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Doing Business Dominican Republic
I. Main Economic Variables 1 II. Doing Business in the Dominican Republic 4 III. Legal System 15 IV. Tax Aspects 20 References 27 Contact 28
I. Main Economic
Variables
Doing Business
Dominican Republic
I. Main Economic
Variables
GDP Growth
GDP 2019: 88.9 mmdd
(Annual percentage change, original figures)
Position
in the World:
67 / 189 2018 2019 2020 e 2021e
7.0 5.1 -5.8 4.0
Macroeconomic Context (figures at the end of 2019)
GDP per Reference Unemployment Exchange
Inflation Population FDI
Capita rate rate rate
8,583.1 4.5 1.81 6.17 53.09 10.6 3.01
Dollars Percent Annual percentage By Hundred USD/DOP Millions of Millions of
variation people dollars
Macroeconomic Context (figures at the end of 2019)
Primary balance, Public debt, Current account, Trade balance, Reserves,
Fiscal balance, Reserves, debt
percentage of percentage of percentage of percentage of percentage of
percentage of GDP percentage
GDP GDP GDP GDP GDP
-3.1 0.5 40.4 -0.7 -10.2 9.0 25
Balance, % Balance, % Balance, % Balance, % Balance, % Balance, % Balance, %
2
Doing Business
Dominican Republic
Ease of Doing Corruption
Competitiveness
Business Perception Index
(Doing
Position Position Position
in the World:
78 / 141 (WEF, 2019)
in the World:
115 / 190 Bussiness,
in the World:
137/ 180 (TI, 2019)
2020)
Foreign Trade (Main Sectors, 2018 data) Foreign Trade (Major Partners 2018 data)
Exports Exports
Value Value
Sector Participation Country Participation
(mdd) (mdd)
Precious metals 1.57 19.1% United States 5.44 49.9%
Food and tobacco 1.52 18.6% Haiti 0.87 8.0%
Textiles 0.99 12.1% Canada 0.78 7.1%
Electronic equipment 0.93 11.3% India 0.55 5.0%
Optical, measuring equipment 0.64 7.7% Switzerland 0.22 2.0%
Imports Imports
Mineral products 2.63 17.6% United States 8.92 44.3%
Electronic equipment and parts 2.06 13.8% China 2.11 10.4%
Food and tobacco 1.31 8.77% Brazil 0.72 3.6%
Vehicles and their parts 1.19 7.95% Spain 0.68 3.4%
Plastics and their manufactures 0.90 5.99% Mexico 0.59 2.9%
Source: World Bank, International Monetary Fund (IMF), World Economics Forum (WEF, By Transparency International (TI), World Intellectual Property
Organization (WIPO), Atlas of the Economic Complexity (MIT), Dominican Observatory of International Trade (ODCI), The Observatory of Economic
Complexity .
3
II. Doing Business in the
Dominican Republic
Doing Business
Dominican Republic
II. Doing Business in the
Dominican Republic
a) General Profile
The Dominican Republic is one of the economies with the highest
economic growth in Latin America and the Caribbean; In the period from
2015 to 2019 it grew at an average of 6.0% per year. It is the largest
economy in Central America and the Caribbean.1
Recent growth has been driven by strong domestic demand, remittance
growth, and the tourism sector. In addition, inflation has remained below
4% per year from 2014 to 2019.
The Dominican Republic has managed to diversify its exports, since in
addition to exporting agricultural products, it also exports manufactured
goods. In 2018 the main exported products were gold, followed by food
and tobacco, and in third place textiles.2
The main trading partner of the Dominican Republic is the United States
(USA), with whom it trades more than 40% of its imports and exports. The
Dominican government has trade agreements with Central America, the
United States, and the Caribbean Community; and a trade agreement with
the European Union and Panama, which gives it access to a market of
approximately 848 million people.3
Tourism accounted for approximately 9% of GDP and is the main source of
foreign exchange in the country. This sector is focused on beach
destinations, with more than 1,600 km of coastline and major resorts,
attractions of foreign direct investment both in services and in the real
estate sector.4
After Cuba, the Dominican Republic is the country with the largest size and
population of the island countries of the Caribbean. Its only border country
is Haiti, to the west. The country has 10.6 million inhabitants and a GDP
per capita of US $ 8,583 in 2019. The capital, Santo Domingo, is home to
3.3 million inhabitants (32% of the total). The country is divided into a
National District (capital), 31 provinces, 158 municipalities and 232
municipal districts.5
The Dominican country remains vulnerable to natural disasters such as
earthquakes and hurricanes. In addition, the country faces problems of
illegal migration, mainly of immigrants from Haiti. It is estimated that the
Haitian population in the Dominican Republic amounts to 750,000 People.5
1. IMF World Economic Outlook Database October 2019, https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx.
2. Central Bank of the Dominican Republic. https://www.bancentral.gov.do/
3. Ministry of Industry, Trade and MYPIMES, https://www.micm.gob.do/direcciones/comercio-exterior/acuerdos-comerciales-vigentes
4. Ministry of Tourism of the Dominican Republic. http://mitur.gob.do/config/barometro-turistico/
5. CIA. The World Factbook: Dominican Republic. https://www.cia.gov/library/publications/the-world-factbook/geos/dr.html 5
Doing Business
Dominican Republic
b) Political Regime
Constitution
Dominican Republic maintains a democratic, representative, and presidential state structure. Constitutional article 4 states that "the
government of the nation is essentially civil, republican, democratic, and representative", which is divided into the Legislative Power,
Executive Power, and Judiciary. The three powers are independent in the exercise of their respective functions.6
The sovereignty of the country resides exclusively in the people, from whom all the powers emanate, which it exercises through
representatives or directly, in the terms established by its Political Constitution. The Constitution is based on respect for human
dignity and the indissoluble unity of nation.7
For the government and the administration of the state, the territory is politically divided into a National District and 31 provinces.
The city of Santo Domingo de Guzmán is the National District, capital of the Republic, and seat of the national government.7
Powers of the Political System
The Executive Branch is represented by the President of the Republic, who is elected by direct vote every four years. The President has the
possibility of being re-elected in consecutive terms, and if so, prohibited from opting for office, or vice-presidency, again in the future. Luis
Abinader, modern Revolutionary Party (PRM), was elected for the 2020-2024 mandate in the extraordinary elections held July 2020.6
The Legislative Power resides in the National Congress, which is composed of the Senate of the Republic and the Chamber of Deputies,
whose members are elected by direct vote. The Senate is composed of 32 members, elected one by each province and one by the National
District. The Chamber of Deputies is composed of 190 members elected for a period of 4 years.6
The Judiciary Power is represented by the Supreme Court of Justice, the Courts of Appeal, the Courts of First Instance, and the Courts of
Peace. The judiciary power has functional, administrative, and budgetary autonomy.6
Rule of Law
The Dominican Republic is a social and democratic state of law, organized in the form of a unitary republic. The essential function of the
State is the effective protection of the people‘s rights, within a framework of individual freedom and social justice, compatible with
public order and general welfare.
The Political Constitution establishes individual, economic, social, cultural, sporting, collective, and environmental rights. The
government must ensure the effectiveness of fundamental rights, through guardianship and protection mechanisms linked to the three
political powers, which must ensure their effectiveness.
The government decentralizes its management into local governments. The National District and the local governments are legal
entities of Public Law, responsible for their actions and enjoy their own assets, budgetary, and administrative autonomy. They are
subject to the supervisory power of the State, which encourages the transfer of powers and resources to local governments.
The Supreme Electoral Court is the competent body to judge and decide definitively on electoral contentious matters. The state
guarantees the free formation of political parties, groups, and movements, in order to guarantee citizen participation in political
processes, contributing to the strengthening of democracy.
The regulation of the nation's monetary and financial system is the responsibility of the Monetary Board as the top body of the Central
Bank. The Monetary Board, represented by the Governor of the Central Bank, will be responsible for the direction and proper
implementation of the nation's monetary, exchange rate, and financial policies.
Reforms to the Constitution must be presented to the National Congress with the support of a third of the members of one or the
other chamber, or if it is submitted by the Executive Branch6.
6. Authorities of the Dominican Republic. http://dominicana.gob.do/index.php/pais/2014-12-16-20-49-27
6 7. Political Constitution of the Dominican Republic. https://www.ifrc.org/docs/idrl/751ES.pdf
Doing Business
Dominican Republic
c) Economic Structure
GDP is the sum of all the goods and services that a country produces and
the most important way of estimating the productive capacity of an
economy. The three main economic sectors that make up the Dominican
Republic´s GDP are:
• Primary Sector : agricultural activity, livestock, mining, forestry, and
fisheries.
• Secondary Sector : local and free zone manufacturing industry,
construction, and beverages and tobacco products.
• Tertiary Sector : transport, financial services, tourism, and other services.
Dominican Republic represents the largest economy in Central America
and the Caribbean. The Tertiary Sector makes up the main area of
Dominican GDP with 59.9%, followed by the Secondary Sector with 25.7%
and is completed by the Primary Sector with 7.0%. Within the Secondary
Sector, local manufacturing and free zones contribute the most to GDP
with 13.8%.2
Table 1
Sectoral Composition of GDP
(Thousands of Millions of dollars and percentage contribution)
GDP 2019 Value % GDP
Total 88,921
Primary 6,255 7.0%
Secondary 22,861 25.7%
Construction 10,626 12.0%
Local manufacture 9,395 10.6%
Free zone manufacture 2,839 3.2%
Tertiary 53,224 59.9%
Trade 8,959 10.1%
Transport and storage 7,369 8.3%
Real estate activities 6,661 7.5%
Hotels, bars, and restaurants 6,551 7.4%
Teaching 4,865 5.5%
Financial intermediation, insurance, and others 3,717 4.2%
Source: Central Bank of the Dominican Republic. Current values at the end of 2019.
