6
Feb

In this article, we will be explaining everything related to Investment in the Dominican Republic, along with the Tax Benefits and Incentives currently available, designed to attract Foreign Investment to the Dominican Republic.

In other articles, we have elaborated on several topics of interest referring to Business and Investment in the Dominican Republic, such as Investment Opportunities in the Dominican Republic and Profitable Businesses in the Dominican Republic. However, in addition to those business options available in the Dominican Republic, we have specific laws that directly benefit investment in the Dominican Republic, specifically with Tax Exemptions and Incentives, such as:

1. Law No. 16-95 Foreign Investment Law in the Dominican Republic.
2. Law No. 158 -01 On the Promotion of Tourism in the Dominican Republic.
3. Law No. 8-90 On Free Zones.
4. Law 57-07 on Incentives for the Development of Renewable Sources of Energy.
5. Law 108-10 for the Promotion of Film Production in the Dominican Republic.
6. Law 392-07 on Competitiveness and Industrial Innovation
7. Decree 262-15 defines logistics centers as areas located in a customs zone.
8. Among others.

All of these laws are in place to facilitate the development of various sectors in the country, and the goal is to boost Foreign Investment in the Dominican Republic. To this end, foreigners and/or investors are offered a number of benefits ranging from Tax Exemptions, Residence, and other Incentives.

Please note that the Dominican Republic as a country offers investors legal security, policy, innovation, and most importantly a guarantee that your investment will yield great returns, as a result of everything the country offers organically. Some examples of these benefits are:

1. Its geographic location
2. Its weather
3. Skilled and specialized labor
4. But, the most important one is the Human factor that characterizes the people of this Caribbean island.
5. Among others.

Foreign investment in the Dominican Republic

We will begin by explaining Law No. 16-95 Foreign Investment Law in the Dominican Republic.

This law is the basis of what is referred to above. If you are considering being an investor in the Dominican Republic and enjoying all the benefits related to that, you should register as an Investor through law 16-95. The Export and Investment Center of the Dominican Republic can provide advice and guidance on how to achieve the aforementioned status.

This law not only grants tax benefits, but also immigration benefits such as:

Residence for Investors, which can be obtained easily and promptly.

Section No. 55 of Decree No. 631-11 establishes that the minimum amount a foreign national must invest in order to become eligible for this category is Two Hundred Thousand United States Dollars (US$200,000.00). Those able to make investments equal to or greater than that amount in the Dominican Republic are eligible to apply for Residency under the category of Investment.

In addition to that, this law also establishes the following:

• Repatriation of Capital and Remittance of Profits, without restrictions.

A foreign investor shall be entitled to transfer abroad in freely convertible currency, and without the need for prior authorization, the total amount of capital invested and dividends declared during each fiscal year, up to the total amount of the current net profits for the period, upon payment of income tax, including capital gains produced and recorded in the company books in accordance with generally accepted accounting principles. Investors who have duly registered foreign investment in the Dominican Export and Investment Center will have to contact this agency within sixty (60) days after the remittance or repatriation. In addition to this benefit, they may also obtain:

• Exemption from import taxes on personal and household items.
• Among other benefits.

That said, and in order for you to evaluate and consider investment possibilities according to the sectors of your interest, we will summarize the various laws related to this topic, along with their incentives and benefits. These are:

Incentives for investment in tourism

Law No. 158 -01 On the Promotion of Tourism in the Dominican Republic

This law seeks to expand the country’s tourism supply capacity and promote greater social and private investment, which can increases the quality of services, in order to improve, diversify and consolidate a tourism infrastructure that allows the development of new highly competitive destinations that generate income and employment in the Dominican Republic.

The advantages of this law when it comes to tax exemptions and incentives for investors include a 100% tax exemption in the following areas:

• Income Taxes.
• National and municipal taxes that are levied on the use and issuance of construction permits, including the acts of purchase of the land, as long as it is used for one of the uses specified in Law 158-01.
• Taxes on Import as well as other levies, such as duties, and surcharges, including the Tax on Transfers of Industrialized Goods and Services (ITBIS in Spanish), that are applicable to equipment, materials, and furniture necessary for the first equipment and operation of the tourist facility in question.
• This law establishes that national and international financing or interests granted to the companies that are the subject of these incentives will not be subject to payment of taxes or any withholding.
• It also establishes that natural or legal persons may deduct up to an amount of twenty percent (20%) of their annual profits, provided that these are invested in a tourism project that is within the scope of this law.
• There will be total and absolute exemption of the machinery and equipment necessary to achieve a high profile in the quality of the products (ovens, incubators, production control treatment plants and laboratories, among others), at the time of implementation.

