Source: https://www.drlawyer.com/category/publications/international-trade-and-investment/
Timestamp: 2019-04-26 02:53:43+00:00

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This is the Central Bank of the Dominican Republic.
a) Contributions in freely-convertible currency, exchanged in a banking institution authorized by the Central Bank.
c) Those financial instruments the Monetary Board relegates to the category of foreign investment, except those that may be the product of contributions or internment of an operation for the re-conversion of the Dominican foreign debt.
PARAGRAPH I: Independently of the investments foreseen in item b) of this article, contracts for technology transfer can be signed with foreign individuals or corporations, such as contracts for the license of technology, for technical assistance, basic and detailed engineering.
PARAGRAPH II: Intangible technological contributions are understood to be funds originating from technology, such as Trademarks, product models or industrial processes or services, technical assistance and technical knowledge, franchise and management assistance. The application regulation of this law shall determine the general framework that will be applied to technology, including those areas in which the capitalization of intangible technological contributions will be allowed.
a) Investments in the capital of an existing or new company, as per the provisions contained in the Commercial Code of the Dominican Republic, including the establishment of branch offices, pursuant to the conditions set by the laws.
Foreign Investment in share companies must be represented in nominative shares.
c) Investments towards the acquisition of financial assets, pursuant to the general norms issued in this area by the monetary authorities.
b) Proof of entry into the country of the foreign currency or physical or tangible goods.
c) Formative documents of the commercial corporation or the authorization of the operation of branch offices via the setting of domicile.
PARAGRAPH I: Once the document filing requisites have been met, the Central Bank will issue immediately to the applicant a Registration Certification of Direct Foreign Investment.
PARAGRAPH II: Foreign Re-Investment and New Foreign Investment, described in article 1 of this law, shall also be registered with the Central Bank, meeting the requisites provided by the regulation for applications.
PARAGRAPH III: In the case of companies operating in Industrial Free Zones, the registration and delivery of information shall be made in the National Council of Export Free Zones, which shall have the obligation of communicating this immediately to the Central Bank.
c) Production of materials and equipment directly linked to national defense and security, except for an express authorization from the Chief Executive.
PARAGRAPH I: When the Foreign Investment affects the eco-system in its area of influence, the investor must present a proposal with the provisions for recovering the ecological damage it may cause.
PARAGRAPH II: The competent authorities related to the area in question shall have the responsibility for compliance with the provisions contained in this article.
PARAGRAPH III: Foreign investments shall be made in each area of the national economy, pursuant to the conditions and limitations imposed by the laws and regulations governing each one of said areas.
Art. 6.- Investors and the companies or corporations in which foreign investors may participate or be owners, shall have the same rights and obligations that the laws confer upon national investors, save the exceptions foreseen in this law or in special laws.
Art. 7.- The individuals or corporations that make investments defined in article 1 of this law, shall have the right to remit abroad, in freely-convertible currencies, without the need for prior authorization, the total amount of invested capital and the dividends declared during each fiscal period, up to the total amount of the net current profits of the period, upon payment of income tax, including the capital gains made and registered in the books of the company according to generally accepted accounting practices.
They can also repatriate, under the same conditions, the obligations resulting from technical service contracts where fees are established for the purposes of technology transfers and/or contracts for the local manufacture of foreign brands, which include clauses for the payment of royalties (“regalías”) as long as said contracts and the amounts or procedures for the payments involved have been previously approved by the Central Bank of the Dominican Republic or an official agency subsequently designated to coordinate, facilitate and supervise everything related to foreign investment.
b) Documentary proof of settlement of tax commitments.
Art. 9.- Non-compliance with this obligation will carry the applicable sanctions contained in the law that governs the obligation of supplying information to the Central Bank of the Republic.
The Central Bank must inform the National Congress annually of everything related to the flows of foreign investment in the country.
Art. 11.- This law repeals Law Number 861, dated 22 July 1978, and Law No. 138 dated 24 June 1983. In like manner, it repeals item d) of article 3 of Law No. 251 of 11 May 1964 on International Fund Transfers.