2. Central Bank of the Dominican Republic. https://www.bancentral.gov.do/
7Doing Business
Dominican Republic
Industries Under Free Zone Regime, Dynamizing Export Sector
The relaunch of the Free Zones is considered one of the great successes of the
government in the period 2012-2019. The sector now has regional leadership in job
creation, number of companies, and exports.8
By 2019, the sector contributed 54% of the country's total exports. The manufacture
of medical and surgical equipment is the activity with the highest exports with 27% of
the total of Free Zones, followed by the manufacture of electrical products, textiles,
tobacco, and jewelry.2
Dominican Republic has 74 parks in operation, 21 more than in 2012. Within them,
690 companies operate under the Free Zone regime. FDI in the Free Zones rose from
US$163 million in 2012 to US$274 in 2019, up 69% in nominal terms.8
The Free Zone sector generated about 172,000 direct jobs in 2019. The country is
the third largest footwear exporter in Latin America. More than 22,000 people work
in Call Centers serving customers in the United States, Latin America, and Europe.8
Graph 1
Export Composition
(Contribution exports)
2%
4% 15%
4%
7% 27%
9%
14%
54%
15%
18%
15%
17%
Industria - Zonas
IndustryFree zoneFrancas
Equipos médicos
Medical and y quirúrgicos
surgical equipment
Industria nacional - Otros
Local industry-Other productos
products
Productos eléctricos
Electrical products
Minerales (Oro)
Minerals (Gold)
Textiles
Agropecuarios
Agriculture Tabaco
Tobacco
Minerales (Otros)
Minerals (Others) Joyería
Jewelry yand
conexos
related
Industria nacional
Local industry- - Combustible para aeronaves
jet fuel Others
Otros
Local industry-sugar,
Industria cane rum,
nacional - Azúcar, andcaña
ron de wheat flour de trigo
y harinas
Source: Central Bank of the Dominican Republic, at the end of 2019.
2. Central Bank of the Dominican Republic. https://www.bancentral.gov.do/
8. Exports of Free Zones. Presidency of the Dominican Republic.
https://presidencia.gob.do/noticias/en-solo-siete-anos-rd-relanza-zonas-francas-y-obtiene-liderazgo-regional-en-generacion
8Doing Business
Dominican Republic
Foreign Exchange Income to the Country
Tourism is the main foreign exchange-generating activity in the In 2019, 53% of FDI came from the United States (32%) Mexico
Dominican Republic. The sector contributed $7.5 trillion dollars in (21%). Of the total, 29% were earmarked for tourism, 15% to the
2019, equivalent to 8.5% of the country's Gdp.9 real estate sector, 12% to investment in energy and 11% to
Telecommunications.2
While remittances added $7.1 trillion in 2019 (8% of GDP), second
area of foreign exchange entry into the Dominican country Within exports highlights gold. Dominican Republic went from
according to central bank figures. Remittances have grown to an exporting US$1.190.6 million in gold in 2013 To US$1.544 million in
average annual rate of 9.3% between 2015 and 2019. 77% of 2019, annual growth of 4.4%. The mineral represents the product of
remittances came from the United States and 10% from Spain, increased export of the Country.2
accounting for 87% of the total remittances of 2019.2
De combined form, The domestic industry exported $2.4 trillion in
The Foreign Direct Investment (FDI) is the next item in foreign 2019, disaggregated production into multiple products. The largest
exchange contribution. FDI has maintained a growing sustained of these, raw sugar and derivatives, represented $128 million export
trend, an average annual rate of 8% over the past four years. 2 in 2019, 5% of all products Industrial.2
Graph 2
Main Dollar Sources in the Dominican Republic
(Thousands of Millions of dollars)
8.0
7.0
6.0
Turismo
Tourism
5.0 Remesas
Remittance
IED
FDI
4.0
Export. (Oro)
Export (Gold)
3.0 Export. (Otros minerals)
Export (Other minerales)
Export.
Export (Agropecuarios)
(Agriculture)
2.0 Export. (Industria
Export (Local Nacional)
industry)
1.0
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Note: All items include only dollar entries to the country. Exports correspond to exports of national activities, they are not considered exports from free zones. Tourism
considers the foreign exchange income of international travelers according to estimated figures from the National Association of Hotels and Tourism of the Dominican
Republic. Remittances and FDI represent the entry into the country in dollars.