 Note:

Law 195-13  establishes that the exemptions established by tourist incentives will be enjoyed by natural or legal persons who make one or more investments directly with the promoters or developers of any of the activities specified by the law itself, specifically carried out throughout the national territory. Any subsequent transfer in favor of third-party acquirers IS EXCLUDED from these benefits.

For more information about this law specifying the type of investments and where they should be made, i.e., the objects admitted, we invite you to click HERE .

Incentives for Investment in Free Zones 

Another special law that provides multiple tax benefits to investors in the Dominican Republic, is the 8-90 Free Zones Act. 

As we have mentioned in other articles, there are many different business and investment opportunities in the Dominican Republic, but even more importantly, they have multiple benefits for anyone who wishes to invest in the country. Another one of the large sectors that are in free development in the country and grants tax and business benefits are the Export Free Zones. These Free Zones are regulated by special Law No. 8-90 which regulates their purpose, benefits, and more.

The question is, who can benefit from the provisions of this law?

Anyone who contributes to the development of the country, while complying with these three points:

1. Increasing production in the country;
2. Generating job sources; and
3. Increasing foreign exchange revenue.

That said, anyone interested can benefit from this law as long as they comply with its provisions.

Benefits and Tax Exemptions of Investing in Free Zones in the Dominican Republic 

Free zone operators and the companies established within them will be protected under the customs and tax regime contained in article 2 of special Law No. 8-90 and consequently will receive a 100% exemption on the following taxes:

• Income Tax.
• Taxes on construction, loan contracts, and the registration and transfer of a real estate for the constitution of the corresponding free zone operator.
• Tax payment on the establishment of commercial companies or capital increase thereof.
• Municipal taxes that may affect these activities.
• All import taxes, tariffs, customs duties, and other related levies, affecting raw materials, equipment, construction materials, parts of buildings, office equipment, etc., intended to build, facilitate or operate in free zones.
• All existing export or re-export taxes, except those established in Chapters ‘f’ and ‘g’ of Article 17 of the Law.
• Patent, asset, or equity taxes, as well as the transfer tax on industrialized goods and services (ITBIS).
• Consular fees for all imports allocated to free zone companies or operators.
• Import taxes, relating to equipment and tools necessary for the installation and operation of economic employee dining rooms, health services, medical assistance, childcare, entertainment or amenities, and any other equipment that tends to the well-being of the working class.
• Import taxes on transport equipment such as cargo vehicles, garbage collectors, or minibusses for the transport of employees and workers to and from work centers, with prior approval in each case from the National Council of Export Free Zones. These vehicles will not be transferable for at least five (5) years.

Benefits and tax exemptions of investing in Renewable Energy in the Dominican Republic 

Law 57-07 on Incentives for the Development of Renewable Sources of Energy.

One of the goals of Law 157-07 is precisely to promote private investment projects developed from Renewable Energy sources. In essence, since the very conception of this law, it has been aimed at investors, granting them several benefits and tax exemptions, such as:

• Tax exemption. The National Energy Commission (CNE in Spanish) will propose the exemption of all types of import taxes to equipment, machinery, and accessories imported by companies or individuals, necessary for the production of energy from renewable sources referred to in Paragraph II, which in accordance with the regulations of this law apply to the incentives that it creates. The exemption will apply to 100% of these taxes and this incentive also includes the import of the equipment for transformation, transmission, and interconnection of electrical energy to the National Interconnected Electric System (SENI in Spanish), projects based on renewable sources that comply with this law, as well as equipment and materials specified in this chapter are also exempt from payment of the Transfer Tax on Industrialised Goods and Services (ITBIS) and all taxes on final sales.
• Income tax exemption. They are waived for a period of ten (10) years from the start of their operations.
• Reduction of taxes on external financing. The tax for payment of interest for external financing is reduced to 5%.
• Tax incentive for auto manufacturers. Based on the renewable energy technology associated with each project, up to 75% of the cost of the investment in equipment is granted, as a single credit to the income tax, to the owners or tenants of family homes, commercial or industrial houses that change or expand for renewable energy systems in the provision of their private energy consumption and whose projects have been approved by the relevant agencies.
• Incentives for community projects. All those institutions of social interest (community organizations, producer associations, registered and incorporated cooperatives) that wish to develop small-scale renewable energy sources (up to 500 kW) and intended for community use, will be able to access financing funds at the lowest market rates for development projects, for an amount of up to 75% of the total cost of the work and its installation.
• Certificates and/or bonds for the reduction of polluting emissions.

Film industry in the Dominican Republic

Law 108-10 for the Promotion of Film Production in the Dominican Republic.

The purpose of Law No. 108-10 is to promote a progressive, harmonious and equitable development of the national film industry and, in general, to promote cinematographic activity in the Dominican Republic.

