Source: Diario Libre.
Website:
http://diariolibre.com/app/article.aspx?id=129299
November 27, 2007, 9:47 PM
More time to change the labels on Spanish language.
Last September, Digenor warned that from November it would withdraw from the market products that do not meet the standard Nordom 53.
SANTO DOMINGO. The Dirección General de Normas y Sistema de Calidad (Digenor) (General Directorate for Standards and Quality System) extended until February 29th, 2008, the deadline for companies to comply with the provision of tagging in Spanish prepackaged foods, especially those imported.
The information was offered yesterday by Julio Santana, director of DIGENOR, who explained that the milk products and all its derivatives processed or fermented, as well as meat products and cold cuts (deli meats), being highly perishable foods, were granted an additional period until January of the same year.
He said that there has been significant progress on the standards for the labeling of prepackaged foods, as Digenor has made more than four thousand products, which are marketed throughout the national territory, are complying with those requirements.
Santana announced that in agreement with the Dirección General de Salud Ambiental (DIGESA) (General Directorate of Environmental Health) and with the support of the main players in the market, will begin from next year the installation of the "Virtual Kiosk," through which you can read all information of a product in its barcode, and beginning from next year as a pilot plan in Santiago.
"In all business establishments consumers will be able to obtain basic information, mandatory labeling showing a reader automated barcode of the product they are buying and can read on the screen labeling in Spanish language, with the option to print if you want ," said Santana.
-Adonis Santiago Diaz.
Freddy Miranda
Translated by Orlando Alcántara
Monday, December 3, 2007
Wednesday, October 24, 2007
FAQ FOREIGN INVESTORS, CEI-DR
Source: http://www.cedopex.gov.do/pdf/inversion/preguntas_sobre_INVERSION.pdf
CEI-RD (Centro de Exportación e Inversión de la República Dominicana) (Center for Export and Investment of the Dominican Republic).
Investors’ Frequently Asked Questions.
Investors Service Division.
November 2004.
1 .- What is the government's policy towards the private and public enterprises (national and foreign)?
The Dominican government encourages private investment both domestic and foreign. The State has been transferring into private hands the majority of the State-owned enterprises for the purpose of ensuring fair competition and to eliminate monopolies.
Are foreigners treated differently, compared with nationals? No. Article 6 of Law 16-95 establishes the principle of national treatment for foreign investors.
2 .- Does your country have an agreement regarding double taxation and a bilateral investment agreement with my country?
The Dominican Republic signed a Convention for Avoidance of Double Taxation with Canada in the year 1976, and we are currently under negotiation with the following countries: Chile, Trinidad and Tobago, Taiwan, Russia and Spain.
Bilateral Agreements for the Mutual Promotion and Protection of Investments, and Signed By the Dominican Republic.
Country / Regional Block: Spain.
Ratified by the National Congress: October 7, 1996.
Signed: March 16, 1995.
Comments: Approved September 9, 1996. In force.
Country / Regional Block: France.
Ratified by the National Congress: Adopted on June 3, 2000.
Signed: January 14, 1999.
Comments: Accepted by the National Congress. Resolution No. 177-02 of October 30, 2002.
Country / Regional Block: Republic of China (Taiwan).
Ratified by the National Congress: Message No. 4209 of March 30, 1999.
Signed: November 5, 1999.
Comments: Approved by Resolution No. 193-01 on November 27, 2001. In force.
Country / Regional Block: Chile.
Ratified by the National Congress: Approved on May 8, 2002.
Signed: November 28, 2000.
Comments: Approved by Resolution No. 63-02. In force.
Country / Regional Block: Ecuador.
Ratified by the National Congress: Message No. 7122 of June 21, 1999.
Signed: June 26, 1998.
Comments: In force.
Country / Regional Block: Cuba.
Ratified by the National Congress: Approved on January 9, 2001 by the Senate and rejected by the Chamber of Deputies on August 15, 2002.
Signed: November 15, 1999.
Comments: It is not in force.
Country / Regional Block: CARICOM (through the Free Trade Agreement with the Caribbean Community consists of: Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, Saint Lucia, Saint Vincent and Grenadines, Suriname, and Trinidad and Tobago.)
Ratified by the National Congress: February 28, 2001.
Signed: August 22, 1998.
Comments: In force for all of the CARICOM countries, except Guyana and Suriname.
Country / Regional Block: Central MCCA (through Free Trade Agreement with the Central American Common Market (MCCA for its initials in Spanish), composed of the following countries: Costa Rica, El Salvador, Honduras, Guatemala and Nicaragua.)
