DominicaTax Obligations Detailed

In Dominica, employers face various tax obligations, including payroll taxes, social security contributions, and income tax withholding.

Employer Taxes

• Dominican Social Security (DSS): Employers contribute 7.5% of employee salaries to the DSS.
• Income Tax Withholding: Employers are responsible for withholding income tax from employee salaries based on a progressive tax system.
  • 16% on the first $20,000.00
  • 26% on the next $30,000.00
  • 36% on any amount above $50,000.00
• PAYE Remittance: PAYE deductions must be remitted to the Inland Revenue Division by the 15th of the following month.
• Annual Return of Remuneration and PAYE: Employers are required to submit Form T.D.5 annually, by March 31st.
• Other Withholding Taxes: Employers must withhold a 15% tax on payments to non-resident individuals for dividends, interest, royalties, and other specified income. This tax is due within 15 days after the end of the month it was deducted.

Employee Taxes

• Dominican Social Security (DSS): Employees contribute 6.25% of their salary to the DSS.
• Income Tax: Employees are subject to income tax, deducted at source under the PAYE system.

Important Dates and Deadlines

• March 31st: Deadline for filing the annual income tax return and for the annual return of remuneration (Form TD.5) and for other income (Form I.T.24). This is also the deadline for the first installment (25%) of income tax prepayment for the current year.

Value Added Tax (VAT)

• Standard Rate: 15%. A reduced rate of 10% applies to hotel and diving activities.
• Remittance: VAT collected must be remitted by the 20th of the following month.

Other Considerations

• Minimum Wage: XCD 7.50 (USD 2.78) per hour (as of 2025).
• 13th-Month Pay: Not mandatory in Dominica.

It is important to note that this information is current as of February 5, 2025, and may be subject to change. Consulting with a tax advisor or the Inland Revenue Division directly is recommended for the most up-to-date and specific guidance.

In Dominica, employee tax deductions, known as Pay As You Earn (PAYE), are withheld from employee salaries and remitted to the Inland Revenue Division.

Employee Tax Deductions

The PAYE system in Dominica operates on a progressive tax rate structure. After deducting the standard deduction, taxable income is subject to the following rates:

• 15%: on the first EC$20,000
• 25%: on the next EC$30,000 (income between EC$20,001 and EC$50,000)
• 35%: on any income exceeding EC$50,000

As of 2021, the standard deduction is EC$416,220 annually. Please note that this amount is subject to adjustments based on the annual inflation rate, so confirming the current figure with official sources is recommended. Certain payments are exempt from income tax, including Christmas bonuses, severance pay, and pre-notice payments.

Social Security Contributions

Employees also contribute to social security, which funds benefits such as pensions, disability, and health insurance. The employee contributions are as follows:

• 2.87%: Pension and Disability
• 3.04%: Health Insurance
• 0.50%: Technical Education (INFOTEP)

Employer Responsibilities

Employers are responsible for deducting PAYE and social security contributions from employee salaries and remitting them to the Inland Revenue Division. These deductions must be submitted by the 15th of the following month. Employers must also file monthly returns, even if no tax was deducted, along with an annual return by January 31st of the following year. Failure to comply results in penalties, including a 10% penalty on the outstanding tax balance and 1% monthly interest. Specific forms, such as the T.D.3 remittance form, are required for these submissions.

Fringe Benefit Tax (FBT)

Employers in Dominica are subject to a Fringe Benefit Tax (FBT) on certain non-cash benefits provided to employees, such as company cars, housing, and club memberships. This tax is calculated at 27% of the value of the benefit and is payable monthly. For company vehicles, the FBT calculation varies based on ownership and usage:

• Employer-owned/Leased, used in the office: 40% of depreciation/rent, fuel, insurance, etc.
• Employer-owned/Leased, used outside the office: 20% of depreciation/rent, fuel, insurance, etc.
• Employee-owned, used in the office: 20% of fuel, repairs, maintenance, and insurance.
• Employee-owned, used outside the office: 10% of fuel, repairs, maintenance, and insurance.

