The tax on assets was established by Law No. 557- 05 and is levied on the total assets of legal entities or individuals with sole proprietorships.
The purpose of this article is to provide information on the main aspects of such tax.
ASSETS SUBJECT TO THE TAX
In principle, this tax is levied on the total assets in the Company’s Balance Sheet, whereby the adjustment for inflation will not be considered, discounting the depreciation, amortization and reserves for uncollectible accounts.
Taxable assets include the following:
- Cash and banks.
- Accounts Receivable from Customers less reserves.
- Accounts Receivable from Officers.
- Accounts Receivable from Shareholders.
- Leasehold improvements.
- Intangible assets.
- Fixed-term investments.
- Automobiles and Equipment.
- Prepaid expenses.
ASSETS EXCLUDED FROM THE TAX
Investments in shares of other companies, land in rural areas, prepaid tax, and real estate for livestock and agriculture will not be considered for the tax base.
The tax rate on assets corresponds to 1% of the taxable base.
TEMPORARY EXEMPTION OF THE TAX ON ASSETS
Those companies that are not subject to the payment of income tax are exempted from the payment of this tax.
They may also request a temporary exclusion before the Dirección General de Impuestos Internos – DGII (General Directorate of Internal Taxes in the Dominican Republic):
- Companies whose net fixed assets are greater than 50% of their total assets.
- Taxpayers with losses caused by force majeure or extraordinary events.
- Companies that have investments, which by their nature have a cycle longer than one year, in such a way that certain assets are excluded from their taxable base.
FORM AND TERM TO PAY THE TAX
This tax must be filed and paid along with the Income Tax Affidavit of Corporates annually through Form 1R-2.
As for the payment, it will be made in two installments. The first one on the due date of the Income Tax Affidavit indicated and the second one up to six months after the due date of the first installment.
It should be noted that the Income Tax is taken as a credit against the tax on assets, whereby if the former is greater than the latter, only the excess Income Tax should be paid.
In case the tax has not been paid within the established deadlines, a 10% will be added or surcharged on the tax for the first month.
The surcharge will be 4%, and 1.10% will be paid cumulatively for compensatory interest following months.