of 2.58% per month of delay. (This charge is frequently adjusted by inflation). Fiscal Period The fiscal period of this tax is a calendar month. Deduction from Gross tax (ITBIS) The Taxpayer shall have the right to deduct from the gross tax the amounts that, by reason of this tax have been advanced within the same period: 1.- To local suppliers for the acquisition of goods burdened by this tax, 2.- In customs, for the introduction into the country of goods burdened by this tax. Deduction Exceeding Gross Tax: When the total taxes deductible by the taxpayer are greater than the gross tax, the resulting difference shall be transferred, as deduction, to the following monthly period Compensation and Reimbursement When a taxpayer is exempt of this tax and pays ITBIS importing or buying raw materials, packing or any other item destine to manufacture or assembling an exempt product, in the curse business, the DGII allows the tax payer to compensate this tax advance payment with other taxes. The procedure for soliciting this tax compensation or Reimburse is by sending a letter to the DGII soliciting the tax compensation or Reimburse and after a careful inspection by the Auditing department the DGII will proceed preparing a certificate of credit, which will be available for reimburse or compensation with other taxes. (The time frame for soliciting compensation for credit balance is 6 months) Transferring a Tax Credit Also the tax payer can transfer the certificate of credit to other entity with the proper authorization of the DGII. Non Deductible Taxes The taxpayer may not deduct from the assessed gross tax the taxes advance upon acquiring capital goods Exemptions Exempt products The following expenses are exempt of ITBIS (VAT) 1) Agricultural products 2) Living Animals and Products 3) Fuel and gas 4) Medicines and medical instruments 5) Pesticides 6) Minerals 7) Educational Material 8) Basic needs products 9) Paper 10) Printing machinery and Printing accessories 11) Graphics industries and products 12) Books and magazines 13) Personal Computers and accessories Exempt Services 1) Educational Service 2) Financial Service, excluding insurance 3) Pensions plans 4) Cultural 5) Transportation Services: Persons and Cargo 6) Electricity, water and garbage services 7) House renting services 8) Health 9) Personal care d) Selective tax on Consumption Selective tax This tax applies the transfer of certain goods of national production at the level of the manufacturer, their importation and the rendering or leasing of some services. Registration and tax returns The tax payer will register at the national tax payer Registry and must file a tax return of their activities on a monthly basis. Time Limit A tax return must be filed in the course of the first 15 days of each month, even when is not tax to be paid Delay Charges In case the tax payer don’t pay the Selective taxes on time, it will be charge with a 10% delay charges for the first month and a 4% the next months Interest In case the tax payer doesn’t pay the Selective taxes on time, it will be also charge with a legal interest of 2.58% per month of delay. (This charge is frequently adjusted by inflation) Fiscal Period The fiscal period of this tax is a calendar month Deduction from Gross tax (Selective) The Taxpayer shall have the right to deduct from the gross tax the amounts that, by reason of this tax have been advance within the same period: 1.- To local suppliers for the acquisition of goods burdened by this tax 2.- In customs, for the introduction into the country of goods burdened by this tax Deduction Exceeding Gross Tax: When the total taxes deductible by the taxpayer are greater than the gross tax, the resulting difference shall be transferred, as deduction, to the following monthly period: Goods submitted to Selective Tax Certain goods of national production at the level of the manufacturer and at the level of the importation, considered luxurious by the law are charge with the selective tax of consume, also certain services. Tax Rates: TAX CODE DESCRIPTION RATE 1604.30.00 Caviar and its derivatives 65 2402.10.00 Cigars (puros) large and small sizes 32.5 2403.10.00 Any Tobacco product use for smoke in any portion 65 2403.99.00 Other tobacco products 65 33.03 Perfume 39 3922.10.11 “jacuzzi”, Plastic or fiber glass. 52 7324.21.00 “jacuzzi” 52 7324.29.00 Any kind of “jacuzzi” bath 52 7418.20.00 Bath “jacuzzi” 52 7615.20.00 Bath of “jacuzzi” style 52 57.01 Floor carpet from textile materials, even confectionated 58.5 57.02 Floor carpets and other covers for floor of textile materials, weaved, except those of mechón. Inserted and flocados, even if they are confectionated, including carpets named “Kelim”, o “Kilim”, Schumaks” o “Soumak”, “Karamie” and similar handmade carpets. 