Dominica Taxes: Everything You Need to Know

Tax System in Dominica

Dominica is an island country located in the Caribbean known for its natural beauty, friendly people, and attractive tax system. The Dominica’s tax system is structured to encourage investment from both local and foreign individuals by offering favorable rates and a range of incentives. The tax system in Dominica is governed by the Income Tax Act, the Value Added Tax Act, and the Property Tax Act.

Dominica operates under a territorial tax system, where taxes are primarily imposed on income and activities within the country. The country offers several deductions and allowances, including those for mortgage interest, educational expenses, and charitable donations. Notably, Dominica does not levy taxes on capital gains, inheritance, or property, enhancing its appeal to investors. In addition, the government provides tax holidays and duty-free concessions for qualifying investment projects, particularly in sectors like tourism and agriculture. 

Dominica Tax Residency

In Dominica, tax residency is determined by the provisions of the Income Tax Act. An individual is considered a tax resident of Dominica if they meet one of the following criteria: 

• Physical Presence Test. An individual who spends 183 days or more in Dominica during a tax year is considered a tax resident.
• Permanent Home Test. An individual who has a permanent home in Dominica and is present in the country for at least 30 days during the tax year is considered a tax resident.
• Economic Domicile Test. An individual who is not a tax resident of any other country and has an economic domicile in Dominica is considered a tax resident.

It's worth noting that even if an individual is not considered a tax resident of Dominica based on the above criteria, they may still be liable for taxes on income earned within the country. 

Residents of Dominica are subject to personal income tax on their worldwide income, including income earned both within Dominica and abroad. Non-residents, on the other hand, are generally taxed only on their income derived from Dominica.

If you hold a Dominica economic passport, it does not indicate that you are a tax resident. The citizenship by investment (CBI) program does not require you to become a tax resident of Dominica or to reside there. You can have Dominica citizenship and be a non-resident for tax purposes.

Dominica Taxes for Legal Entities

In Dominica, legal entities are subject to taxation under the provisions of the Income Tax Act. Companies incorporated in Dominica are taxed on their worldwide income. Dominica has a 25% corporate tax rate but no capital gains tax, withholding tax, or branch tax. However, if your business is registered outside of Dominica and generates income there, you may be taxed on that income. Please see the table below. 

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VAT in Dominica

The Value Added Tax (VAT) in Dominica is a consumption tax applied to most goods and services. The standard VAT rate is 15%, while a reduced rate of 10% applies to hotel accommodations and diving activities.

Certain goods are zero-rated, meaning they are taxed at 0%. These include exports, basic food items (like rice, flour, and sugar), and medical supplies. Some goods and services are exempt from VAT, including financial services, real estate transactions, and residential rent.

Businesses that meet certain minimum revenue thresholds are required to register for VAT in Dominica. The registration threshold may vary, and businesses exceeding the threshold must apply for VAT registration within a specified period. Registration enables businesses to charge and collect VAT on their taxable supplies and claim input VAT credits.

For your convenience, please refer to the table. 

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Dominica Personal Income

Individuals who are residents of Dominica are subject to personal income tax on their worldwide income. Non-residents are generally taxed only on income derived from Dominica. The income tax rates in Dominica are progressive from 0% to 35%, meaning that higher income levels are subject to higher tax rates.

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These rates apply to various income sources, including salaries, business profits, rental income, etc. Notably, income from the sale of real estate is exempt from both income and capital gains taxes.

Taxpayers may be eligible for deductions, such as up to EC$25,000 for mortgage interest and up to EC$5,000 per student for university education expenses. Donations to approved institutions may also qualify for deductions. 

Property Taxes in Dominica

In Dominica, there is no tax on the sale or purchase of real estate. The owner is exempt from paying property taxes. However, a municipal tax exists: 1.27% of the assessed property value in Roseau and Canefield, the two largest cities. If the owner leases the property, he is required to pay a state fee equal to approximately 1% of the annual rental amount. The owner of real estate must pay 2.5% stamp duty on the transaction amount. The purchaser contributes to the insurance fund and mandatory fees, including stamp duty and legal and judicial fees. About 11% of the transaction amount is comprised of additional fees for the purchaser. Moreover, non-citizens (CBI investors are exempted) intending to purchase property in Dominica are required to obtain an Alien Land Holding License, which carries a fee of 10% of the property's value. ​

For property owners who lease their properties, if the owner resides in Dominica for less than six months of the year, a withholding tax of 15% is applied to rental income received from tenants who are non-residents.

Tax Residents vs Non-Residents Tax Rates in Dominica

Dominica operates under a territorial tax system, meaning non-residents are only taxed on income earned within the country. Holding citizenship through the Citizenship by Investment (CBI) program does not automatically make you a tax resident of Dominica. Additionally, offshore companies incorporated in Dominica enjoy significant advantages, including zero corporate tax on foreign income, no capital gains tax, and no withholding taxes, making the jurisdiction particularly attractive for international business and investment. More details are outlined in the table. 

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Double Taxation in Dominica

​Double taxation occurs when the same income is taxed by two different jurisdictions, potentially hindering international trade and investment. To mitigate this, Dominica has established double taxation agreements (DTAs) and tax information exchange agreements (TIEAs) with various countries.​

Double Taxation Agreements (DTAs):

Dominica is a signatory to the CARICOM Double Taxation Agreement, which includes member states of the Caribbean Community. This agreement aims to prevent double taxation and fiscal evasion, thereby encouraging regional trade and investment. ​In addition, Dominica has DTAs with several individual countries, including:​

• Antigua and Barbuda​
• Barbados​
• Belize​
• Grenada​
• Guyana​
• Jamaica​
• Montserrat
• Saint Kitts and Nevis​
• Saint Lucia​
• Saint Vincent and the Grenadines​

Tax Information Exchange Agreements (TIEAs):

While Dominica does not have a DTA with the United States, it has entered into a Tax Information Exchange Agreement with the U.S. This agreement facilitates the exchange of tax-related information between the two countries to promote transparency and prevent tax evasion.