Source: Central Bank of the Dominican Republic
2. Central Bank of the Dominican Republic. https://www.bancentral.gov.do/
9. National Association of Hotels and Tourism of the Dominican Republic.
9Doing Business
Dominican Republic
Investment and Foreign Trade
43% of Foreign Direct Investment (FDI) in the Dominican
Republic during the last 4 years (2016-2019) has come from the
North American hemisphere: the United States, Canada, and
Mexico (43%). 2
Brazil and Spain appear as relevant trading partners for the
country in terms of FDI, contributing 21% of investment in that
period.2
Tourism is the sector with the greatest attraction of foreign
investment (28% in the 2016-2019 period), and it is also the
main sector of entry of foreign currency to the country. 2
Commerce, industry, real estate and mining are the next in
terms of attracting FDI, reflecting 52% of the total invested
between 2016 and 2019. 2
Table 2
Main Countries of Origin of FDI
(Billions of dollars, accumulated 2016 - 2019)
Total US Canada Brazil Spain
$11.53 $2.75 $1.54 $1.24 $1.17
% of the Total 24% 13% 11% 10%
Source: Central Bank of the Dominican Republic
Table 3
Main Investment Sectors
(Billions of dollars, accumulated 2016 - 2019)
Tourism Trade/Industry Real Estate Mining
$3.23 $2.57 $2.10 $1.36
28.0% 22.3% 18.3% 11.8%
Source: Central Bank of the Dominican Republic
2. Central Bank of the Dominican Republic. https://www.bancentral.gov.do/
10Doing Business
Dominican Republic
Monetary and Fiscal Policy
The main objective of the Central Bank of the Dominican Republic (BCRD) is price stability, as
required by the Monetary and Financial Law. The BCRD uses an inflation targeting scheme
(EMI) as its monetary policy scheme. Since 2015, the inflation rate target established is 4.0%
± 1.0% .10
The BCRD also uses a monetary policy rate (MPR) as a reference rate for expansion and
contraction operations within one business day. To affect the level of the interbank interest
rate, the BCRD carries out daily interventions resulting from the auction of BCRD bills and /
or overnight repos, with yields equivalent to the MPR ± 150 basis points.10
In exchange policy, the BCRD uses a flexible system, in which the exchange rate
results from the pressures of supply and demand for foreign exchange in the
market. In turn, the BCRD has the power to carry out exchange operations for the
purchase and sale of foreign currency with authorized entities under free market
conditions, so that it can intervene at any given time. 10
Ease of Doing Business
The Doing Business 11 report prepared by the World Bank measures the ease with
which business can be done in the Dominican Republic, through various variables.
Currently, the Dominican Republic is in position 115 out of 190 countries
evaluated in the 2020 Edition, having a score of 60.0 points (graph 3).
Graph 3
The Environment to Do Business in the Dominican Republic Compared to Its Peers in Latin America.
(Position of various economies in the World Bank Doing Business Report)
142
129 133
124 125 126
115
96 101
86 91
74 76
67
59 60
Perú
El Salvador
Nicaragua
Panamá
México
Dominicana
Paraguay
Brasil
Colombia
Costa Rica
Panama
Guatemala
Argentina
Mexico
Brazil
Honduras
Ecuador
Republic
Chile
Uruguay
Peru
Dominican
Repúbica
The ranking classifies where each of these countries is located with respect to 190 economies (the closer to 1 the better and vice versa).
Source: Doing Business, World Bank, 2020.
10. Monetary Policy Report 2019. Central Bank of the Dominican Republic. https://bancentral.gov.do/Publicaciones/Consulta?CategoryId=93
11. Doing Business 2020. World Bank. https://espanol.doingbusiness.org/es/reports/global-reports/doing-business-2020
11Doing Business
Dominican Republic
Within the categories of the ranking of Doing Business prepared by
the World Bank, the Dominican Republic scored better in the areas
of "Opening a business" and "Cross-border trade", where in the latter
it rates better than its regional peers, including Mexico, Colombia,
and the Latin American average.
The Dominican country rates worse evaluated in the 2020 edition
in the variable of "Protection of Minority Investors" and in the
"Insolvency Resolution".11
Graph 4
Doing Business In Dominican Republic
(Ranking of DR in the world -general and variable index- and rating in points)
DR 115 112 80 116 74 119 143 150 66 133 124
Ranking
Rating
85.4
83.5
70.7
68.0 67.2
60.0
57.4
50.6
45.0
38.0
34.0
electricity
deregistration
Investor protection
resolution
a business
Total
de execution
permits
credit
payment
trade
Taximpuestos
de construcción
transfronterizo
Total
electricidad
de crédito
propiedad
Protección de los inversionistas
contratos
negocio
de insolvencia
Cross-boarder
Obtaining
Construction
de un
minoritarios
deto
Contract
Obtención
Insolvency
Pago de
Start
Property
Access
Cumplimiento
Registro
Apertura
Resolución
Obtención
Comercio
Manejo de permisos
The ranking classifies where the Dominican Republic is located compared to 190 other countries (the closer to 1 the better and vice versa).The score is a score
between 1 and 100 points, where the ease of each of the variables is measured (the closer to 100 the better and vice versa).
Source: Doing Business, World Bank, 2020.
