Is Your Counterparty on the Dominican Tax Haven List? The Transfer Pricing Trigger Many Companies Miss

A Dominican company that pays an unrelated supplier in Panama, Switzerland or the Cayman Islands may be walking into transfer pricing obligations without knowing it. Under Dominican law, any transaction with a person or entity resident in a jurisdiction classified as a low-tax territory or tax haven is subject to transfer pricing rules, related party or not.

The legal definition comes from Tax Reform Law 253-12 of November 8, 2012: a low- or zero-tax jurisdiction is one where income tax, or a comparable tax, is markedly lower than what the same taxpayer would pay under the general Dominican regime. The practical consequence is documentary: covered transactions must be reported and supported at arm’s-length values in the annual transfer pricing filings before the DGII, with the burden on the taxpayer.

Two lists govern the analysis, and they work in opposite directions. The DGII publishes a periodic “white list” of countries it does not consider tax havens, the 2023-2024 edition named roughly a hundred jurisdictions, from Germany, the United States, Spain, France and Canada to most of Latin America and much of Asia. Separately, a list published in 2013 under the transfer pricing regulation identified fifty jurisdictions regarded as low-tax or tax havens, including the Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, Cyprus, Gibraltar, Guernsey, Jersey, Liechtenstein, Luxembourg, Malta, Monaco, Panama, Singapore, Switzerland and Uruguay, among others.

The mistake to avoid is treating the lists as static. The white list is issued for defined periods and is updated; a jurisdiction’s status can change between fiscal years, and the analysis must be run per transaction, per year. Companies also forget that the rule captures ordinary commercial payments, services, financing, royalties, not only intercompany dealings within a group.

Before structuring payments to or from any offshore jurisdiction, have the current lists checked and the transfer pricing exposure quantified. Our Dominican tax lawyers handle transfer pricing compliance and DGII filings for local subsidiaries of international groups.

Do you want more information about our services regarding the List of Tax Havens in Dominican Republic? Contact Us.

ABOUT THE AUTHOR: Maria Arthur Rodger is a Partner leading the Private Client, Successions and Tax areas at Arthur & Castillo Advisers and Consultants in the Dominican Republic. She specializes in private client, successions, tax, real estate valuation and advisory (Master in Tax and Finance Studies from Georgetown University in Washington, D.C. & Universitat Pompeu Fabra in Barcelona) with more than 20 years of experience. She is also a Certified Public Accountant (CPA), Certified Valuator, Business Bankruptcy Expert and English and Spanish Interpreter.

Email: marthur@aclaw.com

Disclaimer: This publication is not intended to provide advice or suggest a guaranteed outcome as individual situations will differ and the situation may have changed since publication. For specific advice on the information provided and related topics, please contact the author.

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