1. Overview
The Dominican Republic operates under a territorial tax system, meaning that individuals are generally
taxed only on income obtained from Dominican sources. This principle distinguishes the country from
jurisdictions that apply a worldwide income approach.
The Dominican Tax Authority (DGII) recently reaffirmed that the local tax regime does not follow the
principle of global taxation. Only certain categories of foreign-source income, primarily investment and
financial gains, may be subject to taxation once an individual qualifies as a fiscal resident.
2. Tax Residency Criteria
Under Article 12 of the Dominican Tax Code, an individual becomes a fiscal resident if they remain in the
country for more than 182 days within a fiscal year, whether consecutively or not. Once residency is
established, the individual must register before the DGII (Dirección General de Impuestos Internos) and
file an annual income tax return (Form IR-1).
3. Scope of Taxation
For fiscal residents, the Dominican Republic taxes:
• All income derived from Dominican sources, including employment, business activity,
rentals, and other local operations.
• Certain income from foreign sources, but only in limited cases — specifically returns from
investments or financial gains earned abroad, in accordance with Article 269 of the Tax Code.
This mixed criterion means the system does not treat all global income as taxable — only specified
categories connected to financial gains abroad.
4. Transitional Rule for Foreign Nationals Dominican Republic
Foreign individuals who acquire fiscal residency after residing in the country for more than 182 days
benefit from a two-year transition period. During this period, they are subject to tax only on Dominican-
source income.
From the third year onward, their foreign investment or financial income may become taxable in the
Dominican Republic, but general income earned abroad (such as salaries, pensions, or prior savings)
remains outside the Dominican tax base.
5. Funds Brought from Abroad
Bringing funds or savings into the Dominican Republic does not automatically generate a tax liability.
When such funds correspond to:
• Income previously earned and taxed abroad, or
• Personal savings, gifts, or sale proceeds from foreign assets, they are not considered new
taxable income locally.
Nevertheless, it is advisable to maintain supporting documentation that evidences the origin and timing
of those funds to avoid any potential presumption of unreported income or unjustified patrimony.
6. Enforcement and Practical Considerations
DGII’s enforcement focus remains primarily on income generated within Dominican territory — such as
property rentals, business income, or local employment.
However, as the Dominican Republic continues strengthening its tax transparency and exchange-of-
information mechanisms, foreign residents who invest locally or maintain significant transactions through
Dominican institutions should anticipate greater oversight.
Maintaining clear accounting records, proper classification of income sources, and timely annual filings is
the best preventive strategy.
7. Recommendations for Foreign Residents
1. Monitor your days of presence to determine fiscal residency.
2. Register with DGII once residency thresholds are met.
3. Document the origin of all funds transferred from abroad.
4. Distinguish capital from income — savings and pre-residency earnings are not taxable as
new income.
5. Plan ahead: from your third year of residence, review any foreign investment income
exposure with your legal and tax advisors.
6. Coordinate with foreign tax counsel to prevent double taxation and ensure compliance
across jurisdictions.
8. Final Note
Each individual’s tax situation depends on personal circumstances, including the nature of income,
residency patterns, and investment structure.
For this reason, we recommend that foreign residents and investors seek personalized advice before
making financial transfers or investments in the Dominican Republic.
For specific consultations or personalized tax planning, please contact our team at AlterLegal. Our firm
advises numerous foreign residents and investors on compliance, residency, and asset structuring under
Dominican law.
