Telecommunications, second most taxed sector in the region

The telecommunications sector in the Dominican Republic is the second most taxed in the region, with 30% of direct taxes, according to data from the Association of Communications and Technology Companies (Comtec).

In detail, according to the executive director of the organization, Claudia García, telecommunications services at the local level pay 18 % of Tax on the Transfer of Industrialized Goods (ITBIS), 10 % of Selective Consumption Tax (ISC) and 2 % of Contribution to the Development of Telecommunications (CDT).

But additionally, telecommunications companies pay other operation taxes which are: 31 % in asset taxes (tax that only has an effect when it is higher than income tax based on profits); 1 % in taxes to municipalities for installation of antennas and fences,10 % Selective Consumption Tax (ISC) on bonds and insurance, among others; 27 % WHT for payment of remittances abroad, except for the countries of Canada and Spain with which it has agreements, being in these the WHT 18 % and 10 % respectively; 14 % of Social Security Treasury (TSS): Mandatory contributions, Social Security, and 0. 15 % for financial transactions.

Companies spend around US$600,000 annually on maintenance and updating of infrastructure for 9-1-1 management.

Comtec states that in six Latin American countries a consumption tax is applied to some telecommunications service and that only in Brazil (0.5%) and in the Dominican Republic (10%) is it applied to Internet services. In Ecuador it is 15%, but only applies to legal entities.
The association in which Altice Dominicana, Compañía Dominicana de Teléfonos (Claro), Phonix Tower International, Samsung Electronics Latinoamérica/DR, Teletorres del Caribe, Torresec and Wind Telecom participate, recalled that in January 2004, a Transitory Solidarity Contribution (CST) of 5% on gross income from exports of national goods and services was established, as a transitory tax that taxed the income coming from abroad of the telecommunications sector for 6 months and that as of December 2006 the Tax Rectification Law (Law 495-06) comes into force, for the payment to the State for Capital Gains for the acquisition of goods or rights located.

“In December 2006 the 10% Selective Tax on Telecommunications was established. It was implemented under the argument that its establishment had a temporary nature to support the fiscal deficit of that time. It is still in force today in 2021”, Comtec assured.

Recently, in 2012, the tax reform introduced through Law 253-12, on the Strengthening of the State’s Collection Capacity for Fiscal Sustainability and Sustainable Development, included television services to be taxed with 10% ISC, incorporated again in Article 309 of Law 11-92, which instructs government entities to withhold 5% to the payments they make to companies for their consumption of services and established a withholding of 10% of dividends distributed from shareholders. “Since August 2017, the Development and Sustainability Tax of the National Emergency and Security System (9-1-1) was imposed, which taxes all minutes and short text messages (SMS), he noted.

In 2019 the tax burden on the economy was 14.5 while that of the communications sector was 73.5, industry statistics indicate.

In that year, telecom companies paid RS$28,118 million in taxes to the Dominican government, divided into RD$9,428 million of ITBIS, RD$7,713 million of ISC, and RD$11,378 of ISR. In addition, it has made other payments.

The Dominican Republic’s telecommunications sector manages 10,465,169 telephone lines, a total of 9,308,446 mobile lines, 6,976,939 prepaid mobile clients and manages a total of 2,331,507 postpaid mobile clients. The companies manage 1,156,723 fixed lines, a total of 646,393 local fixed lines and 510,330 IP fixed lines.

Sector statistics indicate that formal telecommunications companies manage 804,589 pay TV subscribers. Internet access in the Dominican Republic is 9,010,715 accounts.

The Dominican Republic has an interconnected public network that currently covers 99 % of the population for access to mobile services, including 95 % to LTE. Seventy-seven percent of the country’s inhabitants have access to Internet service.

28 % of households have access to broadband internet and 68 % of the inhabitants have access to mobile internet. From 2014 to date, Comtec member companies have invested some 140 billion pesos in infrastructure and networks.

In the period 2010-September 2020, the Dominican Republic registered some US$27,419.4 million in foreign investment, of which US$1,060.4 million corresponded to investments in telecommunications, representing 3.9% of the total foreign investment received in that period.

Comtec’s member telecommunications companies generate 10,150 direct jobs and 10,926 indirect jobs.

With the lobbyists there is also an issue of concern

On the other hand, the telecommunications companies complain that the municipalities or town councils adopt practices that range from the denial of permits, pretending the payment of exorbitant sums, requirements of operation licenses, contrary to what is established in the General Law of Telecommunications, as well as suspension of works, removal of the networks among other affectations to the property of the companies. “They set their rates, depending on their needs and many times, they do not respond to a reasonable practice”, says Comtec.

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