New Law facilitates taxpayers to reveal their undeclared assets before the DGII and revalue them at market price
18 March 2020
President Danilo Medina enacted Law No. 46-20 on Transparency and Equity Revaluation, which establishes a special mandatory tax regime that allows taxpayers to regulate certain tax obligations.
TO WHOM DOES THIS LAW APPLY ? Law No. 46-20 on Asset Revaluation and Transparency applies to all individuals, companies and undivided estates.
LAW NO. 46-20 GIVES TAXPAYERS A “TAX PEACE OF MIND” Law No. 155-17 on Money Laundering, enacted in 2017, considers tax fraud a crime preceding money laundering. The new Law No. 46-20 allows the taxpayer to “start from scratch”, revealing the assets (not coming from illegal activities) owned and which are not filed before the General Directorate of Internal Taxes (DGII).
BENEFITS FOR THE TAXPAYER OF LAW OF ASSET REVALUATION AND TRANSPARENCY
– Reveal movable and immovable property not filed before the DGII paying a 2% rate – as a single and final payment – on the value of the revealed asset. This way, the taxpayer avoids the possibility that in the future the DGII (i) questions the origin of the funds for the acquisition of said assets and, (ii) may eventually claim – in respect of unfiled assets – the payment of income tax of 25% (natural persons) or 27% (legal persons), in addition to surcharges, interests and fines.
– Revalue its assets at market price by paying a 2% rate on the value of the revalued assets, which will reduce the taxpayer’s capital gain in the event that it sells such assets in the future and, consequently, the tax on the capital gain (25% / 27%) will be lower.
– Settle outstanding tax debts without surcharges and with a very low interest rate (maximum 13.20% of the capital owed to the tax authorities).
PROCEDURE TO QUALIFY FOR LAW No. 46-20 The term to benefit from this special and transitory law is ninety (90) calendar days, counted from the entry into force of the Law.
– Request for transparency and/or revaluation of assets To qualify for the new Law No. 46-20, the taxpayer must submit to the DGII the documents and appraisals required for the DGII to evaluate their case. Within a period of thirty (30) days the DGII will decide whether or not to accept its request. In view of the process, the Directorate may not question the origin of the funds subject to filing or used to acquire the assets being filed, presuming that they are not of illicit origin until proven otherwise.
After the application is approved, the DGII will issue a payment authorization t to the taxpayer that it must cover in the following one hundred and eighty (180) calendar days. If the request is rejected, the taxpayer can resubmit its file for a second and last time.
– Balance of tax debts The taxpayer must express to the DGII their unequivocal desire to pay the corresponding taxes. After this, the DGII will issue a payment authorization that it must cover in the following one hundred and eighty (180) calendar days, with a minimum down payment of 40% of the indicated amount.
IMPLICATIONS OF NOT COMPLYING WITH LAW NO. 46-20 It is very important that all taxpayers seek professional advice on time in relation to the provisions of Law No. 46-20 and, if it is convenient or not to benefit from it in respect of all or part of the assets that form their estate.