Decree to Make Business Reorganizations More Transparent Announced by Tax Office

Decree to Make Business Reorganizations More Transparent Announced by Tax Office
Santo Domingo, 08/24/2010

The General Office of Internal Taxes (DGII in Spanish) stressed the importance of Decree 408-10 pronounced by the Executive Office which will make public the manner in which the Treasury Department will interpret and apply the reorganizational processes carried out by companies who seek to integrate their assets and adapt them to the most utilized contractual judicial forms in modern times.

Internal Tax office officials explained that the measures contained in Decree 408-10 will not generate any additional charge to the societies undergoing reorganization as they are consortium or interests groups already conforming to these norms…

With the application of this decree, made public on Monday at a national press conference, the Treasury Administration will unify the criteria and will standardize regulations over operations concerning the concentration of businesses as found in the Dominican Tax Code as well as Law No. 479-08 which presides over Commercial Societies and Individual Limited Liability Companies, with the goal of establishing a coherent and uniform fiscal regiment in order to meet the international better practice standards.

Internal Tax office officials explained that the measures contained in Decree 408-10 will not generate any additional charge to the societies undergoing reorganization as they are consortium or interests groups already conforming to these norms or those being formed through mergers or transfers of related companies.

On the contrary, the decree guarantees the application of the principle of fiscal neutrality to be maintained in these types of business reorganization transactions; said principle stipulates that tax laws must not become factors which affect the behavior and decision-making of the economic agents to organize their restricting.

The Decree establishes that for situations to maintain transparency in terms of business concentrations, the Executive Power will define the most relevant operations and processes so that contributors can rely on the appropriate conceptual elements to better comprehend the fiscal derivations and discretion of the Tax Administration in the application and collection of taxes based on objective criteria.

This element is highly valued by the authorities of the General Office of Internal Taxes as it emphasizes, yet again, the official line of the Tax Administration which is to be ever more transparent to tax payers and contributors while upholding administrative practices that are overseen and implemented by the economic dynamic imposed by the market with the goal of avoiding ambiguities and carelessness in the interpretation of facts. This would include the use of legal devices and corresponding fiscal consequences.

One of the Considering the Decree establishes that if the Tax Code deals with the undertaking of ¨business reorganization¨ in keeping with international standards – this term is not necessarily equivalent in all its judicial or economic reach – that deal with the ¨concentration of businesses¨ so long as the ¨reorganization¨ refers to changes in law that oversee the structures or confines of society or business while the concentration alludes to the underlying economic interest in the ¨reorganization.¨

From this point, the Decree lays out the express interest of the Executive Powers and Tax Administration to jointly seek to make more transparent the interpretation, application and practical administration of the notion of societal reorganization and criteria that oversee the fiscal results generated by the techniques of business concentration.