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Tax system of Dominica and its advantages. What should you know before applying for citizenship?

Kristina Kurkuliak
19 November 2018

Obtaining the second passport is an effective solution to many problems (from simplifying the procedure for opening accounts in European banks to elevating one’s status). The Dominica passport program is one of 5 Caribbean programs that allows high net worth individuals to achieve the set goals. Among other things, Dominica is characterized by a friendly taxation system.

Taxation of individuals

Tax resident of Dominica is a person residing within the state for a minimum period of 183 days a year. Residents of Dominica should pay taxes on global income, non-residents pay taxes on profits received from sources within the island.
Income tax is calculated based on a progressive scale:

Taxable income is a profit derived from work, business, rental of real estate, royalties, interest, bonuses, etc. Taxes are calculated only on profits exceeding XCD 20,000 ($7400).

In the summer of 2017, the government announced possible changes in the requirements to obtaining  tax residency. The Prime Minister of Dominica, Roosevelt Skerrit, said that in med-term perspective, changes will be made to the program. Citizens who have received a passport by investment will be able to become tax residents of Dominica and receive a taxpayer ID without the need to stay in the country for 183 days a year.

The main requirement in obtaining a taxpayer status is a willingness to pay the minimum amount of income tax to the state treasury on an annual basis. Referring to the results of preliminary assessments, the head of the government noted that the total amount of funds additionally collected from foreign investors in value terms will be greater than the total amount of taxes levied on profits (in 2016 – $34 million).
The country’s government intends to simplify the taxation system soon. Roosevelt Skerrit said they plan to leave one single income tax rate. It is expected that tax rates of 15% and 25% will be abolished. In frames of this initiative, Dominicans will pay income tax if the profit reaches the threshold at which a 35% tax rate is applied. Also, an option of raising the taxable minimum to XCD 25,000 is considered.

Taxation of legal entities

Legal entities who are tax residents have to pay global income tax. The income tax interest rate is 30%. Non-residents pay tax only on the profits received in the territory of the state. The tax rate is 15%. No tax is imposed on capital gains and dividends in Dominica.

Offshore companies registered in the state receive 20-year tax holidays and do not pay income tax, corporate profits tax, inheritance and wealth taxes. Such companies pay registration fee and government levy which is paid annually.

VAT payment terms

Value-added tax is imposed on sale of goods and rendering services on the island, as well as on import of goods to Dominica. VAT rate is 15%. Hotel business and diving centers pay a reduced tax rate of 10%.
Registration for VAT payment and getting a taxpayer ID is required if the annual amount of supplies exceeds the threshold of XCD 120,000. Persons engaged in leasing of commercial real estate, rendering hotel accommodation services are required to register with tax authorities if the total amount of supplies exceeds the threshold of XCD 60,000.

Property tax

There is no property tax on Dominica, however, there is a local municipal fee which must be paid by property owners annually and which depends on the area. On average, its amount is 1.27% of the market value of the real estate item.

Other types of fees

There is no inheritance tax in Dominica, but in some cases, gifts are subject to property transfer tax. In some cases, it is required to pay 1% of the transferred property cost to the financial guarantee fund, pay 2.5% of court fee and 3% of attorney’s fee.
Wage earners pay 4.75% of their income to the social security fund monthly, but this amount should not exceed XCD 6,000.
The annual tax declarations are submitted by March 31 of the year, which follows the reporting year. In case of missing the deadline for submitting documents and tax arrears, a penalty of 5% of the amount is imposed. Monthly late payment interest fee is 1%.

How to apply for Dominica citizenship by investment?

Dominica’s passport program, launched in 1991, is one of the oldest in the world. Today, investment funds coming from foreigners are used in the public and private sectors of the country’s economy.
Investors wishing to apply for Dominica citizenship are offered two investment options:

In addition, the processing fees, due diligence fees and passport fees shall be paid.

The Dominica passport gives the following benefits:

Dependent family members (children under the age of 28, parents older than 55 years of age) may be included in the application along with the investor. The application process is fully discrete and takes 3-5 months. Citizens of Iran, Syria, Yemen are eligible for participation.
Thus, Dominica offers good opportunities for international businessmen wishing to obtain a second passport and at the same time minimize their tax burden.

Interested in more detailed information about Dominica CBI program? Contact us!

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