Complex tax regime for the extractive industry

September 13, 2021

On September 9, 2021, was published in, about the tax structure for extractive activities in the Dominican Republic explained by Virgilio Malagon.

1. Mining activity and regulation

First, mining in the Dominican Republic is an activity regulated by the General Mining Law No. 146 of 1971 and its implementing regulation 207/98. This sector is subject to a complex tax regime, with many taxes and excise taxes stipulated in other adjective provisions.

2. What are the applicable tax rates?

The following rates are applicable to the extractive activity:

  •  Income Tax, the rate of 29.5%.
  • General Sales Tax, 18%.
  • Special Mining Tax, ranging from 2% to 8.4%.
  • Taxes withheld in the case of dividends (5%) and interest (4.99% or 30%).

3. Mandatory Non-Tax provisions

There are other non-tax provisions mandatory for mining companies, which are as follows:

  • Payment of workers’ participation (rates of 8%).
  • Payment of mining royalties, which range from 1% to 12%.
  • Payments to the Complementary Mining Retirement Fund, at a rate of 0.5%.

Along these lines, the tax burden to be assumed by mining companies ranges from 44% to 52%, depending on the operating margin obtained.

4. Mining revenues

Mining revenues derive from the following taxes:

  • 5% royalty on exports.
  • Mining patent
  • Environmental fee for single use
  • Collection of stubs
  • Environmental permits
  • Net profit sharing
  • Net Smelter Return
  • Surface tax
  • Tax on total monthly profits
  • Additional tax on 33% of monthly profits
  • Bauxite purchase price
  • Income tax on salaries,
  • Payments abroad in general
  • Ministry of Energy and Mines service fee

Finally, there is a multiplicity of taxes on the mining sector, preventing a functional taxation scheme. Thus, Virgilio Malagón recommends the unification of the tax variants in a single law.

Fuente: 10/09/21