Like in any country around the world, in the Dominican Republic we can find independent professionals who wish to start a business of their own or sell product or services without being tied up to a partner or even being obliged to comply with the fiscal and legal obligations of establishing a business under a corporate vehicle. Examples of these professionals may be independent lawyers, doctors, engineers, accountants, clerks, notaries, bailiffs, translators, etc., who generate their own income without having to comply with the formalities involved when having a personal business or being an employee of a company.
Even though by being independent professionals they avoid having the legal and fiscal burden, it is not clear for many they must still comply with the minimum obligations, as if they were working for an employer or if they had their own company. Among the fiscal obligations all Dominican professionals have as independent service providers are the following:
• Request a Dominican tax ID card or RNC
• Present affidavits
• Pay income tax
The Dominican tax ID card or RNC is granted by the Dominican tax authority (DGII). This number serves as every independent professional’s identification for the tax obligations to be assumed once the professional starts generating income. The RNC number of independent professionals will be the same as his/her Cedula or Dominican ID card.
The affidavit is the document where the taxpayer, in this case the independent professional, declares the incomes and benefits of the services provided. This document must be submitted annually before March 31st, applicable to fiscal years ending on December 31st. This declaration must be submitted to the Dominican tax authority (DGII) either physically at a any of their offices or through their website. If the affidavit is not submitted before March 31st the DGII will charge an additional 10% as a late fee for the first month or a fraction of the month for the total value of the tax payable and for each additional month thereafter a cumulative1.73%.
The income tax is an annual tax applicable on all income, profit or benefit generated by individuals or companies within a given fiscal period. The payment must be made at any of the DGII offices, authorized commercial banks or via their website. In case the amount to be paid exceeds five thousand Dominican pesos the payment must be made with a certified check payable to the Tax Collector. The percentage to be paid for such tax payment will depend on a scale set by the DGII based on the income earned, which consists of progressive rates ranging from 15%, 20% to 25%. This means that depending on the income generated by the independent professional, an already determined tax percentage shall be paid. Those who did not generate more than RD$316,017.00 will be exempt of paying income tax.
It is also important for the independent professional to take into account that his/ her clients will be deducting 10% for income tax and 16% for ITBIS (Tax on the Transfer of Industrialized Goods and Services) from the final invoice. The client will discount these taxes only if the client is a company, if the client is a physical person then the client will retain 10%.
The deduction of these taxes should not worry independent professionals since these monies, for example in the case of the 10% which is deducted, will basically serve as a credit to the equivalent percentage that must be reported and paid once the incomes are presented. This means that the independent professional does not have to repay, since the percentage was already retained at its moment by the client.
The same happens with the ITBIS, such tax may be compensated when the same is charged once again to purchase materials, equipment or anything needed for the independent