Additional Information

Dominica offers several tax exemptions and incentives to stimulate economic growth and attract foreign investment. These can include tax holidays for new businesses, duty-free concessions for approved projects, and exemptions on certain income types. For the most current and comprehensive details on tax regulations, it is highly recommended to consult official sources like the Inland Revenue Division and relevant legislation. This information is current as of February 5, 2025, and may be subject to change.

In Dominica, the Value Added Tax (VAT) is a consumption tax levied on most goods and services at a standard rate of 15%.

VAT Rates

• Standard Rate: 15% on most goods and services.
• Reduced Rate: 10% on hotel accommodations and diving activities.
• Zero Rate: 0% on specific goods like exports, medical supplies, and basic foodstuffs (e.g., rice, flour, sugar).

Exempt Goods and Services

Certain goods and services are entirely exempt from VAT, including:

• Financial services
• Real estate
• Rent
• Medical services

VAT Registration

Businesses with annual taxable supplies exceeding $250,000 are required to register for VAT. As of September 1, 2016, the VAT registration threshold was increased to this amount from the previous thresholds of $60,000 and $120,000.

VAT Filing and Payment

Registered businesses must file monthly VAT returns and remit payment by the 20th of the following month. The returns must detail VATable sales, purchases, and other relevant information. Filing is mandatory even if no tax is due for the period. Late filing penalties are $100 per month or partial month. The Comptroller may grant extensions upon written request if good cause is shown. Note that an extension does not change the tax payment deadline. Consumers should request a receipt for every purchase. Registered businesses should receive a tax invoice for all purchases from registered suppliers. All displayed prices must be VAT-inclusive (i.e., the final price the consumer pays). Registered businesses must prominently display their VAT registration certificate.

Additional Information

• VAT was introduced in Dominica on March 1, 2006, replacing several previous taxes, including the Consumption Tax, Sales Tax, Hotel Occupancy Tax, and Entertainment Tax.
• Input tax refers to VAT paid on purchases of taxable goods or services by a taxable person.
• Output tax is the VAT charged by a registered business on its taxable sales.
• A taxable activity is one conducted regularly or continuously by any person in Dominica (or partly in Dominica), whether or not for profit, involving or intending to involve the supply of goods or services to another person for consideration.

Please note that this information is current as of today, February 5, 2025, and may be subject to change.

Dominica offers a range of tax incentives designed to attract investment and stimulate economic activity.

Tax Incentives in Dominica

Dominica's tax system offers several advantages for individuals and businesses:

• No taxes on:

  • Capital gains
  • Inheritance
  • Wealth
  • Gifts
  • Foreign income
  • Personal income (for residents)

• Double taxation treaties: Dominica has agreements with the USA and CARICOM to avoid double taxation.

• Profit repatriation: No restrictions exist on repatriating profits and imported capital.

Corporate Tax Incentives

Several incentives are available for businesses operating in Dominica:

• Tax holidays: New businesses and specific sectors like tourism, agriculture, and renewable energy can qualify for tax holidays of up to 20 years.
• Import duty exemptions: Businesses may be eligible for full exemptions from import duties on equipment and materials.
• Export allowances: Tax concessions or rebates are available based on export profits.
• VAT exemptions: Some capital investments can be exempted from Value Added Tax (VAT).

Applying for Incentives

The Invest Dominica Authority (IDA) manages applications for fiscal incentives. Businesses submit applications to the IDA, which then makes recommendations to the government. The process aims to be flexible and non-discriminatory, catering to the specific needs of each project, regardless of size or origin (domestic or foreign). More information on the application process can be found on the IDA website.

Additional Tax Considerations for Individuals

While residents are generally exempt from personal income tax, certain deductions are available for expenses incurred in producing taxable income. These include:

• Resident allowance: $30,000.00
• Mortgage interest allowance: Up to $25,000.00
• Donations to approved institutions
• Student loan relief: Up to $5,000.00 per student

It's important to note that these deductions are subject to specific criteria, such as being wholly and exclusively incurred for income production.

Please note that this information is current as of February 5, 2025, and might be subject to change. It is advisable to consult with a tax advisor or the relevant authorities for the most up-to-date information and specific details regarding eligibility and application procedures.