39 57.03 Carpets and another floor coating, from textile material, with inserted mechón, even confectionated. 39 58.05 Handmade tapestry (Gobelinos, Flandes, Aubusson, Beauvais and similars) y leedle tapestry, (for example: “petit point”, cross point), even confectionated. 39 71.13 Jewelry article and its parts, precious metals or precious metals chapado (plaqué) 39 71.14 Fine pearls manufactured (naturals) or cultivated , from precious metals or from semiprecious (naturals, sintetics or rebuilds) 39 71.17 Bijouterie 39 84.15 Machines for air conditionings that have a motor ventilador and the appropriate dispositives in order to modifie the temperature and the humidity, no matter that they does not regulate separately the hydrometric grade. 39 8479.60.00 Evaporation Machines to refrigerate air. 39 8509.10.00 Vacuum cleaners 26 8509.10.00 Floor waxers 26 8509.30.00 Crushing machine of kitchens 26 8509.40.09 The others (Crushing machine and food mixers) 26 8509.80.00 Other machines 26 8516.10.00 Electric water heaters of instant heater or accumulation and electric heaters of immersion 52 8516.50.00 Microwave ovens 19.5 8516.60.10 Ovens 19.5 8516.60.30 Heaters, grills and spits 32.5 8516.71.00 Tea or coffee machines 32.5 8516.72.00 Bread toaster 19.5 Tax Code DESCRIPTION RATE 8516.79.00 The others 19.5 8517.19.10 Videofonos 32.5 85.19 turntable, record player, cassette players and other sound players, without incorporated record device. Others recorder and play machines in magnetic tape. 8520.32.00 Digitals. 19.5 8520.33.00 Others from cassettes. 19.5 8520.90.00 Others 19.5 85.21 Recording machines or image and sound reproduction (videos), even with signal receptors. 32.5 8525.40.00 Video cameras, including those with fixed image. Radiotelephony receptor, radiotelegraphy, and radiodifussion machines. 32.5 8527.13.10 With recorder or sound player by optical reader system. 32.5 Aparatos receptores de radiodifusión que sólo funcionen con fuente de energía exterior, del tipo de los utilizados en vehículos o automóviles, incluso los que puedan recibir señales de radiotelefonía o radiotelegrafía. 8527.21.10 Con grabador o reproductor de sonido por sistema óptico de lectura. 32.5 Los demás aparatos receptores de radiodifusión, incluso los que puedan recibir señales de radiotelefonía o radiotelegrafía 8527.31.10 Con grabador o reproductor de sonido por sistema óptico de lectura. Receptores de televisión, incluso con aparato receptor de radiodifusión o de grabación o reproducción de sonido o imagen incorporado 32.5 8528.12.00 In colors 19.5 Video monitors 8528.21.00 In colors 32.5 85.29 Parts identified as destined, exclusive or principally to machines of nos.8525 to 8528. 19.5 88.01 Balloons and dirigibles; gliders, glider wings y and other aircrafts not concebide for motor propulsion. 58.5 8903.91.10 Yatch 58.5 91.01 Bracelet watches, pocket and similar watches (including time counter os the same style), with precious metal boxes, or precious metal chapados (plaque) 39 9111.10.00 precious metal boxes, or precious metal chapados (plaque) 39 9113.10.00 precious metal bracelets, or precious metal chapados (plaque) 39 93.02 Guns and pistols, except those of no. 9303 ó 9304 78 Goods and Rates of Alcohol Products Alcohol products The Selective tax charge the importation and elaboration of alcohol products depending on the amounts of alcohol used in the Product. The following are the rates charge by this tax depending on the liter of alcohol included in the product Tax Code Description Specific Amount Year 2004 Specific Amount Year 2005 Specific Amount Year 2006 Specific Amount Year 2007 Specific Amount Year 2008 22.03 Malt Beer (except malt extract) 217.35 201.99 186.63 171.27 155.91 22.04 Fresh grapes wine, Even headed Must of grape, except the item 20.09 144.84 147.61 150.38 153.14 155.91 Tax Code Description Specific Amount Year 2004 Specific Amount Year 2005 Specific Amount Year 2006 Specific Amount Year 2007 Specific Amount Year 2008 22.05 Vermut Other wines of fresh grapes prepared with his plants or aromatic substances 144.84 147.61 150.38 153.14 155.91 22.06 Other drinks fermented (for example, cider, perada, aguamiel, mix of drinks 217.35 201.99 186.63 171.27 155.91 Fermented and Not alcoholic Drinks not included in another part 22.07 Ethilic Alcohol not naturalizad With a volumetric alcoholic degree top or equal to 80 % vol: ethilic alcohol and not naturalized unmatured brandy, of any graduation 91.00 107.23 123.46 139.68 155.91 22.08 Ethilic Alcohol not naturalizad With a volumetric alcoholic degree lower than 80% vol., licors and unmatured brandy, Other spirits Drinks, alcoholic preparations consisted of the type of the used ones for the production of drinks. 