11. Doing Business 2020. World Bank. https://espanol.doingbusiness.org/es/reports/global-reports/doing-business-2020
12Doing Business
Dominican Republic
Current Economy
Graph 5
GDP Growth and Contribution of the Components of Aggregate Demand
(percentage points, left axis; percentage growth of GDP, right axis)
10% 9%
8%
8%
7%
6% 6%
5%
4%
4%
2% 3%
2%
0%
1%
-2% 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Consumo
Private Pirvado
consumption Consumo
Public Público
consumption Inversión
Investment Exportaciones
Net exports netas PIB
GDP(%,
(%, eje
rightderecho)
axis)
Source: Central Bank of the Dominican Republic
At the end of 2019, total consumption contributed 4 percentage points (PP) to GDP growth, i.e. private consumption 3.4 PP and
public consumption 0.6 PP. For its part, the investment contributed PP 1.3 to GDP; while net exports subtracted 0.2 PP from growth
across the economy.2
Dominican Republic represents the fastest growing economy in Central America and the Caribbean. In recent years, between 2015
and 2019, the country recorded an average growth rate of 6.05%.2 GDP is estimated to fall in 2020 by 5.8%, as a result of the global
pandemic, and a 2021 recovery of 4.0% GDP growth.
2. Central Bank of the Dominican Republic. https://www.bancentral.gov.do/
13Doing Business
Dominican Republic
Graph 6 Graph 7
In recent years the Central Bank has maintained stability in Dominican peso exchange rate per US dollar
monetary policy rates and inflation (RD$/USD)
(Inflation rate of thereference)
55.0
9.0% Inflation (% annual)
8.0%
Rate Objective(%)
50.0
7.0%
6.0%
45.0
5.0%
4.0%
40.0
3.0%
2.0% 35.0
1.0%
0.0% 30.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Central Bank of the Dominican Republic Source: Central Bank of the Dominican Republic
In recent years, the Dominican Republic has had inflation levels The exchange policy established by the Central Bank is flexible. The
below the Central Bank's target of 4.0%, (1.0%). In 2019, interannual perceived depreciation of the Dominican peso responds to supply
inflation to December resulted in 3.66%. and demand pressures for the currency in the international
market.
The Central Bank has been reducing the monetary policy target rate
for the last four years. The decision is made in response to an The exchange rate of the Dominican peso against the US dollar
international context of greater uncertainty and with the aim of has shown a consistent depreciation, in the period from 2010 to
establishing expansionary monetary measures aimed at providing 2019 the depreciation was 28%. The average exchange rate in
liquidity to the private sector and stimulating aggregate demand. 2019 was 51.4 Dominican pesos per US dollar.
At an extraordinary meeting of the Central Bank held on March 16,
2020, the decision was made to reduce the target rate by 100 basis
points from 4.50% to 3.50%, as a preventive measure given the
global context of uncertainty in the face of the global pandemic
generated by coronavirus.
14Brochure / report title goes here | Section title goes here
III. Legal System
16Doing Business
Dominican Republic
III. Legal System
To) Legal Persons
Commercial companies regulated by the General Law of Commercial Companies and Individual Limited Liability
Companies:
• Limited Liability Company
• Individual Limited Liability Company
• Stock Company
• Simplified Stock Company
• Collective Name Society
• Simple Limited Partnership
• Simple Limited Partnership by Shares.
• Foreign Company registered as a Branch.
16Doing Business
Dominican Republic
Major Trading Companies
The most common trading companies in the Dominican Republic and their main characteristics are:
Stock Company Limited Liability Company Simplified Stock Company
Shareholders/ Minimum: 2 Shareholders. Minimum: 2 Partners. Minimum: 2 Shareholders.
Partners Maximum: Unlimited. Maximum: 50 Partners. Maximum: Unlimited.
Authorized Social Capital Authorized Social Capital:
RD$30,000,000 RD$3,000,000
Minimum Subscribed and Paid Minimum: N/A Subscribed and Paid Social
Social Capital
Capital RD$3,000,000 or 10% of Capital:RD$300,000 or 10% of
Authorized Social Capital Authorized Social Capital
The responsibility of the partners The responsibility of the partners
in an SC is limited. in a SSC is limited.
The capital is represented by The responsibility of the partners The capital is represented by
shares that give their holders in a LLC is limited. shares that give their holders
Responsibility corporate rights; There may be corporate rights; There may be
The capital stock is divided into
and social capital different series of shares, which different series of shares, which
social quotas.
will confer different corporate will confer different corporate
rights: for example, limited rights: for example, limited
economic or corporate rights. economic or corporate rights.
The administration can be
Board of Directors (minimum 3 Board of Directors (minimum 3
Administration entrusted to a single manager
members) members)
or a Board of Directors
Vigilance Accounts Commissioner Optional Optional
The three types of companies allow the issuance of Variable Capital, which provides significant flexibility for the
Variable Capital
purposes of its increase and decrease.
17Doing Business
Dominican Republic
Financial Sector
The Dominican financial system is regulated by the Monetary and Financial Law (Law No. 183-02), which regulates everything
concerning financial intermediation entities, both public and private. The regulation of each financial intermediary corresponds to
decentralized bodies. The financial authorities are, fundamentally, the following:
Central Bank of the Dominican Republic (BCRD)
The function of the Central Bank is to execute monetary, exchange, and financial policies, in accordance with the Monetary
Program approved by the Monetary Board.
Superintendence of Banks (SIB)
It is in charge of the supervision of financial intermediation entities, to verify compliance with applicable laws and regulations.
