Expat Tax Guide for Americans in the Dominican Republic

Expat Tax Guide for Americans in the Dominican Republic

Living as an Expat in the Dominican Republic

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.

Dominican Taxes at a Glance

  • Tax Year: January 1–December 31
  • Tax Deadline: March 31
  • Currency: Dominican peso (DOP)
  • Population: 10.6 million
  • Number of US Expats: Estimated 25,000
  • Capital City: Santo Domingo
  • Primary Language: Spanish
  • Tax Treaty: No
  • Totalization Agreement: No

What Are Expat Taxes like for Americans Living in the Dominican Republic?

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.

Who Has to File Taxes in the Dominican Republic?

The Dominican Republic taxes expats differently based on whether they qualify as residents for tax purposes.

  • Expats who are considered non-residents are only taxed on income that comes from a Dominican source.
  • Expats who have been residents for three years or less are also taxed on income that comes from a Dominican source.
  • Expats who have been residents for more than three years are taxed on their worldwide income.

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:

  • Foreign employment income
  • Self-employment income
  • Interest
  • Capital gains

Who Qualifies as a Tax Resident in the Dominican Republic?

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.

What Types of Taxation Does the Dominican Republic Have?

Income Tax

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 (DOP)Tax Rate
0 – 416,2200%
416,220 – 624,32915%
624,329 – 867,12320%
867,123 and above25%

Taxable income includes both cash and non-cash compensation, such as the following categories:

  • Employment earnings
  • Self-employment earnings
  • Capital gains
  • Benefits
  • Housing stipends
  • Meal and clothing allowances
  • Reimbursement for education, travel, and other professional expenses

There are no local income taxes in the Dominican Republic. All income is taxed at the national level only.

Social Security Tax

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:

  • Pension contributions: 7.10% from the employer and 2.87% from the employee
  • Family healthcare contributions: 7.09% from the employer and 3.04% from the employee
  • Labor risk insurance contributions: 1.2% from the employer

All told, the employer contributes 15.39% in social security taxes, while the employee contributes 5.91%.

Capital Gains Tax

The Dominican Republic treats capital gains as ordinary income and taxes them accordingly.

Real Estate Tax

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.)

Value-Added Tax

The Dominican Republic imposes a value-added tax (VAT) on certain goods and services. The standard rate for this tax is 18%.

Inheritance Tax

Inheritance is taxed at a flat rate of 3%, payable by the successors and beneficiaries.

Gift Tax

Gifts are taxed at a flat rate of 27%, payable by the recipient.

Technical Education Tax

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. 

The IRS tax code is 7,000 pages. Want the cliff notes version for expats? Let us help.

When Are Taxes Due in the Dominican Republic?

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.

Does the US Have a Tax Treaty with the Dominican Republic?

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.)

Does the US Have a Totalization Agreement with the Dominican Republic?

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.

What If I’m Behind on Filing My US Expat Taxes?

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:

  • Self-certify that your failure to file was an accident, not a willful refusal
  • File the last three delinquent income tax returns and pay any delinquent taxes you owed during that time (with interest)
  • File Foreign Bank Account Reports (FBARs) for the last six years

This will bring you into compliance with IRS regulations.

Get Help With Your US Expat Tax Return

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.

Start your taxes today with the guidance and support of one of our expert accountants.

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