Art. 12.- (Transitional). In the case of accumulated profits from previous periods retained as a consequence of the limitations on remittances established by Law No. 861, each company shall have the right to request the approval of a program for gradual repatriation, with a minimum of 5 years for fully effecting it.
The reassessment surpluses registered in the capital accounts of companies that have reassessed their assets will not be regarded as foreign investment for the purposes of repatriation of capital, except when said revaluation profits have been converted into liquid assets for the sale to third parties or parties related to the company.
Art. 13.- This law repeals any other express legal provision contrary to it.
During the last two decades, the Dominican Republic has sought to foster a highly receptive environment for international investors, adopting policies that minimize regulatory obstacles and, at the same time, provide assistance and incentives to foreign companies and individuals to bring their capital into the country. As a result, the country has become the number one recipient of direct foreign investment in the region: 21 billion dollars’ worth from 2006 to 2015.
The Dominican Constitution accords foreign and local investors equal treatment under the law, stating expressly that foreigners in the Dominican Republic are entitled to the same rights as Dominican nationals, except for participating in local political activities. At the same time, foreign investors are bound by the same rules and regulations applicable to local investors.
Foreign investors can freely hold equity in local businesses and joint ventures, as well as buy real estate in their names.
Foreign Investment Law 16-95, enacted on November 20, 1995, and its enabling regulations, eliminated all barriers formerly imposed on international investments in the Dominican Republic. Investors contributing capital to companies operating in the Dominican Republic are granted unlimited access to all sectors of the Dominican economy, except for investments related to national security and other sensitive industries.
Registration of foreign investments is optional. No government approval is required for the repatriation of profits.
The Center also sponsors events to promote the Dominican Republic as an investment destination and to provide information to potential investors on how to plan and implement successful business projects in the country.
The Dominican government also assists investors by pledging its full faith and credit to loans provided by international agencies for significant infrastructure projects in the Dominican Republic. Foreign investors in large Dominican projects commonly use capital and political/exchange insurance risk facilities provided by the Multilateral Investment Guarantee Agency (MIGA) and the Overseas Private Investment Corporation (OPIC). The Dominican Republic has signed agreements with both entities.
The Multilateral Investment Guarantee Agency (MIGA) is an independent development cooperation institution created by the World Bank in 1988 to provide, in addition to guarantees to investors against losses caused by political risks, technical assistance to promote investments to developing countries.
The Overseas Private Investment Corporation (OPIC) is an independent federal agency of the United States federal government that helps American companies to compete in emerging markets by providing insurance against political violence, expropriation, and the inability to convert foreign currency.
In a deliberate effort to attract investment capital, the Dominican Republic has set up one of the most wide-ranging systems of incentives for investors. The most important initiatives in this regard are described below.
Under Free Trade Zones Law 8-90, its amendments and regulations, companies operating in free zones function in a nearly free trade environment and benefit from considerable tax exemptions for renewable 15-year periods, such as no income, goods and services, municipal or export or re-export taxes, no import duties nor related charges on raw materials, equipment, construction materials, vehicles, office equipment and other goods necessary for the preparation, construction, and operation of the business.
All trade in goods or services from and to a free zone is considered an import or an export, even when the source or destination is another location in the Dominican Republic. As a result, goods and services from the free zones sold in the Dominican market are subject to applicable taxes, such as customs duties and goods and services taxes, except (a) textiles, leather goods, and shoes that benefit from a special program set up under a special statute (Law 56-07); and (b) trade between different free zones if approved beforehand by the authorities. However, companies in the free zones exporting goods or services to the Dominican market pay a preferential income tax rate of 3.5% on gross sales.
Free zones are regulated and supervised by the National Council for Free Zones, which issues the permits allowing companies to operate within a particular free zone, and enforces all applicable legislation.
Under Law 28-01, companies established and operating in free zones within the border region with Haiti are entitled, in addition to the exemptions listed before, to additional benefits such as an extension of the exemption period from 15 to 20 years, government subsidies to lease space in the free zone, and preferential loans with lower interest rates.
Under Law 480-08, companies in special free zones can offer all types of financial and support services to persons or entities located outside the Dominican Republic without having to pay taxes for a 30-year period.