91.00 107.23 123.46 139.68 155.91 2208.20.00 Unmatured brandy of grape (Cognac, Brandys, Grapa) 254.39 229.77 205.15 180.53 155.91 2208.30.00 Whisky 216.51 201.36 186.21 171.06 155.91 2208.40.00 Rum and others unmatured brandys of cane. 91.00 107.23 123.46 139.68 155.91 Tax Code Description Specific Amount Year 2004 Specific Amount Year 2005 Specific Amount Year 2006 Specific Amount Year 2007 Specific Amount Year 2008 2208.50.00 Gin y Ginebra 121.30 129.96 138.61 147.26 155.91 2208.60.00 Vodka 236.65 216.47 196.28 176.10 155.91 2208.70.00 Licors 227.82 209.85 191.87 173.89 155.91 2208.90.00 The others 232.63 213.45 194.27 175.09 155.91 Goods and rates of Tobacco Products All Tobacco products are charge by this tax with the following rates Code Description Specific amount by Packet of 20 units of Cigarettes 2402.20.0 Cigarettes containing tobacco RD$9.60 2402.90.00 The others RD$9.60 Specific amount by Packet of 20 units of Cigarettes 2402.20.00 Cigarettes containing tobacco RD$4.80 2402.90.00 The others RD$4.80 This Selective Consumption Tax (following rules set by Law 288-04) per liter of absolute alcohol is independent of any other tax, and will not be considered part of the calculation price of the imposable base of any other tax or contribution. In the case of alcohol products, alcoholic beverages and beer, the amounts of the Selective Consumption Tax applicable to each year will be determined taking into account the amounts shown in the table described in paragraph I article 375 for the corresponding year. In January 2005, these amounts will be adjusted by in the inflation rate corresponding to the period July-December 2004 in accordance to the figures published by the Central Bank of the Dominican Republic. From April 2005 onward, the amounts of the Selective Consumption Tax applicable to alcohol products, alcoholic beverages and beer, will be adjusted every quarter based on the accumulated inflation rate of the previous quarter, according to the figures published by the Central Bank of the Dominican Republic. From the year 2009 and on the amounts determined for the year 2008 will still adjusted every quarter according to the inflation rate published by the Central Bank of the Dominican Republic. The Direccion General de Impuestos Internos (Internal Tax Department) will request to the Direccion General de Normas(Department of Norms), a categorization of alcohol products based on their content of absolute alcohol. In relation to cigarettes containing tobacco, a specific Selective Consumption Tax is established per pack of cigarettes, according to the following table: Código Description Amount Box of 20 Units 2402.20.0 Cigarette that contains Tobacco RD$13.44 2402.90.00 The other RD$13.44 Monto Descripction Amount Box of 10 Units 2402.20.00 Cigarette that contains Tobacco RD$6.72 2402.90.00 The other RD$6.72 When the presentation of the pack of cigarettes from the above shown, the amount of the fixed rate will by applied proportionally. This Selective Consumption Tax per pack of cigarettes is independent to any other tax and will not be considered part of the calculation price of the imposable base of any other tax or contribution. From April 2005 onward, the amounts of the Selective Consumption Tax applicable to cigarettes packs will be adjusted every quarter based on the accumulated inflation rate of the previous quarter, according to the figures published by the Central Bank of the Dominican Republic. In January 2005, the of Selective Consumption Tax applicable to cigarette packs, these amounts will be adjusted by in the inflation rate corresponding to the period July-December 2004 in accordance to the figures published by the Central Bank of the Dominican Republic. A 25% Tax is established over the sale price of non-bottled beverages and drinks, that use color-sweetener with a high level of fructose in their production processes. G.3 Financial Reporting Disclosure Requirements General Requirements The principal components of financial statements are a balance sheet, a statement of income and retained earnings and a statement of cash flows, together with a summary of the entity's significant accounting policies and other disclosures. Financial statements for both, the current year and the preceding year, are generally presented. The balance sheet usually is classified into current and non-current items. Current assets are those that will be realized in cash within the greater of one year or one operating cycle, and current liabilities are obligations for which liquidation will require the use of current assets or the creation of other current liabilities. Amounts due on demand or payable within one year, including the portion of long-term debt payable within one year, are ordinarily classified as current liabilities. The income statement contains, with some specified exceptions, all items of profit and loss