Dominican Republic – Transfer Pricing (2025)

Legal framework and scope

The Dominican transfer pricing framework is anchored in the Dominican Tax Code, notably Article 281, and is complemented by Transfer Pricing Decree No. 78-14 and subsequent regulatory updates, including Decree 256-21 which amends procedural aspects. Article 281 requires that transactions between a resident and a related natural person, legal person, or entity be agreed at the prices or amounts that would have been agreed between independent parties in comparable transactions and under similar circumstances. Paragraph I extends coverage to transactions with related residents and to transactions with persons domiciled or incorporated in jurisdictions with preferential tax regimes, low or no taxation, or tax havens, treating such jurisdictions as related for the purposes of the article. The Directorate General of Internal Taxes (DGII) publishes annually a list of jurisdictions not considered preferential in Resolution DDG-AR1-2022-00001.

Arm’s length principle and the role of the OECD Guidelines

Domestic law enshrines the arm’s length principle and grants the tax authority powers to challenge and adjust transfer prices that do not conform to market values, as set out in Article 281, Paragraphs II and III. The official profile states: “The OECD TPG is used as an explanatory instrument as long as it does not contradict domestic legislation.” Thus, the OECD Transfer Pricing Guidelines act as an interpretative and technical reference provided they do not conflict with Dominican statutory provisions.

Definition of related parties

Article 281 of the Dominican Tax Code defines related parties and lists several connecting factors: direct or indirect participation in management, control or equity; a resident with a permanent establishment (PE) abroad; a PE in the country with a head office abroad; exclusive agent, distributor or dealer status; when one party receives or transfers at least 50% of its production; or when one party assumes responsibility for losses or expenses of the other. Where the relationship is defined by share capital or voting control, a minimum of fifty percent (50%) direct or indirect participation is required. These rules are supplemented by the provisions of Decree No. 78-14 (TP Decree).

Methods and selection criteria

The Dominican framework recognizes standard transfer pricing methods. Dominican Tax Code, Article 281, Paragraph 7 together with Transfer Pricing Decree 256-21, Article 2 acknowledge the use of CUP (Comparable Uncontrolled Price), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split methods. The jurisdiction applies the “most appropriate method” approach rather than a strict hierarchy. The Transfer Pricing regulation (78-14), Article 6 specifies that method selection should consider which method best corresponds to the business operations, the availability and quality of reliable information, the degree of comparability achievable among parties, transactions and functions, and which method requires the fewest transfer pricing adjustments.

Comparability analysis and ranges

Dominican legislation largely follows OECD Chapter III guidance on comparability analysis. Article 281, Paragraph VI requires consideration of the characteristics of the property or services transferred, contractual terms, a functional analysis (functions performed, assets used and risks assumed), economic circumstances and the business strategies pursued. Paragraph V sets out a comparables identification process consistent with the OECD Guidelines. The law and regulation set forth a stepwise comparability process: evaluation of the economic environment, assessment of the tested party (financials, contracts, assets and risks), identification and assessment of internal and external comparables, selection of the most appropriate method, drafting of the comparability analysis and application of comparability adjustments where appropriate. There is no automatic preference for domestic comparables over foreign ones; Article 5 of the TP Decree (as modified by Decree 256-21) states that comparables requiring the least adjustments and having the best availability and reliability should be used. The regulation permits the use of an arm’s length range and specifically accepts the interquartile range as an acceptable measure (Transfer Pricing regulation (78-14), Article 12). Comparability adjustments are required when differences could materially affect the price or margin under review, and guidance identifies relevant elements for adjustment, such as payment terms, traded quantity, advertising, intermediation costs, freight and insurance, and product specifications (Transfer Pricing regulation (78-14), Article 5, modified by Transfer Pricing Decree 256-21, Article 1, Paragraph III, number 4).

