3 part ITBIS question, hypothetical.

[MrMike]

Let's say there is a US corporation based in the US that performs services on a subcontractor basis for other US based companies in the US, and all payments are between parties in the US.

Let's say that company hired Dominicans living in the DR to actually perform those services and paid them wages, maybe even set up an office where the services would be performed, via internet and telephone.

Part 1:
Would this be legal?

Part 2:
If so, what portion then of the US based company's income, if any would be subject to ITBIS?

A) All of it?

B) None of it?

C) The monthly payments made to cover immediate expenses of doing business in the DR, including rent, bills and payroll?

D) Moot because you can't do that anyway and nobody will believe you that there is any US based company in existence?

Part 3:
Now, if there is any part of the company's income that does not need to have ITBIS paid on it, what proofs and registrations would/should this company maintain to prove that it is not evading taxes?

Thanks in advance all for your insights

[GringoCArlos]

MrMike, to do any of the following, it would be necessary to either have an RNC number (basically a tax ID number for a company), or lacking that, someone's foreign passport number and/or their cedula number here: 1)to have employees 2) to rent an office / space 3) to establish a telephone line/internet account and 4) most other types of commercial services needed (DR bank accounts in the name of the company, Fed Ex, etc)

It is not necessary to establish a separate DR company to obtain an RNC number here in the DR, but it does provide some form of legal separation, and neither the DR or the US can look "under the sheets" so to speak, of the other country's company.

Also, whoever is the "employer" of the employees must also file monthly reports to the Labor Department and DGII showing the taxes withheld, INFOTEP, etc and make deposits for the same. There must also be an employee retirement / health plan put in place, and more paperwork and monthly deposits for this.

If company checks are written to any physical person (not a company), the company writing the check must withhold and deposit 10% (?) as taxes on the recipient. (DGII does conduct audits, and the late fees and penalties are big on this kind of stuff. The accounting is a pain in the a**, and it's easier to have an accountant do it.)

The US-based revenue would not be subject to ITBIS, but at a minimum, the expenses paid for the operations here would be. The DR company could invoice the US company for services rendered, in order to show a minimal profit here, and lessen any tax liabilities, but that is a good question for a good accountant & attorney on the nitty-gritty stuff.

Good luck

[MrMike]

Originally Posted by GringoCArlos

The US-based revenue would not be subject to ITBIS, but at a minimum, the expenses paid for the operations here would be. The DR company could invoice the US company for services rendered, in order to show a minimal profit here, and lessen any tax liabilities, but that is a good question for a good accountant & attorney on the nitty-gritty stuff.

Good luck

Thanks for taking the time to reply.

RNC #, got that

Labor board, got that too.

Now about ITBIS on the expenses paid here, since most of these expenses include ITBIS anyway, like rent, phone, etc. would the ITBIS shown on these receipts be enough?