recognized during the period, including gains and losses that are unusual or non-recurring. The statement of cash flows summarizes an entity's cash receipts and cash payments during a period and classifies them as resulting from investing, financing or operating activities. The notes to the financial statements are considered an integral part of the statements. They disclose information, some of which is specifically required by GAAP. The notes include a summary of significant accounting policies and detailed information relating to specific accounts and transactions in the financial statements, such as income taxes, long-term leases and other significant commitments, pension plans, and contingent assets and liabilities. Requirements for Regulated Industries Regulatory bodies require companies in regulated industries, such as banking and insurance, to maintain detailed uniform financial statements and to conform with certain accounting requirements specific to their industry. Some regulatory financial statements differ in material respects from financial statements prepared in conformity with generally accepted accounting principles (GAAP). G.4 Auditing Requirements A Company is required to have annual audits and to file its tax return accompanied by the auditors' report. Because of various government regulations and private business practices, however, most other organizations have annual audits or a "review" of their books and records. For example, even small business organizations may be asked to provide audited statements to banks and other creditors. An audit is usually conducted by independent certified public accountants in accordance with generally accepted auditing standards. The auditor's report must state whether the company's financial statements conform to generally accepted accounting principles. G.5 Accounting Profession The largest professional association for accountants in the D. R. is the ”Instituto de Contadores Públicos Autorizados de la República Dominicana (ICPARD).” It has primary responsibility for issuing pronouncements on professional ethics, by-laws and auditing standards. These pronouncements on professional standards provide quality control and a frame of reference for practitioners. For example, the ”Instituto” provides guidance on the training of auditors, the level of independence required by auditors, the conduct of an audit, the form of the audit report, etc. Due to economic constraints, however, releases from the Institute are infrequent. In the circumstances, Dominican accountants look to the American Institute of CPA's and its publications for reliable guidance. Only licensed certified public accountants (CPAs) may issue an opinion on financial statements. Licensing is done at the government level. To obtain a CPA license, an individual must be graduated from a recognized university. ATTACHMENTS LAW 288-04 Article 1.- The additional paragraph of article 248 of Law No. 11-92, of May 16 1992, Tax Code, is modified to appear in the following way: Paragraph.- whoever pays spontaneously out of the set deadlines, the tax that was omitted, does not in incur in this infraction but in tardiness. The difference in taxes determined as a consequence of the fiscalizations and estimates made by the Tax Administration, are subject to recharges as established in Article 252 of this Law. Article 2.- Literal k) of article 287, Law 11-92, Tax Code, is modified to appear in the following manner: k) Losses: The economic losses suffered by companies during a fiscal year will be deductible from the profits made by the company in the immediate following fiscal year, but this compensation will not be extendable for more than three fiscal years. However, in any case will this compensation will be applicable in actual or future period, when the losses suffered by other entities with which the Tax Payer has made some process of reorganization after the publication of this Law. Article 3.- A paragraph is added to literal m) of article 287, of Law 11-92, Tax Code, to appear in the following way: Paragraph: When a physical person makes use of the deductions referred to in the present incise, in consequence of his business activities, he/she will not be able to use the contributive exemption disposed of in Article 296 of this same Code. Article 4.- A paragraph is added to literal d) of article 288, of Law 11-92, Tax Code, to appear in the following way: Paragraph: Any charges, fines or interests applied as a consequence of breaking any tax law will not be considered deductible expenses. Article 5.