Dominica - The Caribbean's Nature Island
Officially the Commonwealth of Dominica, this mountainous island nation is known to many as the ‘Nature Island of the Caribbean’ due to its abundant vegetation, varied fauna and flora, and tropical rainforests. Dominica is home to Boiling Lake, the world’s second-largest hot spring, as well as a whopping nine volcanoes. In the northwest of the island, you’ll find the Morne Diablotin National Park, a UNESCO World Heritage Site.
Check out our article: What You Need to Know about Moving to Dominica.
Aside from its fantastic natural environment, Dominica offers a favorable tax environment that attracts individuals and businesses from all over the globe. With competitive tax rates and various incentives, becoming a tax resident of Dominica opens the door to enticing investment, trade, and economic growth opportunities.
Keep reading as we delve into the intricacies of tax in Dominica, including the types of taxes and fees, how to pay them, and the different rates for residents and non-residents.
Is an investor with Dominica citizenship obliged to pay taxes in the country?
For individuals, taxation depends on your status as a taxpayer in Dominica.
Individuals who are not residents of Dominica are required to pay tax on income received from sources within the country, such as rental income.
Dominica tax residents are required to pay income tax on all income received in the country and abroad.
Important note: Receiving a Dominican passport does not mean you automatically become a tax resident of the country. You can only become a tax resident of Dominica if you live in the country for a minimum of 183 days each year. However, if you make use of the country’s citizenship by investment program, you are not required to live in Dominica before or after obtaining a Dominican passport.
Check out our article: Everything You Need to Know about the Dominica Passport.
Personal Income Tax in Dominica
Income tax rates in Dominica range from 15 percent to 35 percent and work on a progressive scale, as outlined below:
- 15 percent on the first EC$20,000 ($7,400) of income
- 25 percent on the next EC$30,000 ($11,000) of income
- 35 percent on the rest of your income
In Dominica, personal income tax is paid on any income that a taxpayer earns, such as salaries, income from self-employment, dividends, and rental income. If a company pays dividends they are subject to a withholding tax, while an individual who receives dividends pays no tax on them. The only exception is income from the sale of real estate, which is exempt from both income tax and capital gains tax.
You will be happy to learn that taxpayers are entitled to reductions in the amount on which tax is levied, also known as tax deductions. As a taxpayer, you can benefit from several reductions at once. These reductions are added up and subtracted from your income, and the remaining amount is what you will pay income tax on.
Standard deductions apply to the following:
- Up to EC$25,000 ($9,260) bank interest on a mortgage
- Donations to institutions approved by the Dominica Cabinet
- Payments up to EC$5,000 ($1,852) per student for university education
General deductions for income-related expenses:
- Rental yield, including utility bills, property renovation costs, municipal fees and taxes paid by the property owner, and payments for services on tax returns preparation.
- Self-employed expenses, including tools and supplies, rental of premises, and services on tax returns preparation.
Income Tax: The Difference for Tax Residents and Non-Residents of Dominica
Tax residents of Dominica must pay tax on all income, including that received from foreign sources. However, as a tax resident, you are entitled to a standard tax deduction of EC$30,000 ($11,000) with no conditions attached. If you have an annual income of $50,000, this standard deduction means that you will pay $3,900 less than a non-resident.
Non-residents pay income tax on income earned in Dominica only.
An example of tax calculation for an annual income of $50,000
The following table shows how income tax in Dominica differs for tax residents and non-residents using an annual income of $50,000.
|Income with deductions||$50,000||$38,900|
|15 percent on the first EC$20,000 ($7,400)||$1,110||$1,110|
|25 percent on the next EC$30,000 ($11,100)||$2,775||$2,775|
|35 percent on the remaining income||$11,025||$7,140|
|Income tax amount||$14,910||$11,025|
As you can see, tax residents of Dominica end up paying less income tax than non-residents, thanks to the country’s standard tax deduction.
Important note: Non-residents are subject to a withholding tax of 15 percent on income sources like dividends, interest on deposits, rental yield, and royalties. The entity responsible for disbursing the income is obligated to pay the tax by deducting it from the payment. It is important to note that this withholding tax is withheld directly from the amount paid, and there is no separate income tax levied on the individual.
Double Taxation in Dominica
If you are a tax resident in Dominica who earns income in another country, or a non-resident who earns income in Dominica, you may be required to pay taxes in both countries. Fortunately, Dominica has international double taxation treaties (DTTs) with the CARICOM (Caribbean Community and Common Market) members, which help individuals avoid having to pay double taxes.