Superintendence of the Securities Market (SIV)
Regulates and supervises the domestic securities market, and seeks a concurrent, organized, equitable, transparent, and efficient
market.
Superintendence of Pensions (SIPEN)
It ensures strict compliance with the law that creates the Dominican Social Security System (SDSS) and its complementary
regulations, to protect the interests of the affiliates, to monitor the financial solvency of the Pension Fund Administrators (AFP) and
to contribute to strengthen the Dominican Pension System.
Superintendence of Insurance
Governing, regulating, and supervising entity of the insurance sector in the Dominican Republic created by Law No. 146-02 on
Insurance and Surety.
In the Dominican Republic, only multiple banks or savings and loan associations can receive deposits from the public. There is no
limitation on foreign investment in the Dominican Republic, there are no restrictions on foreign investment in Dominican banks
(except for certain legally established exceptions). In fact, foreign financial institutions can be incorporated in the Dominican
Republic through a branch.
18Doing Business
Dominican Republic
Infrastructure
Public infrastructure projects can be financed through public debt or through private investment; In any case, the principles established
by the Constitution of the Republic and the laws must be followed, that is, they must be carried out through procedures that ensure the
administration of resources with efficiency, economy, effectiveness, transparency and honesty and, specifically, through public tenders.
There are, of course, procedures for exceptions to public tenders in cases, for example, of national emergency, among others; however,
even these procedures must be aimed at fulfilling the aforementioned conditions.
The main laws that govern national public contracting are the Law on Procurement and Contracting of Goods, Services, Works and
Concessions, Law 687-82 on Public Works and the Law on Public Private Associations; The latter allows the celebration of long-term
agreements or contracts, through which a private developer can finance and provide, totally or partially, the infrastructure necessary for
the adequate provision of public services, for example, hospitals, roads, etc.
Investment
In the Dominican Republic, there are various mechanisms and ways to implement investments, for example:
• Joint-venture agreements or partnerships.
• Consortium.
• Capital contributions.
• Various types of trusts.
• Debt contracting.
• Investment funds.
19Brochure / report title goes here | Section title goes here
IV. Fiscal Aspects
22Doing Business
Dominican Republic
IV. Fiscal Aspects
1. General Aspects 3. Tax Base and Rates
The Dominican Republic taxes primarily on a territorial basis. Resident companies in the Dominican Republic pay taxes on the
Commercial income derived from activities carried out on property taxable base that results from the deductible income and
located or used economically or economic rights used in the expenses of each determined period. Non-resident companies pay
country is taxed, regardless of the domicile or residence of the taxes only on Dominican source income.
participants or the place of hiring.
The corporate income tax rate is 27%. The same rate applies to
The main taxes of importance for companies operating in the branches of foreign entities under the figure of a permanent
Dominican Republic are the Income Tax (ISR), the Tax on Transfers establishment.
of Industrialized Goods and Services (ITBIS), as well as social
3.1 Income Tax
security contributions that must be paid on behalf of the
employees. However, there are other relevant taxes, such as the The income tax of a company is the result of subtracting the costs,
Asset Tax and the Selective Consumption Tax. deductible expenses, and investments from the gross annual
income as well as the incurred tax losses available for deduction in
The Dominican Republic has a National Free Zones Export Regime
accordance with the conditions and requirements established by
which provides tax concessions for companies focused on
Law.
promoting the manufacturing of goods for export, as well as some
services. 3.2 Deductions
Likewise, the Dominican Republic is not an active member of the The costs, expenses, and investments will be deductible if they
Organization for Economic Cooperation and Development (OECD), meet certain requirements. Among others, they must be duly
but it has included transfer pricing provisions applicable to recorded in the accounting, be strictly necessary for the operations
transactions with domestic and foreign related parties. of the company, and be supported by invoices that comply with
the formalities and requirements that mark the fiscal provisions in
this regard.
2. Fiscal Residence
3.2.1 Tax Receipts
Tax receipts are documents that certify the transfer of goods,
A company is resident if it is established under the laws of the delivery in use, or the provision of services. Among the most
Dominican Republic or if its main place of administration is in the important we can point out:
country.
• Invoices that generate tax credit or support costs and expenses.
• Bills to end consumers without tax credit value.
• Debit notes (interest for late payment, freight).
• Credit notes (returns, discounts, errors, or operation
annulments).
21Doing Business
Dominican Republic
6. Remittances Abroad
It should be noted that, in addition to the general requirements Companies that make payments derived from Dominican
for deductions, there are specific and limiting requirements for sources to persons or entities not resident in the Dominican
some of them. To cite a few examples, to exercise the deduction Republic, will be obliged to withhold and pay the tax to the tax
of expenses related to workers' remuneration, the corresponding authorities on the amount paid, on behalf of the recipient, in
obligations regarding withholding and payment of taxes, and certain circumstances. Corresponding rates:
social security contributions must be met.