- A paragraph is added to article 288, of Law 11-92, Tax Code, to appear in the following way: Paragraph: When a Tax Payer presents his/hers sworn declaration and if in the process of fiscalization any contestations are made in reference to incises a), b) and e) of the present Article, the Tax Payer will be fined with a 25% pecuniary sanction on every expense contestated, without any effect on indemnification charges and interests that may result applicable. Article 6.- Article 296, Tax Rate on Persons, of Law 11-92, Tax Code, modified by Law 47-00, of December 27 2000, is modified to appear in the following way: Article 296.- Tax rate on physical persons All persons resident’s or domiciled in the country will pay on over their taxable net income of the fiscal exercise, the resulting sums after progressively applying the following scale: 1. Incomes from RD$0.0 to RD$24,000.00 exempt. 2. The exceeding amount form RD$24,000.01 to RD$36,000.00 15% 3. The exceeding amount from RD$36,000.01 to RD$50,000.00 20% 4. The exceeding amount from RD$50,000.01 on forward 25%. Paragraph: The present scale will adjusted annually in account of the accumulated inflation corresponding the preceding year, in accordance to the figures given out by the Central Bank of the Dominican Republic. Article 7.- Paragraph I is modified and paragraph VI is eliminated of Article 308, of Law 11-92, Tax Code, to appear in the following way: Paragraph I: Credit permitted to a Moral Person against his income: If a “Moral Person” withholds any amount in virtue of this Article, that amount will constitute a credit against the Tax established in Article 267 on the income of the Moral Person that makes the distribution, for the fiscal year in which the withholding toke place, only in the cases in which the amount distributed has paid its income tax. Article 8.- Literals a) and d) of paragraph I, of article 309, of Law 11-92, Tax Code, to appear in the following way: a)10% of all sums paid or credited in accounts coming from rent’s or leases of any type of real estate and personal estate. d)2% over the payments made by the government or it’s dependencies, including government companies and decentralized and autonomous organisms, to physical and “moral persons”, for the acquisition of goods and services, not executed in relation to the dependency. Article 9.- Article 314, of Law 11-92, Tax Code, is modified to appear in the following way: Article 314.- Tax Advance. “From the year 2006 on forward all tax payers of the Income Tax considered as “Moral Persons” will pay their advances based on twelve monthly fees equal to 100% of the Income Tax liquidated on the previous period. In the case physical persons and undivided inheritance domiciled in the country, as long as their income does not come from commercial or industrial activities, are in the obligation of making payments o account of the Tax relative to fiscal period in course, equal to 100% of the tax liquidated on the previous period, in the following months and percentages: 50% on the sixth month, 30% on the ninth month and 20% on the twelve month. When their income comes from commercial or industrial activities, the advance will be paid in the same as a “Moral Person”. From the sums paid by concept of advances, any existing surplus in favor of the tax payer will be deducted, when their compensation or refund has not been requested. Capital societies can compensate the credit generated by the distribution of dividend payments in cash against the advances to pay, previously informing the administration. Paragraph: (transitional) The companies which in the fiscal year 2004 make their advance payments based on a 1.5% rate of their gross income, will pay during the fiscal year 2005, in concept of the same, an amount equal to the advances liquidated during the fiscal year 2004. These payments are not subject to any type of deductions by concept of surplus in favor. The advances that are still pending to be liquidated during the calendar year 2004, will be paid according to the existing system previous to the publication of this Law. Article 10.- Article 341 and it’s paragraph, of Law 11-92, Tax Code, are modified to appear in the following way: Article 341. 16% Rate. This tax will be paid on 16% rate on the imposable base, as established in Article 339 of this Code. Paragraph: When involving publicity services, the applicable rate will be 6% until the 31st December 2004. From the 1rst of January 2005 until the 31rst of December of 2005 the applicable rate will 10% and from the 1rst of January 2006 forward the applicable rate will be 16%. Article 11.- The application of this tax is eliminated to the customs tariff group 2402.10.00. The rates for customs tariff groups 2403.10.00 and 2403.99.00 in article 375, are modified to appear in the following way: CÓDIGO ARANCELARIO DESCRIPCIÓN TASA 2403.10.00 Tabaco para fumar, incluso con sucedáneos del tabaco en cualquier proporción. 130 2403.99.00 Los demás 130 “Paragraph I.