Worldwide transfer pricing reference guide 2014

Dominican Republic
Taxing authority and tax law
Taxing authority: Tax Administration of the Dominican Republic (Dirección General de Impuestos Internos, or DGII).
Tax law: In January 2007, an amendment to Article 281 of the Tax Code introduced the arm’s length principle, allowing the DGII to adjust
prices used in related party transactions that do not meet this standard.
Relevant regulations and rulings
Transfer pricing regulations are in effect as of fiscal year 2011.
Regulations regarding the general guidelines and penalties were enacted by the DGII on 2 June 2011 through Revenue Ruling No.
04–2011. As of 9 November 2012, through the enactment of Law 253–12 (Law), these regulations were incorporated into the Article
281 of the Tax Code.
The aforementioned Law broadened the scope of the Article 281 of the Tax Code, which now states that transfer pricing regulations
apply to intercompany transactions conducted by a Dominican taxpayer with:
• Related parties resident in the Dominican Republic or abroad
• Entities located in a low tax jurisdiction, or tax haven
• Entities which benefit from a preferential tax regime
Further regulations are pending enactment by the DGII following the issuance of the Law.
OECD Guidelines treatment
Under Revenue Ruling No. 04–2011, the OECD Guidelines can be relied upon for interpretation of the rules, as long as they do not
contradict the Dominican Tax Code or any rulings issued by the DGII.
Priorities/pricing methods
The transfer pricing methods in the Dominican Republic are: the CUP, Resale Price, Cost Plus, Profit Split, Residual Profit Split and
TNMM. With Law 253–12, the CUP, Resale Price and Cost Plus methods take priority over the transactional methods.
Law 253–12 also presents an additional non-OECD method (the import and export valuation method), which is intended to be used for
transactions involving imports or exports of goods with well-known prices in transparent markets.
Transfer pricing penalties
Failure to supply transfer pricing documentation on time or failure to provide true, complete or accurate information could result in
penalties up to 0.75% of the previous year’s income. Furthermore, any additional tax generated by price adjustments made by the DGII
should be subject to surcharges and penalty interest.
Penalty relief
A taxpayer might benefit from the reduction of the surcharges assessed as a result of any adjustments made by the DGII. These
reductions might be as follows:
• 40% reduction of the surcharges assessed, if the company decides to voluntarily amend its tax return without any prior notice from tax
authorities
• 30% reduction of the surcharges, if after being audited, the difference between the estimated tax and the effectively paid tax represents
less than 30% of the latter
Documentation requirements
Contemporaneous transfer pricing documentation related to domestic and cross-border intercompany transactions must be kept and
maintained. Documentation must include:
• Relevant market conditions
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