Dominica taxes draw foreign investors by allowing them to optimize their taxes to protect their wealth. This guide presents essential information about Dominica’s tax framework by offering insights into the following:
Dominica Tax Structure
Tax Authority: | The Inland Revenue Division (IRD) is the government authority that enforces Dominica tax law and is responsible for tax collection. |
Personal Income Tax: | Dominica tax residents must pay personal income tax on income earned in the country at a rate of 0 to 35 percent. |
Corporate Income Tax: | Companies registered in Dominica pay a flat 25 percent corporate tax. |
Tax Forms: | Individuals do not file tax returns. Companies can file their tax return in person or through their eFiling tax portal. |
Tax Year: | A company’s financial year-end determines its tax year. |
Tax Deadline: | 31 March is the tax deadline for self-employed Dominica tax residents and registered companies. |
Currency: | Dominica taxes are paid in Eastern Caribbean Dollar (XCD or EC), the country’s official currency, which is pegged at 2.70 XCD to 1 USD. |
Tax Treaty: | Dominica has several tax agreements but does not have a double tax treaty with the United States. |
Dominica Taxes for Individuals
- Withholding taxes: Dominica imposes a withholding tax.
- Social contributions: Both employees and employers must contribute to the Social Security Fund.
- Stamp duty: Buyers and sellers of real estate in Dominica pay stamp duty.
- Property transfer tax: Property sellers pay transfer tax in Dominica.
- Income tax: Income tax in Dominica applies to local income.
Personal income taxes
Dominica personal income tax is charged on:
- Business income
- Interest
- Labor activity
- Rent
- Royalty
Dominica operates a progressive income tax scale of 0 to 28 percent. Both tax residents and non-residents are not taxed on income earned up to EC $30,000.
Income amount | Income tax rate |
$0 to $30,000 | 0 percent |
$30,001 to $50,000 | 15 percent |
$50,001 to $80,000 | 25 percent |
$80,001 and over | 35 percent |
Dominica income tax rates apply to both employees and individuals living in the country who supply independent services. Non-residents pay taxes on all income sourced in Dominica.
Foreign tax relief: Foreign tax deductions are generally not applicable unless the opposing jurisdiction has a tax agreement with Dominica, or the taxes have been paid in a British Commonwealth country that provides similar relief for Dominican tax residents.
Discover the value of a Dominica Passport
Dominica Taxes for Legal Entities
Domestic companies pay a flat Dominica corporate tax rate of 25 percent. The term “Domestic companies” defines the following entities.
- Incorporated or registered as an external business in Dominica.
- Managed and regulated in Dominica
- Trades in Dominica
- Receives earnings from Dominica
- Owns assets in Dominica that generate revenue for the company
Domestic companies pay tax on their worldwide income. The Dominica Income Tax Act treats non-domestic companies differently, placing a withholding tax of 25 percent on chargeable income earned in Dominica. Non-resident companies also pay a 15 percent withholding tax on interest.
Social Security contributions in Dominica
Dominica Social Security is a citizen insurance fund that businesses and their employees contribute to from insurable earnings, providing access to social welfare benefits such as Dominica healthcare. The Dominica tax rate for Social Security is 14 percent for employees without redundancy and 14.25 for employees without redundancy. Employees contribute 6 percent of the tax. Employers contribute 7.5 percent for employees without redundancy and 7.75 for employees with redundancy.
Corporation tax rates
Tax Type | Resident Companies | Non-resident Companies |
Corporate Tax | 25 percent on worldwide income | 25 percent on income earned in Dominica |
Dividends | 0 percent | 15 percent |
Royalties | 0 percent | 15 percent |
Interests | 0 percent | 15 percent |
Social Contribution | 7.5 to 7.75 percent | 7.5 to 7.75 percent |
Value Added Tax (VAT)
The Dominica value-added tax is fixed at 15 percent. Special rates apply to businesses in specific industries:
- Businesses providing hotel accommodations pay ten percent VAT.
