Tax Residency in the Dominican Republic
1. Criteria for Determining Tax Residency
According to Article 10 of the Dominican Republic's Tax Code, an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in the country for more than 183 days during a calendar year.
- Domicile in the Dominican Republic, as determined by the Civil Code.
- Having a permanent home in the country.
- Carrying out economic activities in the country that generate income.
For legal entities, tax residency is determined based on their legal domicile or the place where their effective management and control is exercised.
2. Impact of International Tax Treaties
The Dominican Republic has entered into several international tax treaties, which may modify or provide exceptions to the standard criteria for tax residency. These treaties aim to prevent double taxation and promote cross-border trade and investment.
One key treaty provision that affects tax residency is the "tie-breaker" rule. This rule is designed to resolve situations where an individual or entity is considered a resident of both the Dominican Republic and another country under their respective domestic laws.
For example, the Dominican Republic's tax treaty with the United States provides that an individual will be considered a resident of the Dominican Republic if they have a permanent home in the country and spend more than 183 days there during a calendar year. However, if the individual also has a permanent home in the United States and spends more than 183 days there, the tie-breaker rule will apply. Under this rule, the individual will be considered a resident of the United States for tax purposes.
Other treaty provisions may also affect tax residency, such as those relating to the definition of "permanent establishment" and the allocation of business profits. These provisions are designed to ensure that individuals and entities are taxed fairly and avoid double taxation.
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