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The Dominican Republic is one of the most popular expat destinations in the world. There are good reasons for that, too. With the Dominican Republic’s beautiful weather and welcoming culture, it’s no wonder so many Americans have chosen it as their new home.
Of course, when moving abroad, knowing what taxes you can expect is always essential. In this guide, we’re going to look at how the Dominican Republic taxes expats.
Before talking about Dominican taxes, it’s worth noting that expats living in the Dominican Republic still have US tax obligations. Every US citizen is required to file a US tax return every year, regardless of where they live. Whether you’ve made your home in San Diego or Santo Domingo, you still have to report your income to the IRS.
Of course, if you live in Santo Domingo (or anywhere else in the Dominican Republic), you will probably also have to file a Dominican tax return. The good news is that the Dominican Republic is known for its low tax rates.
The Dominican Republic taxes expats differently based on whether they qualify as residents for tax purposes.
Regardless, you will not need to file an annual return if you have only received traditional employment income from a Dominican employer. In that case, your taxes will be withheld at the source and do not have to be reported on an annual return. You will only have to file a return if you have received income not withheld in this manner, such as:
The Dominican Republic will consider you a resident for tax purposes if you spend more than 182 days in the country in a single year. These days do not have to be consecutive. Until you meet this standard, you will be considered a non-resident.
The Dominican Republic taxes income at progressive rates ranging from 0% to 25%. In the table below, you can see the rates for the Dominican income tax. (All amounts are given in DOP.)
Taxable income includes both cash and non-cash compensation, such as the following categories:
There are no local income taxes in the Dominican Republic. All income is taxed at the national level only.
Every employee and employer in the Dominican Republic is required to contribute to the Dominican social security system. This applies to residents and non-residents alike. The rate for this tax comes to roughly 21.3% of an employee’s salary, with both employer and employee contributions. The breakdown for that rate is as follows:
All told, the employer contributes 15.39% in social security taxes, while the employee contributes 5.91%.
The Dominican Republic treats capital gains as ordinary income and taxes them accordingly.
Real estate is taxed at 1% of the total value of the property exceeding approximately 6.85 million DOP. (The exemption amount changes every year to account for inflation.)
The Dominican Republic imposes a value-added tax (VAT) on certain goods and services. The standard rate for this tax is 18%.
Inheritance is taxed at a flat rate of 3%, payable by the successors and beneficiaries.
Gifts are taxed at a flat rate of 27%, payable by the recipient.
Employers and employees are also required to contribute to a fund financing technical instruction and training for workers. The employer’s rate is 1% of the total monthly payroll, and the employee’s rate is 0.5% of any benefits received.
Just like in the US, the Dominican tax year is aligned with the calendar year—January 1 to December 31. Individual tax returns are due by March 31 of the following year.
No, there is currently no US-Dominican tax treaty. This leaves Americans living in the Dominican Republic at risk of being taxed twice on their income. Fortunately, the IRS provides several tax benefits to help expats avoid double taxation. (More on this below.)
No. The US and the Dominican Republic do not currently have a totalization agreement in place. This means that Americans who live and work in New Zealand may be required to contribute to both nations’ social security systems.
Every US citizen is required to file an annual US tax return. This applies regardless of where you live. However, if you didn’t know that, you’re far from alone. Many Americans living overseas are unaware of this tax obligation.
Fortunately, the IRS provides an amnesty program to help expats come into compliance without facing any penalties. It’s known as the Streamlined Filing Compliance Procedures.
To use this program, all you have to do is:
This will bring you into compliance with IRS regulations.
Now that you have a better understanding of how the Dominican Republic taxes US expats, you can make sure you meet your international tax obligations. If you still have questions, our team of CPAs and IRS Enrolled Agents can give you the advice you need. In fact, we can even prepare and file your expat tax return on your behalf.
Filing expat taxes doesn’t have to be a hassle. Start your filing process with Greenback today.