- Companies supplying staple food, water, and medical supplies are not subject to VAT.
Dominica Tax Benefits
- No worldwide income tax: Dominica residents do not pay personal income tax on global income.
- Tax-free assets: Dominica’s tax system does not impose wealth, capital gains, or inheritance taxes.
- No annual property taxes: Property owners are only required to pay a municipal tax, with no annual property tax obligations.
- Corporate tax breaks: Dominica International Business Companies (IBCs) may qualify for a 20-year corporate tax holiday.
- Reduced sales tax: Businesses offering hotel accommodation services are charged a ten percent reduced value-added tax.
- No Controlled Foreign Company regulations: Dominica tax law does not enforce Controlled Foreign Corporation (CFC) regulations, allowing tax residents to own offshore companies without affecting the tax obligations of those entities.
How to Become a Dominica Tax Resident
Foreign investors and retirees in Dominica can obtain tax resident status in the country, which is an effective tax strategy to utilize certain tax incentives such as foreign tax credits.
Dominica tax residency requirements:
- Obtain legal residency
- Spending a minimum of 183 days in the country annually
- Obtaining a certificate of residency and Dominica Tax Identification Number (TIN)
Dominica does not have a tax residency program allowing foreign nationals to establish tax residency without residing in the country for at least 183 days.
Dominica citizenship
Foreign investors can apply for Dominica citizenship by investment to gain residency in Dominica for tax purposes. The program incentivizes foreign investment by allowing investors to make a non-refundable contribution to the Economic Diversification Fund (EDF) or acquire real estate and obtain citizenship. The minimum investment starts at $200,000.
Successful applicants receive a Dominica passport and the right to reside in Dominica permanently.
Take a look at our Dominica Citizenship by Investment Ultimate Guide
Filing Tax Returns in Dominica
Anyone liable to pay taxes in Dominica for investments or employment income must register with the Inland Revenue Division (IRD) and obtain a Tax Identification Number (TIN).
Individuals
Employed individuals in Dominica pay tax on their monthly salary through the Dominica Pay-As-You-Earn system (PAYE). The PAYE system withholds monthly employment income taxes from an employee’s gross income. PAYE taxes are paid monthly by the employer.
Self-employed individuals
Self-employed Dominican tax residents must file taxes with the Inland Revenue Division by 31 March yearly. The tax calculation must include income earned in the previous calendar year. Sole traders must ensure their tax filing declares all earnings and claims allowable deductions, such as tax relief from international double taxation treaties, bank interest payments, and legal fees.
Legal entities
Business in Dominica must file corporation tax returns by the end of the fourth month after the end of their fiscal year. The tax return must contain value-added tax reports filed monthly or quarterly, depending on the company’s structure, and any requirement to pay additional taxes, such as PAYE taxes and consumption tax.
PAYE and withholding tax for company employees are submitted by employers on the 15th of each month. The Inland Revenue Division provides an eFiling system to submit tax returns.
Other Taxes in Dominica to ConsiderÂ
Landholding license: Non-resident real estate investors must apply for an Alien Landholding License (ALHL) to legally buy Dominica real estate. The license fee is ten percent of the assessed property value. Real estate investment through the Dominica citizenship by investment does not require applying for an ALHL.
Stamp duty: Based on the market property value, Dominica stamp duty is imposed at 2 percent for the buyer and 2.5 percent for the seller.
Sales tax: Dominica’s sales tax is 15 percent. Businesses operating in the tourism sector pay a reduced 10 percent rate.
Import tax: Customs duty is levied at 40 percent against the cost and freight (CIF) value of goods. All taxable imports are assigned a tax code.
Excise tax: Excise tax is applied to specific imported items such as vehicles, alcohol, tobacco, and petroleum.
Taxes and Fees for Buying, Selling, and Owning Property in Dominica
Land transfer taxes
Property transfer taxes and mandatory fees when buying property in Dominica include an Assurance Fund Fee, stamp duty, and legal and judicial fees. All the fees combined amount to 9 or 10 percent, depending on the cost of legal fees.
