Bill regarding Asset Revaluation
On September 3rd of 2018, the President of the Dominican Republic submitted a Bill before Congress regarding the application of a temporary tax regime for the Declaration and Revaluation of Assets, based on the need to create certain conditions for the tax payers to be able to voluntarily transparent their goods and real estate assets, undeclared before the Tax Administration, and revaluate them according to the current market value prices.
The purpose of said Asset Declaration and Revaluation Bill is the establishment of a temporary tax regime that allows individuals, legal entities and undivided estates to perform an asset declaration and revaluation of the goods described therein, and make the payment according to the following tax rate:
|Goods declared or revaluated (as applicable)||Rate|
|Real estate property||3%|
|Movable assets located in the Dominican Republic*||5%|
|Local or foreign currency deposited in a regulated entity, financial instruments or securities, nominal shares, rights of the beneficiary of the trust (fideicomiso) and other similar types of assets or rights susceptible of economic value.||5%|
|Any asset whereby the revaluation implies a decrease of its assets, such as: shareholder receivable accounts, real estate assets and movables transferred when such transfer does not imply a shareholder distribution.||5%|
*Except motor vehicles, goods acquired as a result of illicit activities, cash deposited in foreign financial institutions and securities registered in countries identified by the Financial Action Task Force (FATF) as High Risk or Non Cooperative.
It is important to note that the Law Project regarding Asset Declaration and Revaluation establishes certain conditions for the application for the declaration or revaluation, as applicable, of the tax payers’ assets; as well as the compliance of certain formalities so that the request is duly filed and approved by the Tax Administration.
According to the proposed Bill for Asset Declaration and Revaluation, the period available for being able to apply to such transitory tax regime is of nine months, and of thirty business days to make the corresponding payment, after the payment authorization has been received.
In addition, it was provided that the tax payers who sell or make in-kind contributions of the assets declared or revaluated, after a period of no longer than two years, shall reduce the adjusted fiscal cost of the assets in order to determine the potential capital gain.
For cases regarding in-kind contributions subject to future capitalization, a period of no longer than the next fiscal period was proposed to carry out the capitalization.
Finally, the revalorized patrimony of the tax payers, according to the provisions of the Asset Declaration and Revaluation Bill, shall be subject to the ordinary tax regime.
Please consult Arthur & Castillo Lawyers (AC LAW) on issues related to tax law and asset valuation in Dominican Republic.
Note: This is not legal advice: it is intended to provide information of general interest about current legal issues. Arthur & Castillo, SRL. © 2018. All rights reserved.