ProCompetencia warns of ‘ambiguities’ in the regulations for the ITBIS

Santo Domingo, DR.
The National Commission for the Defense of Competition (ProCompetencia) detected ambiguities in the transportation and accommodation issues of the draft regulation for the application of the tax on the Transfer of Industrialized Goods and Services (ITBIS) to providers of digital services abroad prepared by the General Directorate of Internal Taxes (DGII).

The institution recommended that the DGII solve them to prevent this instrument from becoming a regulatory barrier that discourages the entry of new players into the markets and affects the dynamics of free and fair competition, as well as the rights of users, and provides discretionary application by the various agencies of the tax administration, which would generate uncertainty in those who would be subject to compliance with said regulation.

He warned that if the inaccuracies remain, there would be an alteration to the principle of fiscal neutrality because local digital services providers would be granted a differentiated and advantageous treatment concerning digital services provided from other countries.

The agency understands that the treatment to be given to providers domiciled or resident in the country that incur in the provision of the indicated services should be specified to avoid possible adverse repercussions.

Although the draft does not establish that the cost of the tax will have to be assumed by the local consumer, it will be paid by him in the digital service he consumes.

According to a note sent to the media, the observations are contained in a communication sent on 16 March 2022 to the director-general of the DGII, Luis Valdez, by the president of the Board of Directors, María Elena Vásquez Taveras, after being unanimously approved by the organism integrated by Gianna Franjul, Víctor Mateo, Iván Gatón and Juan Reyes.

Article 20 of the General Law for the Defense of Competition of 2008 establishes that administrative acts intended to issue regulations or to resolve administrative sanctioning processes brought before other market regulatory entities different from the Commission provided they are related to the object of this law should be sent to the Commission for its examination together with the documentation that supports them.

Suggestions
The state body has suggested that the DGII appeal to the Dominican Telecommunications Institute (Indotel), in its capacity as a regulatory entity, to evaluate the principle of equity when taxing digital services with that or any other tribute.

It points out that Article 4 of the draft identifies as taxable persons the companies and individuals not resident or domiciled in the Dominican Republic that provide some of the digital services and that are used in the national territory, but it does not refer to the applicability or not of the ITBIS to the similar services provided through the Internet by local suppliers to be consumed within the national territory, as it happens with Corotos.com, LaPulgaRD.com, PedidosYa.com.do.

Regarding the issues of land transportation and lodging mediated by digital services, the agency analyzed the following aspects: scope of application, implementation mechanism to digital services, application to lodging services judged by digital services, application to transportation services mediated by digital services, and determination of the taxable base of the tax on digital services.