How to Calculate the ITBIS in a Price: The formula with 1.18

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The Tax on the Transfer of Industrialized Goods and Services, known as ITBIS , is a tax applied in the Dominican Republic on the sale of goods and services. Its rate is set at 18% (as of writing this post, in January 2024), and understanding how this tax is calculated on prices that already have it incorporated is important to avoid unpleasant surprises in commercial transactions.

Here we will explain where the number 1.18 comes from and the formula to calculate the ITBIS accurately in the prices that already include it.

Note: This article is created for people who ask questions investor database to: How can I calculate the ITBIS on a price that already includes it? How do I know the ITBIS of an item if I only have the final price? How do I calculate the ITBIS from a price? How do I calculate the ITBIS?

Table of contents

Origin of 1.18:
Formula to calculate the ITBIS in a final price:
Practical example:
Origin of 1.18:
The reason we use the number 1.18 in the ITBIS calculation is related to the nature of the tax. 18% of the ITBIS is added to the original price of a good or service. To reverse this process and find out how much 18% represents within a final price , we need to divide the total by the factor that represents 100% plus 18%. That is, 1 + (18/100) or simply 1.18.

Formula to calculate the ITBIS in a final price:
The general formula for calculating the ITBIS of a price is quite simple and is expressed as follows:

ITBIS = FINAL PRICE – (FINAL PRICE ÷ 1.18)

Where:

ITBIS: Represents the amount of the Tax on the Transfer of Industrialized Goods and Services.
Final price: It is the price of the good or service with the tax applied.
Practical example:
Now, we will illustrate the calculation of the Tax on the Transfer of Industrialized Goods and Services (ITBIS) through a practical example. Let's suppose that the final price of an item is 1,000 Dominican pesos. To determine the exact amount of the ITBIS, we can use the formula mentioned above: