Dominica taxes for individuals and companies

The taxation of individuals in Dominica depends on the status of the taxpayer. They can be tax residents or non-residents of the country.

Non-residents are to pay taxes in Dominica if they receive income from sources in the country, e.g., rent the property out.

Tax residents pay income tax in Dominica on all income received in the country and abroad.

After receiving a passport, an investor does not automatically become a Dominica tax resident. A person gets the status of a tax resident only if they live in the country for at least 183 days a year. Participants in the Dominica citizenship by investment program are not required to live in the country before or after obtaining a passport.

Dominica has a progressive income tax scale:

• 15% on the first EC$20,000 ($7,400) of income;

• 25% on the next EC$30,000 ($11,100) of income;

• 35% on the rest of the income.

The tax is paid on any income earned by a taxpayer: salaries, business income of a self-employed, dividends, renting yield. A company that pays dividends is subject to a withholding tax. A person who receives dividends doesn’t pay the tax on them. The exception is income from the sale of real estate: it is not subject to income tax or capital gains tax.

Taxpayers are entitled to tax deductions, which are reductions in the amount on which tax is levied. Deductions are standard and general. A taxpayer can receive several deductions at once: they are added up, subtracted from income, and income tax is levied on the remaining amount.

The standard deductions apply to:

• bank interest on a mortgage — up to EC$25,000 ($9,260);

• donations to funds from the state list;

• payments for university education — up to EC$5,000 ($1,852) per student.

The general deduction for income-related expenses:

• for rental yield: utility bills, property renovation costs, municipal taxes and fees paid by the owner, payments for services on tax returns preparation;

• for self-employed: expenses on tools and supplies, rental of premises, services on tax returns preparation.

Tax residents are entitled to a standard tax deduction of EC$30,000 ($11,100). There are no additional conditions for receiving the deduction. With an annual income of $50,000, a resident pays $3,900 less than a non-resident due to the standard deduction.

Some income of non-residents is subject to a 15% withholding tax: dividends, interest on deposits, royalties, rental yield. The tax is paid by the one who makes the income payment — the company that pays dividends. Withholding tax is retained from the payment amount, and income tax is not levied.

If a Dominica tax resident earns income in another state or a non-resident earns income in Dominica, and there may be a duty to pay taxes at full rates in both states. However, the situation can be avoided with international double taxation treaties (DTTs).

Case: how to reduce taxes by 1.5 times by becoming a tax resident in Dominica

Dominica has DTTs with CARICOM countries:

• Antigua and Barbuda;

• Barbados;

• Belize;

• Grenada;

• Guyana;

• Jamaica;

• Montserrat;

• Saint Kitts and Nevis;

• Saint Lucia;

• Saint Vincent and the Grenadines.

The list of countries may change, e.g. if the government of Dominica enters into new agreements with other states.

Dominica doesn’t have DTTs with most countries. If an investor receives the main income from a company in the jurisdiction of Dominica and lives in another state, changing the country of tax residence may reduce the tax burden.

Income tax on salaries is paid monthly: until the 15th of the month following the reporting one. The employer withholds tax from the salary and transfers it to the tax office.

Dominica tax residents file an annual income tax return if they receive income only from salaries and it does not exceed EC$30,000 ($11,100) per year. The deadline for filing the tax return is the 31st of March of the year following the reporting one. The tax return is submitted through a personal account on the tax service website.

To become a tax resident in Dominica, a person needs to register at the place of residence in the country, get a Tax ID and Tax Code, and live in the country for 183 days a year or more.

There is no tax on the sale or purchase of the real estate, property transfer and a single property tax in Dominica.

Property ownership. The owner does not pay property tax. But there is a municipal tax of 1,25% of the assessed property value located in the largest cities — Roseau and Canefield. If the owner leases the property, he pays the state duty to conclude a lease agreement: it is about 1% of the rental amount per year.