Dominica has double tax treaties with the following countries:
- Antigua and Barbuda
- Saint Kitts and Nevis
- Saint Lucia
- Saint Vincent and the Grenadines
While Dominica does not have DTTs with most countries, this list may expand to include more countries if Dominica enters into new agreements.
How to Pay Personal Income Tax in Dominica
Monthly income tax
Income tax on salaries must be paid monthly by the 15th of each month. Your employer will pay the tax by withholding it from your salary and transferring it to the tax office.
Annual income tax
Dominica tax residents who receive an income from salaries only, with the amount not exceeding EC$30,000 ($11,100) per year, must file an annual income tax return. Your tax return must be submitted by 31 March each year through your personal account on the Inland Revenue Division website.
How to become a Dominica tax resident
To become a tax resident in Dominica, you must register at your place of residence in the country, obtain your Tax ID and Tax Code, and reside within Dominica for a minimum of 183 days each year.
Taxes and Fees When Buying, Owning, and Selling Property in Dominica
In Dominica, no tax is charged on the purchase or sale of a property. When purchasing real estate, the buyer must contribute to the Insurance Fund and pay stamp duty, legal fees, and judicial fees. These additional costs amount to about 10.5 percent of the transaction amount.
As the owner of a property, you will not pay property tax. However, you will need to pay a municipal tax, which is 1.25 percent of the assessed property value located in the towns of Roseau and Canefield. If you rent the property out, you must pay a state duty of about one percent per year to conclude your lease agreement.
If you are selling a property in Dominica, you must pay stamp duty which amounts to 2.5 percent of the transaction amount. However, the income you receive from the sale of your property will not be taxed.
Taxes and Fees for Car Owners in Dominica
When purchasing a car in Dominica, you must register the vehicle and pass the state technical inspection, the cost of which amounts to about $52. In addition to this, car and motorcycle owners must pay an annual road tax and license fee, the amount of which will depend on the category of the vehicle (car, truck, or motorcycle) and whether it is a personal or commercial vehicle. For example, if you own a personal passenger car, you will pay $200 each year for road tax and license fees.
Fees for vehicle owners in Dominica
The following tables outline the costs you will encounter when purchasing a vehicle in Dominica.
One-time payments for the purchase of a car or motorcycle
|Registration||Car: EC$100 ($37)
Motorcycle: EC$60 ($22)
|Technical inspection||EC$40 ($15)|
Annual payments for a vehicle in Dominica
|Road tax||EC$50 – EC$150 ($18.50 – $55.50)|
|License fee||EC$120 – EC$6,010 ($44 – $2,226)|
Yacht Registration in Dominica: Cost and Procedure
If you own a yacht in Dominica, you will need to pay a registration fee, as well as an annual license fee. The registration fee is EC$1,900 ($704) and is not affected by the size or displacement of the yacht. The annual fee from the second year is EC$950 ($352) and can be reduced to EC$750 ($278) if you pay it upfront for three to five years.
The Dominica Maritime Administration is ranked as one of the five largest private boat registers in the world, and Dominican citizens – or citizens of any other CARICOM member country – can register a yacht in the country. Foreigners, however, will need to open a Foreign Maritime Entity (FME) in order to register a yacht in Dominica.
If you own a personal yacht, you can register it remotely without an inspector from the Maritime Administration having to visit the yacht. To do so, you will need the following documents:
- Registration application
- Owner’s passport or power of attorney from the owner (to confirm applicant’s authority)
- Certificate of ownership
- Declaration of non-commercial use
- Displacement certificate
- Certificate of suitability of the yacht for its purpose of use
- Insurance policy
Taxes and Fees for Companies in Dominica
Tax resident companies in Dominica must pay the following:
- 25 percent corporate income tax
- Seven percent contribution of employee salaries to social funds
Companies registered as tax residents in Dominica must pay a corporate tax on worldwide income as well as any activities performed in Dominica, while non-resident companies pay tax on profits earned in Dominica only. Companies also pay VAT at the standard rate of 15 percent.
Corporate tax must be paid within three months following the end of the financial year, which is 30 June in Dominica. Accrued tax can be paid three times a year in quarterly installments of 25 percent, 30 percent, and 40 percent.
