New law establishes tax incentives for commercial civil aviation in the Dominican Republic
By Leandro Corral, firstname.lastname@example.org, Senior Counsel at Guzmán Ariza, Attorneys at Law
On October 7, 2023, President Luis Abinader enacted Law 57-23, which establishes a regime of tax incentives for domestic and international commercial civil aviation in the Dominican Republic.
The law aims to foster and increase the competitiveness of civil aviation in the Dominican Republic, promote sustainable growth and the increase of visitors by air, as well as establish new domestic and international routes to and from strategic markets of the Dominican Republic.
In addition, it seeks to strengthen the positioning of the Dominican Republic as a connecting hub for passenger and cargo transportation, trade and international investment. The new law will make the Dominican Republic one of the most attractive destinations for international investment, thus contributing to boost the economy and create new jobs in different parts of the national territory, especially investment in commercial civil aviation.
It also creates the conditions for the Dominican Republic to compete advantageously in the large aviation tourism market, which annually moves close to 50,000 airplanes throughout the Caribbean. The regulation grants the following tax incentives to national and international commercial air transport operating companies that comply with the requirements established by the law:
1)Total exemption from withholding tax on foreign income payments for leasing aircrafts or aircraft engines, aircraft maintenance and repair services, engine parts and other aircraft parts.
2) Single and definitive withholding of 5% of the tax on payments abroad for training and qualification of crew personnel, use and maintenance of computer programs and software related to the operation of the aircraft, and aircraft insurance.
3) Exemption of the Tax on the Transfer of Industrialized Goods and Services (ITBIS) on the sale of complete flights by Dominican operating companies to companies abroad, as long as the flights are originated abroad with destination to the Dominican Republic.
4) Exemption of the Tariff and ITBIS on the importation of ships and aircrafts of the subheadings 8802.30.00 corresponding to airplanes and other aircrafts of weight in emptiness superior to 2,000 kg but inferior or equal to 15,000 kg, and the subheading 8802.40.00 corresponding to airplanes and other aircrafts of weight in emptiness superior to 15,000 kg.
5) Exemption from the Tax on Assets declared in the General Directorate of Internal Taxes (DGII).
The enacted law assigns the Civil Aviation Board the function of receiving applications and assessing the records of companies interested in benefiting from the fiscal incentives of this regulation, as well as recommending to the Executive Branch the approval of these benefits, subject to the no objection of the Ministry of Finance.
The new regulation is oriented towards promoting the development of international civil aviation in line with the guidelines and principles set forth by the International Civil Aviation Organization (ICAO), which contains the international standards, recommended practices, and procedures governing the sector, and it will come into effect upon its publication in the Official Gazette.