- When related to alcohol products, alcoholic beverages and beers, the amounts to be paid for liter of absolute alcohol according to the Selective Consumption Tax are established in the following table: Código Arancelario Descripción Monto específico año 2004 Monto específico año 2005 Monto específico año 2006 Monto específico año 2007 Monto específico año 2008 22.03 Cerveza de Malta (excepto extracto malta) 326.03 302.99 279.95 256.91 233.87 22.04 Vino de uvas frescas, incluso encabezado mosto de uva, excepto el de la partida 217.26 221.42 225.57 229.71 233.87 22.05 Vermut y demás vinos de uvas frescas preparados con sus plantas o sustancias aromáticas 217.26 221.42 225.57 229.71 233.87 22.06 Las demás bebidas fermentadas (por ejemplo, sidra, perada, aguamiel, mezclas de bebidas fermentadas y bebidas no alcohólicas no comprendidas en otra parte) 326.03 302.99 279.95 256.91 233.87 22.07 Alcohol Etílico sin desnaturalizar con un grado alcohólico volumétrico superior o igual al 80% vol. alcohol etílico y aguardiente desnaturalizados, de cualquier graduación 136.50 160.85 185.19 209.52 233.87 22.08 Alcohol etílico sin desnaturalizar con un grado alcohólico volumétrico inferior al 80% vol., licores y aguardiente, demás bebidas espirituosas, preparaciones alcohólicas compuestas del tipo de las utilizadas para la elaboración de bebidas. 136.50 160.85 185.19 209.52 233.87 2208.20.00 Aguardiente de uvas (Cognac, Brandys, Grapa) 381.59 344.66 307.73 270.80 233.87 2208.30.00 Whisky 324.77 302.04 279.32 256.59 233.87 2208.40.00 Ron y demás aguardientes de caña 136.50 160.85 185.19 209.52 233.87 2208.50.00 Gin y Ginebra 181.95 194.94 207.92 220.89 233.87 2208.60.00 Vodka 354.98 324.71 294.42 264.15 233.87 2208.70.00 Licores 341.73 314.78 287.81 260.84 233.87 2208.90.00 Los demás 348.95 320.18 291.41 262.64 233.87 Paragraph II.- This Selective Consumption Tax per liter of absolute alcohol is independent of any other tax, and will not be considered part of the calculation price of the imposable base of any other tax or contribution. Paragraph III.- In the case of alcohol products, alcoholic beverages and beer, the amounts of the Selective Consumption Tax applicable to each year will be determined taking into account the amounts shown in the table described in paragraph I article 375 for the corresponding year. In January 2005, these amounts will be adjusted by in the inflation rate corresponding to the period July-December 2004 in accordance to the figures published by the Central Bank of the Dominican Republic. From April 2005 onward, the amounts of the Selective Consumption Tax applicable to alcohol products, alcoholic beverages and beer, will be adjusted every quarter based on the accumulated inflation rate of the previous quarter, according to the figures published by the Central Bank of the Dominican Republic. From the year 2009 and on the amounts determined for the year 2008 will still adjusted every quarter according to the inflation rate published by the Central Bank of the Dominican Republic. Paragraph IV.- The Direccion General de Impuestos Internos (Internal Tax Department) will request to the Direccion General de Normas(Department of Norms), a categorization of alcohol products based on their content of absolute alcohol. Paragraph V.- In relation to cigarettes containing tobacco, a specific Selective Consumption Tax is established per pack of cigarettes, according to the following table: Código Description Amount Box of 20 Units 2402.20.0 Cigarette that contains Tobacco RD$13.44 2402.90.00 The other RD$13.44 Monto Descripction Amount Box of 10 Units 2402.20.00 Cigarette that contains Tobacco RD$6.72 2402.90.00 The other RD$6.72 Paragraph VI.- When the presentation of the pack of cigarettes from the above shown, the amount of the fixed rate will by applied proportionally. Paragraph VII.- This Selective Consumption Tax per pack of cigarettes is independent to any other tax and will not be considered part of the calculation price of the imposable base of any other tax or contribution. Paragraph VIII.- From April 2005 onward, the amounts of the Selective Consumption Tax applicable to cigarettes packs will be adjusted every quarter based on the accumulated inflation rate of the previous quarter, according to the figures published by the Central Bank of the Dominican Republic. Paragraph(Transitional).- In January 2005, the of Selective Consumption Tax applicable to cigarette packs, these amounts will be adjusted by in the inflation rate corresponding to the period July-December 2004 in accordance to the figures published by the Central Bank of the Dominican Republic. Paragraph IX.- A 25% Tax is established over the sale price of non-bottled beverages and drinks, that use color-sweetener with a high level of fructose in their production processes. Article 12.