Tax Office Establishes New Measures to Assure Transparency in Company´s Expense Reports

Tax Office Establishes New Measures to Assure Transparency in Company´s Expense Reports
Santo Domingo, 9/13/2010

The Office of Internal Revenue (DGII in Spanish) released a series of new measures aimed at increasing transparency, security and control over expense reports made by companies establishing that all of its contributors who report payments of more than $50,000 pesos, in addition, proof of payment receipts, will have to abide by the established measures within the banking and financial mediation system. 

The Tax Code establishes a formal duty on the part of contributors to present to the Tax Administration all declarations, reports, documents, applications, etc…

The decision, released through General Norm 06-10, explains that the payment used will make each person responsible to the beneficiary and will be different from cash payments in order to back up deductible costs and expenses or those that constitute tax credits and other taxable income.

The General Norm 06-10 published in today’s press establishes, in addition, that activities that generate obligatory tax payments of those carried out by means of exchanging natural goods or other types of activities in which one can use payments as established in the banking system. These should be formalized in acts of good faith, according to the DGII.

In order to take these measures, the Tax Office took into consideration existing costs and expenses that represent an elevated volume in business operations that must be sustainable through irrefutable documentation in order to be admitted as deductible Income Tax expenses and that can constitute a tax credit on the Transference of Industrial Goods and Services (ITBIS).

The General Norm of the DGII points out that the dispositions of the full certified copy h.) of Article 50 of the Tax Code, the Tax Administration should demand that those registered must show supporting and corresponding expense proof and the proof of value for each with the goal of paying taxes and that this depends on the good faith being placed in each individual. 

It also adds that in accordance with the copies g) and h) of Article 50 of the Tax Code, the Tax Administration must demand that taxpayers and those responsible for keeping the books or special accounts registries for their companies and operations, those who keep and show this information for tax purposes and for payment of contributions, those in charge or third parties who deal with certain expense documentation must hang on to all this documentation and expense receipts for a period of ten years.
 
The Tax Code establishes a formal duty on the part of contributors to present to the Tax Administration all declarations, reports, documents, applications, etc related to activities generated by labor obligations and, in general, to give any clarification sought or requested by the DGII.

The DGII puts forth in Article Two of the Norm that proof of expenses referred to must remain in the custody of the contributor for a period of ten years and especially for this period while the laws governing the matter are in effect.

In taking these measures, the Internal Tax Office, realizes the fact that banking operations constitute a general method to guarantee transparency and security for taxpayers as well as constituting an element of additional proof with regard to costs and expenses.
On the other hand, the DGII points out that proof of payment do not in itself constitute what is necessary to be used to show truthful costs or expenses. The General Norm 06-10 stresses that in conformity with Article 288 of the Tax Code, there will be no deductions of the expenses if proper and verifiable documentation is not provided.

The DGII provides information for taxpayers to determine which documents are considered legally acceptable for admission. As such, the Tax Office has the power to determine and interpret the stipulations within the tax law, with the idea of clearing up for the contributors any doubt or concern regarding this issue.