Additionally, selling this product nationally and internationally would attract foreign investment for this purpose, while also granting multiple tax benefits, such as:

• One hundred percent (100%) of the real value invested of the Income Tax for which you are responsible, corresponding to the taxable period when the investment was made.
• Exemptions to the construction of movie theaters, between 50% to 100% Income Tax for a period of fifteen (15) years for the income generated by this property.
• National and municipal taxes charged for issuing construction permits, including deeds of purchase of real estate, for a period of five (5) years.
• Import and other taxes, such as tariffs, duties, and surcharges, including the Tax on the Transfer of Industrialized Goods and Services (ITBIS), that are applicable to the equipment, materials, and furniture necessary for the first equipment and operation of the movie theater in question, in a period of five (5) years.
• For a period of ten (10) years, income obtained by natural or legal persons domiciled in the Dominican Republic, who provide technical services for film productions made in Dominican territory and approved by the General Directorate of Cinema (DGCINE in Spanish), are exempt from the payment of Income Tax.
• All goods, services, and/or leases directly related to the pre-production, production, and post-production of cinematographic works and approved audiovisual works, which are expressly qualified as belonging to the film industry, will be exempt from the Transfer Tax on Industrialised Goods and Services (ITBIS).
• Incentive to set up film or recording studios.
• Customs duties on imports of domestic feature films.
• Provisional import of equipment and goods. With the Single Shooting Permit, issued by the DGCINE, the equipment and consumable or non-consumable goods necessary for the filming can be temporarily imported into the country for a period of six (6) months, extendable and in accordance with the relevant requirements, provided that all the goods imported in this manner are exported at the end of the term.
• Among others.

Competitiveness and Industrial Innovation  

Laws 392-07 and 542-14 on Competitiveness and Industrial Innovation

The Manufacturing Industry is comprised of institutions dedicated to transforming raw materials into processed or semi-processed products, through the physical and/or chemical transformation of materials and components into different products, by the use of machinery or by hand in a factory, to then sell their products wholesale or retail.

Benefits: While operating in accordance with the Law, the industries qualified by the Center for Development and Industrial Competitiveness (PROINDUSTRIA in Spanish) can enjoy the following benefits:

• Exemption from the Tax on the Transfer of Industrialized Goods and Services (ITBIS) applicable in customs for the import of raw materials, industrial machinery and capital goods for the industries detailed in article 24 of Law No.557-05 on Tax Reform, of December 13, 2005, as well as other capital goods and raw materials that have a zero percent (0%) tariff rate.
• Reimbursement to national or foreign legal entities qualified by PROINDUSTRIA that export to third party markets: 1) Taxes on the Transfer of Industrialized Goods and Services (ITBIS); 2) Consumer Selective to Telecommunications; 3) Consumer Selective to Insurance; 4) the Consumer Selective of Fuels, and 5) the tax on the issuance of checks.
• Exemption from the obligation to withhold the Income Tax (ISR in Spanish) corresponding to foreign natural or legal persons who provide them with professional services related to product development projects, materials and production processes, research and technology development, personnel training, innovation, research, training and environmental protection, as well as all kinds of consulting and/or technical advisory services.

Logistics centers such as areas located in a customs zones

Decree 262-15 establishes logistics centers as areas located in customs zones, in which the activities of transport, logistics, and distribution of goods will be carried out. The logistics operating companies may operate in these logistics centers, and they may offer the following services:

1. Administration and distribution of goods.
2. Labelling.
3. Re-export and transport.
4. Among other logistics and product supply chain services.

The Decree offers an innovative alternative to the current customs and logistics system in the country and should be of high interest to the Dominican and international business community.

There are three special points to highlight with the decree and benefits for investors, which are:

• Goods entering the logistics centers may remain for up to twelve months without paying the customs duties that correspond to their entry into Dominican territory.
• The goods may be transferred to another logistics center or to a free zone in the Dominican Republic. Through the use of a simplified declaration, the complete customs declaration would only have to be submitted in case the goods enter national territory or when they are exported abroad.
• Sales made by companies that operate as logistics centers or logistics operators will be considered as exports in reference to article 24 of Law 392-07 on industrial competitiveness and innovation.

The purpose of this decree is to take advantage of the strategic position and transport structure of the Dominican Republic, as well as the development of the country’s international trade. Additionally, it seeks to promote the Dominican Republic as a logistics hub of the Caribbean in terms of maritime cargo.

That said, if you are contemplating investing, we invite you to consider the Dominican Republic, to enjoy its attractions, benefits, and security.

In our law firm Morillo Suriel Attorneys at Law, we have a division specialized in Business and Corporate Law. Through this division, we can assist you with any questions or concerns you may have regarding Investment and Fiscal matters. Our lawyers are available to assist you anywhere you may be in Santo Domingo, Dominican Republic and the rest of the world, through  our online tool or in-person.