Documentation and reporting requirements

Dominican law requires transfer pricing documentation aligned with the three-tier approach. Transfer Pricing regulation (78-14), Article 18, as modified by Transfer Pricing Decree 256-21, Article 4, obliges taxpayers to prepare and submit a Master file consistent with Annex I to Chapter V of the OECD Guidelines, a Local file consistent with Annex II, and a Country-by-Country Report consistent with Annex III. Taxpayers must also file a transfer pricing return. Timing requirements are: the transfer pricing return must be filed within 120 days after the fiscal year-end; the Master Report and Local Report must be submitted within 180 days after the transfer pricing return; and the CbCR must be filed within one year after the fiscal year-end. All documentation must be filed in Spanish. Regarding CbCR specifics, DGII issued General Rule No. 08-21 on October 5, 2021, establishing the content and formalities for CbC filing.

Safe harbours and simplification measures

The legal framework contemplates the possibility of safe harbours. Dominican Tax Code, Article 281 bis, Paragraph V and Transfer Pricing regulation (78-14), Article 16 provide that safe harbours may be introduced for certain sectors or activities where a price or minimum profit could be determined. However, implementing regulations for operationalizing safe harbours have not yet been issued. A de minimis simplification exists: taxpayers with accumulated related-party transactions not exceeding DOP 13,229,945.7 (approximately EUR 200,708 for 2022) are exempt from preparing the Local File, while still being required to comply with the arm’s length principle (Transfer Pricing Decree 256-21, Article 04, Paragraph VII).

Advance Pricing Agreements (APAs) and Mutual Agreement Procedures (MAP)

APAs are available under Dominican law. Article 281 bis of the Dominican Tax Code and Article 15 of the TP Decree regulate APAs, allowing for unilateral, bilateral and multilateral agreements. A competent authority may enter into a bilateral or multilateral APA under the MAP provision of the relevant tax treaty. The jurisdiction also makes MAP available for the resolution of transfer pricing disputes. For operational details, practitioners should consult the Dominican Republic MAP profile.

Penalties and other administrative considerations

The Dominican Tax Code provides penalties for non-compliance with formal duties. Article 281ter and Article 257 set fines ranging from 5 to 30 minimum wages; the profile mentions the minimum wage as DOP 13,915. Penalties for failure to produce transfer pricing documentation or required information are multiplied by three. Additionally, the tax administration may impose an extra sanction equal to 0.25% of the income tax accrued in the previous fiscal year. The tax administration has the power to challenge and adjust transfer prices where agreed valuations result in reduced taxation or tax deferral (Dominican Tax Code, Article 281, Paragraph II and III). Year-end adjustments are permitted provided they do not reduce the taxable base or defer tax, and corrections to previously filed information are allowed in cases of mistakes, miscalculations or omissions (Transfer Pricing regulation (78-14), Article 1, Paragraph I). Secondary adjustments are contemplated by the regulation (Transfer Pricing regulation (78-14), Article 1, letter c)), but as of the profile date they had not been broadly applied and the administration was analyzing their potential application on a case-by-case basis.

Other tax rules affecting related-party transactions

Certain tax provisions outside transfer pricing rules affect intragroup transactions. The Tax Code provides that deductions for interest, royalties or technical assistance payments will not be allowed where the corresponding withholding tax (27%) under Articles 298 and 305 of the Tax Code has not been withheld (Dominican Tax Code, Article 281, Paragraph III. B). Regarding interest limitation rules, Article 287, letter (a), Paragraph I to IV sets a cap on the deductibility of interest on import financing obtained abroad, linking the deductible amount to the product of total accrued interest and three times the ratio of average annual book capital (C) to the average annual balance of interest-bearing debt (D), i.e., an expression of the form I * 3 * (C/D); this limitation does not apply to entities that are part of the regulated financial system.

Conclusion

The Dominican Republic maintains a comprehensive transfer pricing regime grounded in Article 281 of the Tax Code and in Transfer Pricing Decree No. 78-14, as subsequently modified. The country applies the arm’s length principle, relies on the OECD Guidelines as an interpretative tool where consistent with domestic law, mandates Master, Local and CbC documentation with specified deadlines and language requirements, and provides APAs and MAP mechanisms. Practical areas still developing include the issuance of implementing rules for safe harbours and the consistent application of secondary adjustments.

References

More information and the global OECD country profile page: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html