Partners and shareholders of companies in financial free zones are exempted from paying taxes on the profits or dividends received.
International financial free zones are regulated and supervised by the National Council for International Financial Zones, which issues the permits allowing companies to operate within a particular free zone and enforces all applicable legislation.
Executive Order 262-15 defines logistic operators as companies authorized by the Customs Department of the Dominican Republic to supply, within a logistic center, services such as storage, inventory administration, classification, consolidation, cargo distribution, packaging, labeling, division of cargo, refrigeration, re-export, and transport.
Logistic operators benefit from a significant reduction in their income tax, which is set at just 3.5% of sales made in the local market, and from import duties on merchandise brought into the country, repackaged and then exported, if done within a specified time period.
The inflow of tourists to the Dominican Republic began with the enactment, in 1971, of a special statute granting incentives to investors willing to risk their capital in what was then the last tourist destination in the region. Nowadays, when the country is the undisputed tourism leader in the Caribbean, companies still benefit from very attractive enticements to invest in the industry. Law 158-01 on Tourism Incentives, as amended by Law 195-13, and its regulations, grants wide-ranging tax exemptions, for fifteen years, to qualifying new projects by local or international investors.
The projects and businesses that qualify for these incentives are: (a) hotels and resorts; (b) facilities for conventions, fairs, festivals, shows and concerts; (c) amusement parks, ecological parks, and theme parks; (d) aquariums, restaurants, golf courses, sports facilities, and any other tourist facility; (e) port infrastructure for tourism, such as recreational ports and seaports; (f) utility infrastructure for the tourist industry such as aqueducts, treatment plants, environmental cleaning, and garbage and solid waste removal; (g) businesses engaged in the promotion of cruises with local ports of call; and (h) small and medium-sized tourism-related businesses such as shops or facilities for handicrafts, ornamental plants, tropical fish, and endemic reptiles.
As for existing projects, hotels and resort-related investments that are five years or older are granted 100% exemptions from taxes and duties related to the acquisition of the equipment, materials and furnishings needed to renovate their premises. In addition, hotels and resort-related investments that are fifteen years or older will receive the same benefits as a new project if the renovation or reconstruction involves 50% or more of the premises.
Finally, individuals and companies get an income tax deduction for investing up to 20% of their annual profits in an approved tourist project.
The Tourism Promotion Council, known by its Spanish acronym of CONFOTOUR, is the government agency in charge of reviewing and approving applications by investors for these exemptions, and, generally, of supervising and enforcing all applicable regulations. Once CONFOTOUR approves an application, the investor benefitting from the incentives must start and continue work in the authorized project within a three-year period to avoid losing all benefits under the program.
The Dominican Republic encourages investment in the renewable energy sector. Under Law 57-07 on the Development of Renewable Sources of Energy, investors in this area are granted, among other benefits, the following incentives: (a) no custom duties on the importation of the equipment required for the production, transmission and interconnection of renewable energy; (b) no tax on income derived from the generation and sale of electricity, hot water, steam power, biofuels or synthetic fuels generated from renewable energy sources; and (c) exemption from the goods and services tax in the acquisition or importation of certain types of equipment.
The National Energy Commission is the governmental entity in charge of granting incentives in this industry, which has attracted substantial interest from international investors.
Film Industry Law 108-10, as amended by Law 257-10, and its enabling regulation, created a legal framework to promote the development, production, distribution and preservation of movies, TV shows, music videos, and other audiovisual productions, as well as the construction of film-making studios and movie theaters. The most important incentives contemplated in the legislation are exemption from payment of the goods and services tax, income tax exemption for the construction of movie theaters and film or recording studios, and a transferable tax credit equal to 25% of expenditures in the Dominican Republic, subject to certain requirements.
To benefit from these incentives, investors need to be registered and authorized with the Dominican Republic Film Commission, which is the regulatory agency in charge of implementing the law.
