The Dominican Republic's tax authority has issued guidance on the fiscal treatment of doubtful and uncollectible accounts, clarifying deduction requirements, authorised write-off methods and the 4% cap on deductible bad debt reserves.
The Dominican Republic’s Directorate General of Internal Revenue (DGII) has published a practical guide setting out how taxpayers should identify, justify, calculate and deduct doubtful or uncollectible accounts for Income Tax (ISR) purposes.
The guide, issued on 21 August 2026, is intended to help businesses avoid costly adjustments during audits by clarifying the application of Articles 28 and 29 of Regulation No. 139-98, alongside Article 287, literal h) of the Dominican Tax Code (Law No. 11-92).
Under the guide, a bad debt expense can only be recognised as deductible when it is properly justified and falls within the fiscal period in which the doubt over its collectibility actually arises, regardless of when the original credit was issued. Where an account previously written off as uncollectible is later recovered, the amount must be declared as taxable income in the fiscal year the payment is received.
Definitions of doubtful and uncollectible accounts
The guide distinguishes between an “uncollectible account”, meaning any credit or outstanding commercial obligation for which there is reasonable evidence that recovery will not occur, typically arising from credit sales of goods or services or commercial financing, and a “doubtful account”. Under Article 28 of Regulation 139-98, a debt becomes doubtful once four months have passed since its due date without any payment from the debtor.
Two scenarios apply to the four-month calculation. Where no payments have been made, the count begins from the invoice’s original due date. Where the debtor has made a partial payment, the four-month window resets and begins counting again from the date of that last payment.
Two authorised deduction methods
Taxpayers may use one of two methods to claim the deduction.
The first, direct write-off or cancellation under Article 28, allows specific bad debts to be charged directly to expenses without prior DGII authorisation, provided the taxpayer holds adequate proof of un collectibility. Acceptable evidence includes cessation of payments, bankruptcy, insolvency agreements, disappearance of the debtor, a statute-barred debt, closure of business operations, or the start of compulsory collection proceedings. Accounts with outstanding balances of DOP 7,035 or less are exempt from having to prove that compulsory collection has begun; this threshold is adjusted annually for cumulative inflation using data published by the Central Bank of the Dominican Republic.
The second, the bad debt reserve method under Article 29, allows a taxpayer to set up an allowance or reserve, but only with prior DGII authorisation. Taxpayers using cash-basis accounting are barred from applying this method. To obtain authorisation, applicants must submit a formal request letter together with audited financial statements from the most recent fiscal year, an aging accounts receivable report for the current year showing days past due, a sales invoicing report for the preceding three months distinguishing cash from credit sales, accounts receivable activity and income details for the same three months identifying clients by name, and evidence of proactive collection efforts. Once approved, the reserve method cannot be changed without further DGII authorisation, and the taxpayer may no longer write off individual uncollectible accounts directly to expenses.
Reserve capped at four per cent of receivables
Under the reserve method, the deductible reserve cannot exceed four per cent of the total accounts receivable balance at the close of the fiscal year.
The guide illustrates the calculation with an example. A company with total accounts receivable of DOP 5,000,000 at 31 December would have a maximum deductible reserve of DOP 200,000. If its doubtful accounts, those more than four months past due, total DOP 4,500,000 (made up of DOP 2,000,000 from one client and DOP 2,500,000 from another), only DOP 200,000 may be claimed as a deductible reserve expense for the period. The remaining DOP 4,300,000 is treated as a non-deductible excess and cannot be written off in that period.
