Countries › Dominican Republic › Guide › 6. Taxes › Interest paid abroad from the Dominican Republic: 10% withholding and the deduction limit most people miss

Interest paid abroad from the Dominican Republic: 10% withholding and the deduction limit most people miss

Argentina. For full detail on Argentina, go to The Argentine Thread.

Last verified: 2026-10-30 · Status: Stable

Interest paid to non residents carries a final 10% withholding, and the same 10% applies to interest paid to resident individuals. The payer's deduction is then limited to 10/27 of the interest unless the lender is taxed abroad at an effective rate of at least 27%, so a low tax lender costs far more than the withholding suggests. Interest is deductible only if the withholding was paid.

USD figures use the Banco Central de la República Dominicana reference selling rate of RD$60.8594 per US dollar for 28 October 2026, the latest row in its published rate file on the verification date, rounded to the cent.

Key facts

Interest withholding, non residents	10 %Ley 11-92 art. 306, as of 2026-10-30 · in force
Interest withholding, resident individuals	10 %Ley 11-92 art. 306 bis, as of 2026-10-30 · in force
Deduction limit when the lender is not taxed abroad at 27% or more	10/27 of interestLey 11-92 art. 287 paragraph III literal a, as of 2026-10-30 · in force

The rule

1. Anyone paying or crediting Dominican source interest to non residents withholds 10% as a sole and final payment.
Example: Interest RD$1,000,000: withholding RD$100,000. / Interest US$16,431.32: withholding US$1,643.13.Ley 11-92, Código Tributario, art. 306, 2012-11-09 official text · verified 2026-10-30

2. Interest paid to resident individuals carries 10%, as a final payment, with a refund option for low income individuals. For securities the central depository is the withholding agent.Ley 11-92, Código Tributario, art. 306 bis, 2012-11-09 official text · verified 2026-10-30

3. Interest from loans in general, bonds of Dominican companies and loans secured on Dominican real estate is Dominican source income.Ley 11-92, Código Tributario, art. 272 literals g and h, 1992-05-16 official text · verified 2026-10-30

4. Interest on imports financing and foreign loans is deductible only if the withholding is made and paid. No deduction is allowed for interest, royalties or technical assistance if the withholding was not paid.Ley 11-92, Código Tributario, art. 287 paragraph III literal a; art. 281 paragraph III literal b, 2012-11-09 official text · verified 2026-10-30

5. When the interest is taxed to the lender under art. 306 or 306 bis, the deduction is limited to the interest multiplied by the withholding rate over the art. 297 rate, which is 10/27 at current rates. If the lender is taxed abroad at an effective final rate of 27% or more the deduction is 100%, and at a lower effective rate it is proportional, always subject to the same limit.
Example: Interest RD$1,000,000 to a lender with no foreign tax: deductible RD$370,370, a lost tax shield of RD$170,000. / Lost shield about US$2,793.32.Ley 11-92, Código Tributario, art. 287 paragraph III literal a, 2012-11-09 official text · verified 2026-10-30

6. Interest on loans the State or its entities arranged with governments or international lenders is excepted from withholding if the contract provides for exemption or the State bears the tax, and Congress approved it.Reglamento 139-98, art. 62, 1998 official text · verified 2026-10-30

7. The Spain treaty caps source tax at 10% and gives exclusive residence taxation for listed public cases. The Canada treaty caps source tax at 18%, above the domestic 10%.Spain treaty; Canada convention, art. 11; art. XI, 2014-07-25 official text · verified 2026-10-30

Lender	Withholding	Deductible	Note
Foreign bank taxed at an effective 27% or more	RD$100,000	RD$1,000,000	Keep proof of the effective rate
Foreign lender taxed at an effective 21%	RD$100,000	RD$777,778	Proportion 21/27, per the literal reading; check the regulation
Lender with no tax on the interest	RD$100,000	RD$370,370	Limit of 10/27

Deduction of RD$1,000,000 of interest by lender type

Worked example

A company pays RD$5,000,000 (about US$82,156.58) of interest to a related lender in a no tax jurisdiction. It withholds RD$500,000 (about US$8,215.66). Only RD$1,851,851.85 (about US$30,428.36) is deductible, so income tax rises by about RD$850,000 (about US$13,966.62) compared with full deduction, before the thin capitalization test.

Step by step

Confirm the lender's residence and effective tax rate before signing.
Withhold 10% at payment or credit in account.
File IR-17 by the 10th of the next month.
Run the art. 287 proportion, then the thin capitalization limit, then transfer pricing on the rate.
Keep the loan agreement and proof of bank transfer.

Common traps

Withholding is not the whole cost. The proportional limit can deny most of the deduction.
Thin capitalization and transfer pricing apply on top of this limit, as the article says expressly.
Accrued interest credited in account triggers withholding even with no cash paid.
An Argentine lender has no treaty, so the domestic 10% applies. See The Argentine Thread for the Argentine side.

Sources

Related: Dominican Republic country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide

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