Industrial Innovation and Competitiveness Law 392-07, as amended by Law 542-14, creates an institutional framework to enhance the ability of Dominican industry to compete in international markets by promoting horizontal and vertical integration and granting incentives to qualified operators such as exemption from custom duties and goods and services tax on raw materials, machinery and capital goods, accelerated depreciation of goods and industrial equipment, and reimbursements of certain taxes to exporters.
To qualify for these incentives, industries must be certified by the Center for Development and Industrial Competitiveness (PROINDUSTRIA), the agency of the Dominican government created to implement Law 392-07.
Law 171-07 grants foreign nationals who invest a minimum of $200,000 in the Dominican Republic or meet certain criteria as retirees with special benefits such as expedited residency in the country, exemption from duty for the importation of household goods, exemption from transfer taxes for the first purchase of real estate, exemption from taxes on dividends and interest, and 50% reduction on property and capital gains taxes.
Geographically located at the center of the Caribbean, with privileged market access to the United States, Europe, and Central America, an abundant work force, a domestic market of more than ten million people, and a decades-old policy of great openness to foreign investment and international trade, the Dominican Republic has become the largest economy in the Caribbean and Central America, the number one recipient of direct foreign investment in the region (2. 3 billion dollars in 2015), and its most-visited tourist destination (5.6 million tourists in 2015). From 1993 to 2015, gross domestic product (GDP) growth of the Dominican economy averaged 5.4% annually; in 2014 and 2015, it reached 7.3 and 7.0%, respectively, the highest by far in the Western Hemisphere.
In 2015, the Dominican Republic bought $16.9 billion dollars’ worth of imported products and exported 9.7 billion dollars in local products. The top four countries for Dominican exports in 2014 were the United States (49%), Haiti (14%), Canada (9%), and Switzerland (2.5%). Imports came mainly from the Unites States ($7.3 billion in 2014), China ($2.1 billion), and Mexico ($1.1 billion).
In the Western Hemisphere, the Dominican Republic is the seventh largest trading partner of the United States, after Canada, Mexico, Brazil, Venezuela, Colombia, and Chile.
The Dominican Republic maintains diplomatic relations with 129 countries and is a member of many regional and international organizations, including the United Nations, the Organization of American States, the Central American Integration System, the World Trade Organization, the International Monetary Fund, the World Bank, the International Centre for Settlement of Investment Disputes, the International Finance Corporation, the Inter-American Development Bank, the Inter-American Investment Corporation, the Central American Bank for Economic Integration, the Caribbean Development Bank, the Multilateral Investment Guaranty Agency, and the Caribbean Forum of African, Caribbean and Pacific States.
The Dominican Republic has been a member of the World Trade Organization (WTO), the world-wide regulator of international trade, since its founding in 1995. The main objective of the WTO is to foster international trade by eliminating trade barriers and enforcing the multiple commercial agreements reached by its members over the decades.
As a developing country, the Dominican Republic is allowed to receive preferential, non-reciprocal treatment from other member states.
The Dominican Republic enjoys advantageous trade with the United States, the European Union, and countries in the Caribbean and Central America region. Two important agreements are the free trade agreement with the United States and Central America (DR-CAFTA) and the Economic Association Agreement with the European Union (AAE). Both encourage the free flow of trade among the member states by significantly reducing tariffs, opening new markets, and promoting regional integration. Furthermore, the country has initiated discussions to liberalize trade with Canada, Mexico, Mercosur, and Taiwan.
Signed August 5, 2004, and effective in the Dominican Republic on March 1, 2007, DR-CAFTA facilitates trade and investment between its member states and promotes regional integration by eliminating tariffs, opening markets, reducing barriers to services, promoting competition, protecting intellectual property rights, and advancing transparency. Parties to the agreement are the United States, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. These last six countries represent the third largest export market for U.S. goods in Latin America after Brazil and Mexico.
DR-CAFTA permanently guarantees the Dominican Republic the ability to export most of its products and services to the member states without customs duties. Service sectors with open access to all signatories of DR-CAFTA include financing, insurance, investments, tourism, energy, transport, construction and engineering, government contracts, telecommunications, express delivery, electronic commerce, entertainment, professional services, computer and related services, and environmental industries. Importantly, laws that protect domestic dealers by locking companies into distributorship arrangements have been loosened.