- Articles 381 and 382 of the Tax Code are re-established, to appear in the following way: Article 381.- TELECOMUNICATIONS SERVICES: 10% RATE.- The Telecommunications Services include, voice transmission, images, written or printed materials, symbols and sounds by means of telephonic, telegraphic, cable graphic, radiophone, wire-less, via satellite, submarine cable or any other means that is not land, air or sea transportation. This concept does not include transmission of radio or television programs. Article 382.- A 0.0015% Tax is established on the value of every check of any nature, paid by financial intermediaries entities as also any payments made through electronic transfers. The transfers to accounts, made as payments to third parties in a same bank will be taxed with a 0.0015% rate. From this tax are excluded the withdrawals made in electronic cash machines as well as back offices, the consumption on credit cards, the payments on Social Security, the transactions and payments made by the Pension Funds, the payments made to the Dominican Government by concept of taxes as well as the transfers made by the Government of these funds. This tax will presented and paid at DGII(Tax Department), in the way and conditions that are established. Article 13.- Articles 1, 2 and 3 of Law 8-88, of February 5 of 1988, of the Lavish Homes and Non Constructed Lots Law(IVSS in Spanish), are modified to appear in the following way: Article 1.- A annual tax denominated Tax on Lavish Homes and Non Constructed Lots(IVSS), that will be determined over the value established by the Direccion General de Catastro Nacional. Paragraph(transitional).- The tax payers of the IVSS that on the date of this Law coming into effect that are omitted from the payment of this tax, will have a deadline of six months to present their corresponding declaration of this tax. Article 2.- The Real Estate burdened with this tax are the following: a) Housing Real Estate, which value including the lot on which it is constructed, is superior to RD$5,000,000.00 adjusted annually by inflation. b) Lots not used in construction and Real Estate not used for housing purposes, including those destined for commercial, industrial and professional activities, which value is superior to RD$5,000,000.00. Paragraph I.- Non constructed Urban Lots are those on which there has been no legalized formal construction by the competent organism’s (Secretary of State of Public Constructions and Communications, municipal government and all those contemplated by the law and resolutions of the government), destined for housing or commercial activities of all kind and those which construction occupies less than 30% of the total extension of the lot. Paragraph II.- Houses with the following conditions will be excluded from this tax, when the owner has sixty five(65) years or more and only the cases when the house has not been transferred en the last fifteen(15) years and the owner has only this one real estate property. Paragraph III.- It is established that this tax will only be applied to the lots and constructions of the real estate taxed and in consequence will be part of the taxable base rural real estate dedicated to farming activities, as well as the personal estate, equipment, machinery, electrical generators, merchandises and other chattels that may be inside or on the taxed real estate. Paragraph IV.- In the cases of the real estate described in literal “d” of this article owned by “Moral Person’s” that have organized accounting, present sworn declarations of operations and pay Income Tax, the base to apply the rate of this tax will be the costs of acquisitions, adjusted by inflation until the last fiscal period. In the case when the “Moral Person” does present operations or the costs of acquisition has not been updated, the value of the real estate will the one determined by the Direccion General de Catastro Nacional. Article 3.- RATE.- The real estate reached by this tax will pay 1% of it’s given value. For the cases described in literal’s a) and d) of article 2 of this Law, this rate will be applied on the exceeding value of the real estate, after the no taxed RD$5,000,000.00 have been deducted from the value. Article 14.- After January the 1rst 2005, all the tributes not contemplated in the Tax Code, not including the stamps, seals, registers, etc, that are used to control the local production and importation of finished products, that are established with values under RD$30.00 will be adjusted in their value up to RD$30.00, this value will adjusted annually by inflation, in accordance to the rules established in the Tax Code. When necessary the Tax Administration will have the authority to design the seals and method of payment of the same. Article 15.