Transfer Pricing
Country Summary
Dominican Republic
This document summarizes the transfer pricing requirements and regulations in the Dominican Republic. The Dominican Republic has committed to implementing the BEPS minimum standards of tax transparency under the OECD’s Inclusive Framework. These standards include Action 13, which deals with Transfer Pricing Documentation. The Dominican Republic’s tax authorities align with OECD Transfer Pricing Guidelines, and specific regulations have been enacted to meet BEPS standards.
Overview:
Transfer Pricing Regulations in the Dominican Republic
In the Dominican Republic, transfer pricing regulations have been established through various legal instruments, including General Norm 04-2011, Law No. 253-12, Regulatory Decree No. 50-13, and Regulatory Decree No. 78-14. A significant update came with Decree 256-2 in April 2021, which introduced the requirement for taxpayers to file a country-by-country report, notifications, a master file, and a local file. While not an OECD member, the Dominican Republic’s tax authorities generally recognize the OECD Transfer Pricing Guidelines as a technical reference.
Definition of Related Party
Related parties are defined based on various criteria, including statutory and economic dependency, shared control, permanent establishments abroad, exclusive sales agreements, substantial production exchange, and transactions with residents in tax havens. Tax haven countries and territories are announced periodically by the tax authority.
Nature of Transfer Pricing Documentation
Taxpayers must declare loans contracted with related entities, both local and abroad, along with the financial expenses incurred on these loans. The Informative Return of Operations between related parties (DIOR) must be filed within the first 180 days after the fiscal year ends. The DIOR includes transaction details, identification of related parties, and other relevant financial information.
Advance Pricing Agreement (APA)
Taxpayers can request APAs with the tax authority, setting values for commercial and financial transactions with related parties before these transactions occur. The APA takes effect for the current fiscal year and the three subsequent fiscal years, extending to previously expired fiscal years with limitations.
Transfer Pricing Audit Practice
Transactions between related parties should reflect what independent parties would have agreed upon under similar circumstances. When transactions’ prices don’t meet the values for similar operations between independent companies, the tax authority may adjust them if they result in lower or deferred taxation in the country.