DR-CAFTA also requires member states to effectively enforce local labor and environmental regulations, and eliminate corruption, in order to ensure fair competition and a level playing field for all.
Certain obstacles to free trade remain under the treaty. Member states have kept tariffs on specific agricultural products up to a certain limit, and have prohibited the importation of certain goods. For instance, the Dominican Republic does not allow the entry of used clothes, used electric household appliances, or cars older than five years.
The administrative structure of DR-CAFTA is headed by the Free Trade Commission, consisting of cabinet-level representatives of the seven parties to the agreement. The Commission is responsible for supervising the implementation of the agreement and resolving disputes regarding its interpretation and application.
The Economic Partnership Agreement (EPA) is a free trade treaty with financing and investment aspects signed in 2007 between the European Union (EU) and CARIFORUM, an organization of Caribbean nations, whose members are Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Granada, Guyana, Haiti, Jamaica, Saint Lucia, Saint Kitts and Nevis St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, and Dominican Republic. The EPA allows duty-free access to Caribbean products to the 28 countries of the EU and provides economic assistance to Caribbean countries with the stated purpose of reducing poverty, promoting regional integration, and encouraging regional consolidation into the world economy. It also promotes free trade within the Caribbean region. The Dominican Republic entered the EPA on October 15, 2008.
Under the terms of the EPA, access to markets is asymmetrical. Provisions for exports from Caribbean countries to the countries of the EU are generous for eligible products. In contrast, provisions for similar imports from the EU are subject to restrictions for up to 25 years, with safeguards to protect local employment and sensitive industries. This asymmetry protects certain products and sectors in the less-developed Caribbean countries from the potential unequal effect of trade with the EU while affording the less-developed member states access to EU products.
The EPA, together with DR-CAFTA, offers international investors and local producers in the Dominican Republic unprecedented free-trade access to the two largest markets in the world: The EU and the United States. Few other countries benefit from such a privileged situation.
Signed in 1998 and ratified by the Dominican Republic in February 2001, this agreement involves the Dominican Republic and 14 Caribbean nations (CARICOM), and establishes free trade zones in the region along WTO guidelines. Trade between the Dominican Republic takes place on an equal or reciprocal basis with other more developed Caribbean states, but may be differentiated with those less-developed, such as Antigua y Barbuda, Belize, Dominica, Granada, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and Haiti.
The free trade agreement between the Dominican Republic and CARICOM coexists with free trade agreement between the Caribbean nations and the European Union (EPA). A provision in the EPA stipulates that in case of a conflict in the handling of a product or sector between the two agreements, the agreement with the less restrictive treatment will prevail.
This agreement coexists with DR-CAFTA, which incorporates several of the provisions of the former, including the negative lists. In case of a conflict in the handling of a product or sector between the two agreements, the agreement with the less restrictive treatment will prevail.
This agreement was signed in 1985, but discrepancies over its application delayed implementation until 2003. Four lists of products benefit from liberalized trade, subject to rules of origin: (a) “two-way products,” which consists of those that enjoy free access to the markets of both countries; (b) Dominican products than can be freely exported to Panama; (c) Panamanian products that can be freely exported to the Dominican Republic; and (d) products manufactured in free trade zones.
A Permanent Mixed Commission consisting of representatives from both countries may add new products to the lists.
Involvement exemplifies Guzmán Ariza’s experience in trade agreements. We dedicate a large part of our practice to helping international corporations meet their operational and strategic business objectives in the country. We have actively participated in the negotiation of the most important international trade agreements, giving us intimate knowledge of the local impact of their contents on your business. When DR-CAFTA was enacted, we pioneered the field of public procurement law in the Dominican Republic to meet the objectives of that trade agreement.
Our presence in and attention to trade issues enable us to monitor provisions that impact your business, such as technical barriers to commerce, rules of origin, domestic components, and tariff. Armed with timely information, we can anticipate legal changes and guide your business for the long term.

References: Art. 6

Art. 7

Art. 9

Art. 11

Art. 12

Art. 13