• Dividends: 10%
• Interest: 10%
4. Assets Tax
• Royalties 27%
This tax is equivalent to a Minimum Tax (annual) and is applied
• Services: 27%
whenever it exceeds the ISR, in the event that the ISR is higher
then this tax it will be considered covered. 6.1 International Treaties
The tax base for this tax is made up of the book value of all assets The Dominican Republic has so far signed two treaties to avoid
shown in the financial statements, minus investments in shares, double taxation, which follow the OECD model. These were signed
land in rural areas, and tax accounts. with Canada in 1977 and Spain in 2014. Among other objectives,
the treaties generally provide a measure of relief against double
Rate: 1%
taxation, limiting or eliminating the taxes of the contracting
countries on the income obtained by their respective residents.
4. Capital Gains With respect to income or earnings obtained directly by foreign
residents in the Dominican Republic, double taxation agreements
frequently grant a benefit consisting of the reduction or
Capital gains from the sale of assets, real estate, or stocks are elimination of tax withholdings for income from Dominican
included in the gross income and are subject to the standard income sources, provided that various requirements and formalities are
tax rate of 27%. The capital gain is calculated by deducting the met.
acquisition cost (adjusted by inflation) from the sales price and adding
6.2 Anti-avoidance measures
the accumulated gains / losses (other adjustments may also apply, as
appropriate). Transfer pricing: based on OECD guidelines. The following
methodologies are accepted: (1) comparable uncontrolled price;
(2) resale price; (3) cost more; (4) profit split; and (5) transactional
5. Dividend Distribution and Capital Return net margin.
An annual information return must be filed no later than 60 days
after the due date to file the corporate income tax return.
Entities that distribute dividends or profits from Dominican sources
Advance pricing agreements are available to all taxpayers and
in any other way to resident or non-resident individuals and legal
sectors.
entities, must retain and pay the tax administration as a single and
definitive payment 10% of the distributed amount. Interest Deduction Limitations: thin-cap rules limit the interest
deduction.
Similarly, branches of foreign entities or permanent establishments
must retain and pay the 10% dividend distribution to their parent The deductible amount cannot be greater than the result of
company. multiplying the total amount of interest accrued in the fiscal
period by three times the average annual balance of the equity,
divided by the average annual balance of all the debt that accrues
interest from the taxpayer.
22Doing Business
Dominican Republic
Indirect Taxes Taxes on Individuals
1. ITBIS 1. Tax Residence
The Tax on Transfers of Industrialized Goods and Services (ITBIS) is a A natural person is considered a resident if he or she is in the
value-added tax similar to VAT, which applies at a rate of 18% to the country for at least 182 days in a fiscal year, whether continuous or
sale of goods, to the provision of services, to the import and export of not. Foreign persons who become residents are subject to taxes on
goods or services, and rentals. their foreign income from the third year or taxable period in which
they become residents.
Imports of services are not subject to ITBIS or any other indirect tax.
ITBIS exemptions:
2. Tax Base and Rates
• Basic food basket.
Residents, regardless of their nationality, are subject to income tax
• Fuels.
on their income from Dominican sources.
• Medicines.
• Books and magazines.
2.1 Income Tax
• Educational material at the pre-university level.
People pay taxes on income received in cash, in kind, or credit. Tax
• Education. revenue includes compensation for personal services (salaries,
bonuses, and special allowances like housing), interest, corporate
• Health.
dividends paid out of gross income, capital gains, rental income,
• Others. etc.
Companies can credit the ITBIS payments that they make against
ITBIS at their own expense; the part not credited, passes as a balance
2.2 Rates
in favor to the next month. In certain cases, and under certain
conditions, the taxpayer can request a refund. Income tax rates on individuals are progressive from 15% to 25%.
Employers withhold provisional tax payments on earned income.
Capital gains of an individual, arising from the sale of publicly
2. Selective Consumption Taxes
traded and unlisted shares, including financial derivative
The ISC applies to certain specific products and services, such as: transactions related to such shares, are subject to capital gains
tax of 25%.
• Tobacco products and alcohol products (subject to two special
taxes, one specific and the other based on value).
• Communications (Rate 10%). 2.3 Deductions
• Insurance (Rate 16%). Resident persons who carry out activities other than employment
activities can deduct all expenses necessarily incurred to obtain,
• Bank Debt Tax (0.15% per thousand).
maintain, and preserve taxable income or its source. Subject to
documentation requirements, an individual may deduct up to
10% of their net taxable income for educational expenses
incurred for the benefit of themselves or their independent direct
dependents.
3. Property Tax
Individuals and trusts are subject to the annual payment of 1% of
their total real estate assets. Individuals have an exemption of up to
RD $ 7,710,159, so the tax applies on the excess of said amount.
23Doing Business
Dominican Republic
First Steps - (Soft Landing in
Dominican Republic)
There is a more in-depth brochure on these activities produced by Deloitte Dominican
Republic. However, for those companies looking to invest in the Dominican Republic, the
most relevant steps to consider are the following:
Legal Tax
• Legal and corporate analysis of the characteristics of the • Analysis of the operating model transactions, to define their tax
investment for the development of a strategy. implications in the Dominican Republic and / or abroad.