The seller of real estate pays a stamp duty of 2,5% of the transaction amount. Income from the sale of real estate is not taxed in Dominica.

Owners of cars and motorcycles pay road tax and license fees annually. The amount of fees depends on the category of vehicle: a car, truck, or motorcycle. The purpose of use also matters: whether it is personal or commercial.

The owner of a personal passenger car pays $200 as road tax and license fees annually.

Yacht owners pay a registration fee and an annual license fee.

The registration fee doesn’t depend on the size and displacement of the yacht and is EC$1,900 ($704). The annual fee from the second year is EC$950 ($352). However, it can be reduced to EC$750 ($278) if paid upfront for three or five years.

The Dominica Maritime Administration is one of the five largest private boat registers globally. Citizens of Dominica or another CARICOM country have the right to register a yacht in the country. Foreigners can register a yacht in Dominica by opening an FME — a Foreign Maritime Entity.

Personal yachts are registered remotely without the visit of an inspector of the Maritime Administration.

List of documents for registering a personal yacht in Dominica:

1. An application for registration.

2. A document confirming the applicant’s authority: the owner’s passport or a power of attorney from the owner.

3. A certificate of ownership.

4. A declaration of non-commercial use.

5. A displacement certificate.

6. A certificate of suitability of the yacht for the purpose of use.

7. An insurance policy.

Corporate tax is paid no later than three months after the end of the financial year. The financial year in Dominica ends on the 30th of June. The accrued tax can be paid in three quarterly instalments: 25% — 35% — 40%.

Some income of non-resident companies is subject to a 15% withholding tax, like for individuals: dividends, interest on deposits, royalties, rental yield. However, when calculating corporate tax, these types of income are not taken into account.

In two weeks, an international business company (IBC) is registered in Dominica remotely. Registration costs about $2,100, and the minimum annual cost of maintaining a company is about $1,400.

Some goods have zero VAT. These include goods for export, medical supplies and medications, and basic food like rice, milk, sugar, and flour. In addition, VAT is not charged on the sale of real estate, rent, or financial services.

VAT can be paid by both companies and individuals, such as self-employed people. The taxpayer is obliged to register as a VAT payer and pay tax if the annual revenue is above the threshold. Goods on which VAT is not taken are excluded from revenue, but goods with zero VAT are included.

The minimum revenue to pay VAT:

• for any goods and services — EC$250,000 ($92,592);

• for accommodation in hotels and diving — EC$62,500 ($23,148).

VAT is paid monthly. The due date is the 20th of the month, following the reporting one.

Dominica exchanges tax information with other countries but does not disclose the names of the owners of companies registered in the country.

Dominica has joined the Convention on Mutual Administrative Assistance in Tax Matters. Under the Convention, countries provide each other with assistance in:

• exchange of tax information;

• conducting simultaneous tax audits and participation in tax audits abroad;

• assistance in tax collection, including the adoption of interim measures concerning the taxpayer’s property abroad;

• document exchange.

Members of the Convention exchange information automatically under the OECD Common Reporting Standards, CRS. As of March 2022, CRS unites 144 countries, including the EU states, the UK and the USA.

The Dominica passport can be obtained by investment. The country’s CBI program offers two investment options:

• $100,000+ as a non-refundable contribution to the Economy Diversification Fund, EDF;

• $200,000+ as a purchase of real estate from the government list.

The investment amount depends on the investor’s family composition. Citizenship can be obtained by:

• a spouse;

• children under 30;

• parents of the investor or their spouse;

• unmarried siblings under 25 of the investor or their spouse.

Other than spouses and minor children, family members must be financially dependent on the investor.

The investor also pays Due Diligence, processing and passport fees.

The Dominica passport is issued within 2—6 months. The most lengthy procedure is a government Due Diligence check. The approval of a citizenship application depends on Due Diligence results.

A licensed agent can only apply for Dominica citizenship by investment: it is a requirement under the CBI program. The passport is obtained remotely; it is unnecessary to come to Dominica.