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Dominican Republic To Tax Internet-Bought Goods

by Mike Godfrey, Tax-News.com, Washington

12 August 2014


The Dominican Republic is to subject previously exempt low-value imported goods, purchased online, to value-added tax, luxury tax, and import taxes, from August 15, 2014, after the Customs Authority's decision to revoke the de minimis rule.

The de minimis rule, introduced in Decree No. 402-05, exempts all consignments to the Dominican Republic that are worth USD200 or less. This allows for items to quickly pass through customs, but postal companies are obliged to seek a license from the Directorate General of Customs.

The customs authority has been meeting with all postal companies to oblige them to subject goods worth under USD200 to tax, in a controversial move that will result in the payment of 18 percent value-added tax and other taxes, which opponents to the plans claim will result in a cumulative tax burden of about 42 percent.

A legal challenge has been launched. Opponents contend that the change contravenes the constitution, existing domestic laws, including Decree No. 402-05, and the provisions of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). The constitutional challenge has been raised on the basis that the customs authority's mandate does not include tax policy-setting powers, while provisions in the CAFTA expressly preclude nations from introducing higher barriers to consignments than were in place on the date of concluding the Agreement.

The measure is expected to be introduced from August 15, 2014, as planned, despite the legal challenge, although free zones in the Dominican Republic will fall outside the scope of the change as a different legal framework applies.

TAGS: compliance | VAT rates | VAT tax authority guidance | tax | value added tax (VAT) | VAT legislation | VAT cross-border transactions | law | luxury tax | tax authority | legislation | Dominica | Dominican Republic | United States | VAT compliance matters | Central America

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