Dominica is set to introduce significant income tax reforms from January 1, 2027, replacing its current progressive tax rates of 15%, 25%, and 35% with a single 10% personal income tax rate. At the same time, the country plans to shift from taxing residents on their worldwide income to a territorial tax system, under which only income earned in Dominica will be subject to income tax.

Personal Income Tax Rate to Fall to 10%

From January 1, 2027, Dominica plans to replace its existing income tax bands of 15%, 25%, and 35% with a single 10% rate. Income up to EC$30,000 will continue to be exempt from taxation. According to Finance Minister Dr. Irving McIntyre, an individual earning EC$48,000 annually would retain approximately EC$900 more, while someone earning EC$84,000 would save around EC$6,500 under the new system.

Shift to Territorial Taxation

The second major reform will change how Dominica taxes income. From the same date, residents and non-residents are expected to pay income tax only on income earned in Dominica. This would effectively remove taxation on legitimate worldwide income for individuals who are tax resident in Dominica, bringing the country closer to jurisdictions that apply a territorial taxation system.

Limited Impact on Citizenship by Investment

The proposed reforms have limited direct implications for Dominica’s Citizenship by Investment Programme. Obtaining citizenship through the CBI Programme does not automatically make an individual a tax resident of Dominica. Tax residence is based on physical presence, with the Inland Revenue Division considering individuals who are physically present in Dominica for more than 183 consecutive days. Therefore, an investor who obtains Dominica citizenship through the CBI Programme but continues to live abroad would generally not have been subject to Dominica income tax before the reform and would not become subject to it simply because of the new rules.

Benefits for New Tax Residents

The main beneficiaries of the reforms will be individuals who move to Dominica and become tax residents. They would benefit from both the reduced 10% domestic income tax rate and the exemption from taxation on foreign-sourced income. The government expects the changes to encourage retirees, remote workers, and investors to establish their homes in Dominica.

Rental Income Remains Subject to Separate Tax

The reforms do not change the separate tax treatment of rental income. Rental income generated from property in Dominica by an owner living abroad will continue to be subject to a 15% withholding tax under the existing schedule, which was not amended by the budget measures.

The Broader Caribbean Trend

The proposed reforms come as several Caribbean jurisdictions are placing greater emphasis on physical presence, genuine links, and economic activity.

Saint Kitts and Nevis is moving toward genuine-link and physical-residency requirements, while Grenada has proposed legislation that could require new CBI citizens to spend at least 30 days in the country within five years of approval.

Timing and Future Outlook

The proposed tax changes were presented as part of Dominica’s EC$1.24 billion budget on August 4, 2026. However, neither reform has become law yet, as the relevant amendment has not been published in the Gazette. The reforms also come amid broader pressure on Caribbean Citizenship by Investment programmes. In June 2026, the European Commission asked Dominica and four other Caribbean countries with CBI programmes to end them by June 1, 2028, warning that failure to do so could affect Schengen visa-free access. Prime Minister Roosevelt Skerrit later stated that Dominica could potentially eliminate income tax altogether by 2028, subject to sufficient increases in government revenues.

Summary

Under the proposed reforms, income up to EC$30,000 will remain tax-free, while income above this threshold will be subject to a flat 10% rate. The government also plans to remove taxation on legitimate foreign-sourced income for both residents and non-residents.

The reforms are particularly relevant to individuals who choose to become tax residents in Dominica. However, they have limited direct impact on Citizenship by Investment (CBI) applicants, as obtaining Dominica citizenship does not automatically make an individual a tax resident.