- All tax payers who in the following 12 months after the date of enforcement of this law repatriate to the Dominican Republic capitals or funds held in the foreign countries, will be permitted to introduce the same into the accounting reported to the DGII, paying 1% of the amount repatriated. Also, the tax payers whom to this date have not used the correction of their patrimony as permitted in article 1 of the Law 11-01, January the 17 of 2001, will be able to do so until December the 31 of 2004, liquidating before the DGII 1% of the difference of the adjusted patrimony. Paragraph.- The effect of the correction process of the financial statements of “physical persons” , “moral persons” and businesses owned by a single person over their assets, will not generate any fiscal effect or obligation in respect to the taxes stated in the titles of the Tax Code. Article 16.- Article 6 of the Law 2569, December 4th of 1950, Tax Law of Inheritance and Donations, and it’s modifications, to appear in the following way: Article 6.- The rate of this tax will 3% of the inheritance mass, after the corresponding deductions have been made, for inheritance cases. In donation cases the rate will be 25% of the value of the donation. The recourses and sanctions applicable for this tax, will be those established on Title I of the Tax Code. Paragraph(Transitional) .- For the cases of debts of inheritance taxes, originated before the enforcement of this law, the base of this tax can be liquidated at the same rate as established in this article so long as the interested parties pay the full amount of the tax before December 31st 2004. The DGII will emit norms, to set up the process of payment of any partial pending debt of this tax, at the moment of enforcement of this law. Article 17.- Article 5, of Law No. 2569, of December 4th 1950, Tax Law of Inheritance and Donations, is derogated. Article 18.- Literal d) of article 7, of Law No. 831, of March 5th 1945, that subjects a proportional tax to the acts intervened by title registers, to appear in the following way: d) The non pecuniary investments in the authorized social capital of national companies, as also the investments made in registered real estate in cases of organization and re-organization of national companies. Article 19.- The present law leaves without effect, the exemptions of the Transfer of Goods and Services Tax(ITBIS) and Income TAX(ISR), contemplated in Law No. 06-04, of January 11th 2004, Organic Law of the Housing and Production Bank. Article 20.- From the enforcement of this law onward, a 3% tax rate will be applied to the real estate transfers established in Law No. 831, of March 5th 1945, that subjects a proportional tax to the acts intervened by the title registers, No. 32, of October 14th 1974, for the contribution of 2% over real estate operations, No. 3341, July 13th 1952, the establishes an additional tax on real estate operations; No. 5113, April 24th 1959, that modifies article 2 of Law No. 5054, of December 18th 1958, and it’s modifications. The 3% above stated will applied on the market value of the real estate transferred and will substitute and the taxes in the referred laws. The following will also be taxed, the transfers of real estate purchased through loans from financial intermediaries of the financial system, as long as the home or lot acquired for this purpose with these loans, has a value over RD$1,000,000, amount that will be adjusted annually by inflation. Article 21.- Article 9, of Law No. 1041, of November 21st 1935, of the reforms made to Commercial Code, and dispositions made concerning the formation of capital companies, to appear in the following way: Article 9.- The constitutions of Limited Commercial Partnership Companies and Limited Stock Partnership Companies, will taxed with a 0.5% of the Authorized Social Capital of their capitals, which in no cases will be under RD$1,000. This tax will also be applied to Participation and Factual Companies, the tax being calculated on the base of capital agreed upon the contract or accord that gives birth to the society. Any further capital investments will be taxed with the same rate. Paragraph.- This tax will be paid before the DGII, and it’s payment receipt presented to the Director of Mercantile Registry or any other entity private or public in which it is required the registration formation documents of the company or factual society formed. These functionaries will not register the required documents until the corresponding payment receipt is presented, this will acknowledged in the documents that are issued for the interested parties. The non-compliance with this formality will sanctioned in accordance to the Tax Code. Article 22.- This law derogates any legal disposition that contrary to it.

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