• Request for information related to the incorporation of the • Application of corporate taxes to transactions, including
company. withholding rates in the Dominican Republic.
• Management of the registration of the company name before • Analysis of the fundamental fiscal aspects, to comply with the
the National Industrial Property Office. deductibility requirements of national and / or foreign
payments.
• Preparation of the constitutive documents and bylaws.
25Doing Business
Dominican Republic
Accounting, Payroll, and Tax Compliance Expat Employees
• File annual income statements (IR-2). • Determination of tax residence, considering local
legislation, as well as treaties, to avoid double taxation
• Submit monthly form (IT-1) related to ITBIS (VAT), together with
in terms of Income Tax.
form 606 on report of expenses and form 607 on report of
income. • Analysis of the expatriate's investments in the
Dominican Republic or abroad, to determine the
• Withholding and payment of contributions for Family Health
corresponding tax treatment.
Insurance and Pension Fund Administrator.
• Withholding at source for employees (Form IR-17)
26Doing Business
Dominican Republic
References
1. National Association of Hotels and Tourism of the Dominican Republic.
2. Central Bank of the Dominican Republic, Objectives and strategies https://www.bancentral.gov.do/a/d/2560-objetivos-y-
estrategias
3. Central Bank of the Dominican Republic, Gross Domestic Product (GDP) by sectors of origin
https://bancentral.gov.do/a/d/2533-sector-real
4. Central Bank of the Dominican Republic. https://www.bancentral.gov.do/
5. World Bank, population at the end of 2018 https://datos.bancomundial.org/indicador/SP.POP.TOTL?locations=DO
6. INC. The World Factbook: Dominican Republic. https://www.cia.gov/library/publications/the-world-factbook/geos/dr.html
7. Political Constitution of the Dominican Republic. https://www.ifrc.org/docs/idrl/751ES.pdf
8. Doing Business 2020. World Bank. https://espanol.doingbusiness.org/es/reports/global-reports/doing-business-2020
9. National Survey of Household Income and Expenditure (ENIGH) 2018
https://cdn.bancentral.gov.do/documents/estadisticas/encuesta-de-gastos-e-
ingresos/documents/ENGIH_2018.pdf?v=1584977882515.
10. Exports from Free Zones. Presidency of the Dominican Republic. https://presidencia.gob.do/noticias/en-solo-siete-anos-rd-
relanza-zonas-francas-y-obtiene-liderazgo-regional-en-generacion
11. International Monetary Fund, World Economic Outlook, https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-
april-2020
12. English Proficiency Index 2019 https://www.ef.com/wwes/epi/#
13. Monetary Policy Report 2019. Central Bank of the Dominican Republic.
https://bancentral.gov.do/Publicaciones/Consulta?CategoryId=93
14. Ministry of Industry, Commerce and MYPIMES, https://www.micm.gob.do/direcciones/comercio-exterior/acuerdos-
comerciales-vigentes
15. Ministry of Tourism of the Dominican Republic. http://mitur.gob.do/config/barometro-turistico/
16. Senate of the Republic. United States of Mexico. Dominican Republic, Technical Sheet.
https://centrogilbertobosques.senado.gob.mx/docs/F_Republica_Dominicana.pdf
27Doing Business Dominican Republic Contact Carla Coghi Phone: +(809) 563 5151 Managing Partner Email: informacioncr@deloitte.com Central America, Panama, and Dominican Republic Richard Troncoso Tax and Legal Services Partner David Infante Tax and Legal Services Partner Rosa Morales Business Process Solutions Partner Carlos Valverde Legal Services Partner Tomas Guardia Legal Services Partner 28
About Deloitte: Deloitte refers to Deloitte Touche Tohmatsu Limited, a private limited company in the United Kingdom, its network of member firms and their related entities, each of which is a single and independent legal entity. Please see www.deloitte.com for more information on our global network of member firms. Deloitte provides professional audit and assurance, consulting, financial advisory, risk advisory, tax and legal services related to our public and private clients from various industries. With a global network of member firms in more than 150 countries, Deloitte provides world-class capabilities and high- quality service to its clients, bringing the expertise necessary to meet the most complex business challenges. Deloitte's more than 312,000 professionals are committed to making significant impacts. As used in this document, "Deloitte S-LATAM, S.C." is the member firm of Deloitte and comprises three Marketplaces: Mexico-Central America, the Southern Cone, and the Andean Region. It involves several related entities, which have the exclusive legal right to be involved in, and limit their businesses to, the provision of auditing, tax consulting, legal, risk and financial advice respectively, as well as other professional services under the name of Deloitte. About this publication: This presentation contains general information only and Deloitte is not, through this document, providing accounting, commercial, financial, investment, legal, tax or other advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as the basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. No representation, warranty or promise (either expressed or implied) about the truthfulness or completeness of the information is provided in this communication and Deloitte will not be responsible for any loss suffered by anyone who relies on this presentation. © 2020. Deloitte S-LATAM, S.C.
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