Similarly, Dominica has a TIEA with the United Kingdom, effective since December 23, 2011, enhancing cooperation in tax matters between the two nations. 

These agreements reflect Dominica's commitment to fostering international economic relations and ensuring compliance with global tax standards.​

Tax Filing in Dominica

​In Dominica, tax filing obligations differ based on the type of tax and the taxpayer's status. Below is an overview of the filing requirements for Personal Income Tax, Corporate Income Tax, and Value Added Tax (VAT).​

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Tax Exemptions and Incentives in Dominica

Dominica has a broad range of tax exemptions and incentives designed to encourage foreign investment and foster economic development across various sectors. These benefits include tax holidays, duty-free concessions, and exemptions on specific types of income, making Dominica an attractive destination for investors.

Fiscal Incentives Act

Through the Fiscal Incentives Act, Dominica provides numerous advantages for eligible businesses to boost investment, job creation, and overall economic activity. Key benefits include:

1. Corporate Tax Holidays. Qualified businesses can enjoy a temporary exemption from corporate income tax, significantly reducing their initial tax burden.
2. Waivers on Import Duties. Companies can import machinery, equipment, and raw materials duty-free, helping to lower operational costs.
3. Stamp Duty Relief. Certain investment-related transactions, including property purchases and share transfers, are exempt from stamp duty.
4. Accelerated Depreciation. Eligible capital investments benefit from accelerated depreciation, allowing businesses to recover their costs more quickly in the early years.

Tourism Development Incentives

To stimulate growth in the tourism sector, Dominica offers attractive incentives under the Tourism Development Act, such as:

1. Duty and Tax Exemptions. Import duties and consumption taxes are waived for specified items like furniture, fixtures, and equipment used in tourism businesses.
2. Corporate Tax Holidays. Approved tourism projects benefit from temporary exemptions from corporate income tax.
3. Property and Land Tax Relief. Approved developments in the tourism sector may receive exemptions from property taxes and land transfer fees.

Agricultural Sector Benefits

Recognizing the importance of agriculture, Dominica supports the sector with a variety of tax incentives, including:

1. Tax Deductions. Expenses related to farm equipment and infrastructure are deductible, reducing taxable income.
2. Duty-Free Agricultural Inputs. Seeds, fertilizers, and farming machinery are exempt from import duties and consumption taxes.
3. Tax Holidays for Agro-Projects. Agro-processing and other value-added agricultural initiatives may qualify for tax holidays.

Incentives for Export-Oriented Enterprises

Export-focused businesses can also benefit from targeted incentives, such as:

1. Tax Exemptions on Inputs. Inputs used in the production of goods for export are exempt from import duties and consumption taxes.
2. Tax Holidays. Qualifying export enterprises enjoy a period of corporate tax exemption to support their international competitiveness.

Offshore Business Advantages

Dominica’s offshore sector offers significant tax advantages for companies engaged in international business activities:

1. No Corporate Tax on Foreign Income. Offshore companies are exempt from corporate income tax on earnings derived from outside Dominica.
2. Withholding Tax Exemption. Dividends, interest, and royalties paid to non-residents are not subject to withholding tax.
3. No Capital Gains Tax. The sale of shares in offshore companies is free from capital gains tax, enhancing the appeal of offshore investments.

Tax Benefits for Dominica Citizens

As a citizen of Dominica, you are entitled to various tax benefits, including lower personal income tax rates and exemptions from certain types of taxes. If you're a citizen of Dominica but live outside of the country, you are not subject to tax on your worldwide personal income. There is no tax on inheritance, capital gains, foreign income, dividends, interest, or royalties.

Dominica CBI Program

Established in 1993, the Dominica Citizenship by Investment program is one of the longest-running and most trusted routes to securing second citizenship in the Caribbean. Known for its straightforward process and affordable investment thresholds, the program attracts high-net-worth individuals and families looking to enhance their global mobility and optimize tax efficiency. Investors are not required to live in Dominica to benefit from its favorable tax regime, ensuring full flexibility for personal and business affairs.

To qualify for Dominican citizenship by investment, applicants must be at least 18 years old, possess a clean criminal record verified through a thorough background check, and be in good health, confirmed by a medical examination. The program is accessible and designed to attract reputable investors worldwide.

Dominica offers two primary investment routes for citizenship:

• Economic Diversification Fund (EDF) Contribution: A non-refundable donation starting at USD 200,000 for a single applicant, supporting national development projects. ​
• Real Estate Investment: A minimum investment of USD 200,000 in a government-approved real estate project, with a required holding period of at least three years. ​

Applicants may include eligible dependents such as a spouse, children under 30, parents or grandparents over 65. Dominica permits dual citizenship, allowing investors to maintain their original nationality while enjoying visa-free or visa-on-arrival access to over 140 destinations worldwide.

The application process is streamlined and efficient, typically taking 6-9 months from submission to approval. Combined with its competitive investment options, favorable tax environment, and solid international reputation, Dominica’s Citizenship by Investment program is an ideal solution for investors seeking greater freedom, security, and financial benefits.

If you are interested in obtaining citizenship in Dominica through the CBI program, Golden Harbors can help. Our team of experts can guide you through the application process and help you choose the right investment option to meet your needs. Contact us today to learn more about the Dominica CBI program and start your journey to a second passport and a better tax future.