Rental income
An individual or business owner must pay tax on the income they earn from rent. The tax liability depends on the property owner’s total earnings, including the rental value, and allowable income-related expenses, such as property renovation costs.
Annual property tax
Dominica does not have an annual property tax. Only properties located in the cities of Roseau and Canefield are subject to a 1.25 percent municipal tax.
How to Reduce Taxes as a Foreigner in Dominica
Foreign nationals living in Dominica, such as Americans, Canadians, and Europeans, can utilize tax credits and deductions to reduce their tax liability. A standard tax deduction strategy for US citizens is reducing gross income subject to taxation by filing Form 1116 for the foreign tax credit with FORM 1040 when submitting an annual income tax return to the US Internal Revenue Service (IRS).
Other methods include increasing income payments to IRAs, 401ks, SIPPs, RRSPs, and other retirement accounts. Selling a real estate investment at a loss and property maintenance costs can reduce annual tax bills by itemizing deductions.
Dominica tax deductions for foreign investors
Foreign Tax Credit: Americans can apply for a Foreign Tax Credit (FTC) with FORM 1116 to deduct taxes paid on their annual income to the Dominican government.
Capital Gains Tax exemption: There is a alternative capital gains tax for non-UK residents, exempting them from capital gains on most UK assets, except for residential property and specific business-related assets.
Foreign Earned Income Exclusion: Americans may qualify for the Foreign Earned Income Exclusion (FEIE), which excludes income earned in the country from their US taxable income.
RRSPs and Pensions deductions: RRSPs or RRIFs deductions allow Canadian citizens to withdraw from these accounts to reduce withholding tax rates under specific double taxation treaties.
Foreign Housing Exclusion: Owning a primary residence in Dominica allows US citizens to deduct housing-related expenses from their US taxes.
Dominica Double Tax Treaties and Agreements
As a member of the Caribbean Trade and Economic Union Agreement, Dominica has Double Taxation Agreements with members of the Caribbean Community (CARICOM), including:
- Antigua and Barbuda
- Barbados
- Belize
- Grenada
- Guyana
- Jamaica
- Monaco
- Saint Kitts and Nevis
- Saint Lucia
- Saint Vincent and the Grenadines
- Trinidad and Tobago
Exchange of tax information between Dominica and other countries
The Government of Dominica has Tax Information Exchange Agreement with EU countries, Australia, Canada, New Zealand, Singapore, Switzerland, and the United Kingdom.
Dominica complies with the US Foreign Account Tax Compliance Act (FATCA) by reporting the financial accounts of US citizens who are paying income taxes in the country.
Dominica Taxes and Fees for Vehicle Ownership
The car purchase cost in Dominica is high and subject to several taxes and fees. Charges include:
- Customs duty
- Customs Service Charge
- Environmental levy
- Excise tax
The total fee is about 70 to 75 percent of the vehicle’s value.
Owning costs
The cost of owning a vehicle includes direct vehicle charges and fees for licenses. Costs include:
- Registration
- Road tax
- License fee
- Highway maintenance levy
The cost of standard fees is around $350 to $450, depending on the vehicle type. Insurance costs differ greatly according to the vehicle type, value, and driver profile.
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Frequently Asked Questions about Taxes in Dominica
One of the Dominica tax advantages is that only income sourced in Dominica is subject to tax for individuals.
Dominica is not a tax free for individuals or businesses, with income tax levied on both. Foreign investors can use the services of banks in Dominica for tax optimization, provided they only earn foreign income.
Dominica departure tax is payable in cash only and is EC 72 ($28) for nationals and EC 86 ($33) for non-nationals.
Dominica is not a Caribbean tax haven, as businesses and individuals must pay income taxes, whether employed or self-employed. Â
Dominica has several personal income tax rates applied in a progressive tax system. The rates range from 0 to 30 percent for individuals and a flat 25 percent tax rate for legal entities.
