Tax Regime of Trusts in Dominican Republic was issued under Tax Authority Ruling 02-12 with the purpose of establishing the regulations and procedures to be complied with by trusts and the parties thereto involved, with respect to their tax duties and obligations.

Pursuant to the provisions set forth under Law No.189-11 for the Development of the Mortgage Market and of Trusts in the Dominican Republic, the applicable tax regime on trusts provides for similar and different rules depending on the type of trust to be created.

The mentioned Revenue Ruling 02-12 established mechanisms aiming at benefiting purchasers of low cost households, construction fiduciaries and the State in the interest of facilitating the acquisition of houses by the needy and boosting the construction and financing business. Such mechanisms include the compensation of the Tax on the Transfer of Industrialized Goods and Services (ITBIS) paid by fiduciaries in the acquisition of goods and services for the construction of Low Cost Households, and that of deferring the construction benefits until finalization and sale of the household units.

Formal Duties

Corporations interested in acting as fiduciaries must register before the DGII and its sole activity should be the management of trusts. Likewise, trustees must request the DGII a Tax Identification Number for the trust.

Trusts should file Informative Income Tax Returns annually, and trustees must submit certain informative data pursuant to the form provided by the DGII.

Tax

When transferring assets to the trust, applicable transfer taxes should be taken into account. With respect to real estate assets and motor vehicles, taxes should be paid within the 6 months following the date of the trust agreement. On the other hand, the potential Tax on the Transfer of Industrialized Goods and Services (“ITBIS”, which works as a Value added tax) should be filed and paid by the trustee (on behalf of the trust) in the period wherein the trust is registered before the DGII.

With regards the trust beneficiaries, the same shall file Ordinary Income Tax Returns annually, reflecting any gains or losses incurred.

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ABOUT THE AUTHOR: Dra. Maria Arthur Rodger is a Partner leading the Tax & Private Client areas at Arthur & Castillo Law Firm and Attorneys in the Dominican Republic. She specializes in tax and real estate advisory (Tax LLMs in Georgetown Law Center in Washington, D.C. & Universitat Pompeu Fabra in Barcelona) with more than 20 years of experience. Dra. Maria Arthur is also a CPA, Certified Bankruptcy Liquidator and Legal Interpreter.

Email: [email protected]

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

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