About the Business and Free Trade Law:
1) DOMINICAN REPUBLIC’S FREE TRADE AGREEMENT WITH THE UNITED STATES
The Dominican Republic has entered into the United States of America’s first “free trade” agreement. CENTRAL AMERICA FREE TRADE AGREEMENT (CAFTA) is a NAFTA-style deal with five Central American nations (Guatemala, El Salvador, Honduras, Costa Rica, and Nicaragua), and the Dominican Republic.
Under the Agreement, the Parties substantially liberalize trade in goods and services. The CAFTA-DR entered into effect for the Dominican Republic on March 1, 2007.
Combined, the countries in the CAFTA-DR would represent the United States’ 18th largest goods trading partner, with $57.4 billion in total (two-way) goods trade during 2018. Exports totaled $32.2 billion while imports totaled $25.2 billion. The U.S. goods trade surplus with CAFTA-DR countries was $7 billion in 2018. According to the Department of Commerce, U.S. goods exports to CAFTA-DR supported an estimated 134,000 jobs for that year.
The CAFTA-DR additionally includes essential disciplines relating to customs administration and trade facilitation, technical obstacles to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, transparency, and labor and environmental protection.
The DR also has free trade agreements with many European countries.
2) DOMINICAN REPUBLIC’S FREE TRADE ZONE AND ITS ADVANTAGES
During the past few years, hundreds of international businesses have learned that the Dominican Republic isn’t just for vacation anymore. Currently, there are more than 700 foreign companies operating from the Caribbean in free trade zones.
In the Dominican Republic companies are 100% exempt from income tax, export tax, local tax, construction tax, taxes applied to loan contracts, real estate registrations, and transfers, capital increases, value-added taxes, import and patent taxes, asset taxes, and patrimony taxes. These benefits and exemptions create a great environment for companies located in the free trade zones, the free trade zones are found throughout the country. However, most are within 30 kilometers of Santo Domingo and within 50 kilometers of Santiago.
Other significant incentives of operating in free trade zones of the Dominican Republic are the significant tax advantages, for example, companies producing goods for export are exempted from corporate income-related taxes, value-added tax, customs duties, real estate transfer taxes, and construction taxes.
National and foreign companies operating in the Dominican Republic’s free trade zones have credit and financing options available. As long as a financing applicant can meet requirements established by the country’s Monetary Board, it can take advantage of the country’s liberalized banking system and available lines of credit.
Conducting business in the Dominican Republic’s free trade zones is favorable due to its high-quality infrastructure to offer moving goods in, out, and around the country. That infrastructure was recognized in the World Economic Forum’s Global Competitiveness Report and ranked as the best in the Latin America region. The Dominican Republic’s world-class infrastructure network includes international airports and seaports, as well as more than 20,000 kilometers of highways and roads.
Accessible and affordable labor
Being a major host to manufacturing companies, as well as a growing hub for tech and contact centers, the Dominican Republic has an available pool of skilled and unskilled workers with a reputation for hard work and a desire to develop at competitive rates.
3) HOW TO AFFILIATE A CORPORATION UNDER DOMINICAN REPUBLIC’S FREE TRADE ZONE; PROCESS AND REQUIREMENTS
All requests must be accompanied by communication on stamped paper from the requesting company, addressed to the Executive Directorate of the National Council of Export Free Zones, signed by the President and/or the person duly authorized by the company, indicating the Registry number. National Taxpayer (RNC), address, telephone, and fax of the same.
In the case of operating companies, they must also bear the seal of the same. The same must be deposited in the offices of the National Council of Export Free Zones together with the following documents:
Application Form for Installation Permit for Industrial and Service Free Zone.
Lease contract and/or letter of intent of the park where the company will be installed.
Definitive or preliminary constitutive documents of the company, indicating the relationship of the shareholders, their nationality, and contributions.
A certified check for processing in the name of the National Council of Export Free Zones.
Sample of the product to be manufactured.
Solvency letter or some document that identifies the investors.
Letter addressed to the CNZFE, requesting that it be authorized to operate under the Free Trade Zone regime, under Law 8-90.
The request will then be reviewed by the Department of Free Zones and Parks.
4) PURCHASING REAL ESTATE IN THE DOMINICAN REPUBLIC
The real estate industry has been significantly fostered by government decrees that stimulate Tourism and provide significant tax incentives to the investors in Tourism Development Promotion. One of the main Laws supporting this is the CONFOTUR [Law No. 158-01]. Its purpose is to attract sustainable tourism by offering tax incentives to investors.
It is important to emphasize the 100% tax exemption for a period of 15 years in the Dominican Republic on the following:
- Rental income
- Capital Gain
- Company Incorporation and Capital Increase
- Real Estate Transfer
- Real Estate Property
In other words, the Dominican Republic has undeniable potential for foreign investors looking for new business opportunities, with real estate in tourism areas definitely being a very attractive sector.
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