Non-resident companies will need to pay a 15 percent withholding tax on income such as dividends, interest on deposits, rental yield, and royalties. It is important to note that these types of income are not factored in when calculating the company’s corporate tax.
You may be wondering about the cost of registering an International Business Company (IBC) in Dominica. The process is fairly fast, with an IBC taking only two weeks to be registered remotely in Dominica, and the cost of this registration is about $2,100. Following this, you will need to pay a minimum annual maintenance cost of about $1,400.
Value-Added Tax in Dominica
VAT – or value-added tax – is a tax levied on the sale of goods and services. In Dominica, the standard VAT rate is 15 percent. However, a reduced rate of 10 percent applies to hotels and diving companies. There are also some goods that have no VAT at all, such as goods for export (flour, milk, rice, sugar). Additionally, VAT is not charged on financial services, rent, or the sale of real estate.
VAT rates in Dominica
The table below provides a summary of the VAT rates in Dominica based on the good or service:
|Good or service||VAT rate|
|Goods and services||15 percent|
|Hotels and diving||10 percent|
|Exported goods and services, including medical supplies, medication, flour, milk, rice, and sugar||0 percent|
|Financial services, rental payments, sale of property||No VAT|
VAT can be paid by individuals, such as those who are self-employed, as well as companies. If your annual revenue exceeds the threshold, you must register to pay VAT. VAT is due to be paid by the 20th of each month. The minimum threshold at which you must pay VAT is as follows:
- Any goods and services: EC$250,000 ($92,592)
- Hotels and diving: EC$62,500 ($23,148)
Important note: Goods on which VAT is not taken (financial services, rental payments, sale of property) are not included in revenue, while goods with zero VAT (exported goods and services including medical supplies, medication, flour, milk, rice, and sugar) are included.
Exchange of Tax Information with Other Countries
While Dominica does exchange tax information with other countries, it does not share the names of the owners of companies that are registered in the country. Dominica is part of the Convention on Mutual Administrative Assistance in Tax Matters, members of which assist one another on the following matters:
- Exchanging tax information
- Conducting tax audits simultaneously
- Participating in tax audits abroad
- Assisting in tax collection (including adopting interim measures concerning taxpayers’ property abroad)
- Exchanging documents
How to Get Dominica Citizenship
It is possible to obtain a Dominican passport through the Dominica citizenship by investment program. Under the program, you have two routes to choose from:
- A non-refundable contribution of at least $100,000 to the Economic Diversification Fund (EDF)
- A real estate purchase of at least $200,000 from a government-approved list
It is important to note that the investment amount is dependent on the investor’s family. Family members, excluding the spouse and minor children, must be financially dependent on the investor. The following family members can obtain Dominican citizenship:
- Children under 30 (if aged between 21 and 30, they must be in education)
- Unmarried daughters under 25 living with the main applicant or spouse
- Parents of the investor
- Parents of the investor’s spouse
- Unmarried siblings of the investor under 25
- Unmarried siblings of the investor’s spouse under 25
Investors are required to pay fees, including due diligence, processing fees, and passport fees. Your citizenship application will be approved based on the results of your due diligence check, which is the longest part of the entire process. Your passport should be issued within two to six months.
Check out our article: Dominica Citizenship by Investment – The Ultimate Guide by Experts.
As you can see, Dominica taxes shape the country’s economic landscape by offering favorable tax rates and various incentives that attract individuals and businesses from across the globe. So, why not get started on becoming a tax resident in Dominica by investing in the country today?
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Frequently Asked Questions about Tax in Dominica
1. What is the corporate income tax rate in Dominica?
In Dominica, the income tax rate for companies is 25 percent. Legal entities are also required to pay value-added tax (VAT) at a rate of 10 to 15 percent.
2. Is Dominica a tax haven?
Dominica offers favorable tax rates and a number of incentives that attract individuals and businesses from all over the world, causing many to consider it a tax haven.
3. What is the tax rate in Dominica?
Dominica offers a progressive income tax scale:
- 15 percent on the first EC$20,000 ($7,400)
- 25 percent on the next EC$30,000 ($11,100)
- 35 percent on the rest of the income
4. What are the tax benefits of Dominica?
Dominica offers several tax benefits, such as no personal income tax and no tax on inheritance or capital gains. The country also offers incentive packages on corporate tax, import duty exemptions, tax relief, and export allowances.