Ratified by the National Congress: March, 2001.
Signed: April 16, 1998.
Comments: In force for all of the Central American countries.
Country / Regional Block: Argentina.
Ratified by the National Congress: Not available.
Signed: March 16, 2001.
Comments: In force.
Country / Regional Block: Finland.
Ratified by the National Congress: Not available.
Signed: November 27, 2001.
Comments: In the National Congress for ratification.
Country / Regional Block: Morocco.
Ratified by the National Congress: Not available.
Signed: May 23, 2002.
Comments: In the National Congress for ratification.
Country / Regional Block: United Kingdom of Great Britain and Northern Ireland.
Ratified by the National Congress: Not available.
Signed: July 11, 2002.
Comments: In the National Congress for ratification.
Country / Regional Block: Swiss Confederation.
Ratified by the National Congress: Not available.
Signed: January 27, 2004.
Comments: In the National Congress for ratification.
Country / Regional Block: Free Trade Agreement with the United States and Central America (DR-CAFTA).
Ratified by the National Congress: Not available.
Signed: August 5, 2004.
Comments: Pending ratification by the congresses of the signatory countries. (Translator's Note: In force today, October 20, 2007).
Under Negotiation: Colombia, Peru, Israel, Canada, Italy, Korea, Denmark, Norway, Sweden, Germany, Russian Federation, Czech Republic, Belgium, Austria, Venezuela, the Republic of Ukraine.
Agreement Negotiated definitely and pending of signature:
Kingdom of the Netherlands, dated October 11, 2002.
Trade Agreement of Partial Reach:
DR-Panama; it is in force at the moment.
3 .- What are the possible forms of corporate organizations?
In the Dominican Republic, the most widely used organizational form is the commercial joint stock company (compañía por acciones); this form of business organization can be called Compañía por Acciones (Stock Company) (C. A., or C. x A.), Compañía Anónima (Anonymous Company) (C.A.) or Sociedad Anónima (Anonymous Society) (S.A). It is the company of choice for carrying out acts of trade because of its limited liability.
By powers that the Law gives to it, the stock company is an entity that has its own legal personality, different from that of their partners. Therefore, it may be subject to exercise rights as well as duties, and like individuals it has a name, an address and a patrimony.
It is also possible to establish branches and subsidiaries of foreign companies in the country.
To open a branch, it is only needed to settle a home address in the Dominican Republic requesting that authorization to the Executive Power. The branch has no legal personality.
To establish a subsidiary with limited liability it is necessary to continue the process of establishing a company, which would require 7 partners, to pay its constitution taxes, to register a name, and to deposit the constituent documents in the Civil Registry and the corresponding Courts. The procedure costs about US$2,000.00 dollars.
4 .- Are there any special requirements or restrictions for a foreigner to acquire all the rights of ownership over his/her investment? Does he/she need to have a local partner?
Law 16-95, on Foreign Investment, gives investors and to the companies in which they take part, or which they are owners of, the same rights and duties that the laws give to Dominican domestic investors. It is not necessary to have a local partner, except for individual sectors such as Banking, Insurance and Air Transport, for which the laws require a Dominican shareholding of more than 50%.
5 .- Are there requirements for notification, registration, approval or authorization of foreign investment?
Any investor or foreign company, as soon as they have made their investment must register it with the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic (CEI-RD). For this purpose both individuals and corporations have to deposit the following documents:
A) Application for registration, specifying the name of the foreign investor, receiving local company, the amount of investment, RNC (Registro Nacional del Contribuyentes; National Registry of Taxpayers), sector of activity of the project, information on invested capital and the area where the investment has been made;
B) Proof of entry into the country of foreign currency or physical or tangible assets;
C) Documents establishing the commercial company or the authorization of the operation of branches by settling the home address.
6 .- How much complication are in the procedures? How long does they take?
This registration of the investment consists of a simplified procedure, where the investor deposits documents required by Law 16-95, on Foreign Investment, at the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD). After meeting these requirements it will immediately be issued to the applicant the Certificate of Registration of Foreign Direct Investment.
7 .- Is there a place where I can get help to fulfil these procedures?
There is the official help that the country gives to the investor; it can be gotten through the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD), established by Law 98-03 of June 17, 2003.
The Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD) has as its main purpose the promotion and encouragement of the Dominican exports and investment, for the purpose of boosting the country's competitive insertion in the international markets for goods and services. Besides promoting the country as a very good place for investment; it helps the investor in streamlining government procedures for the placement of investment, as well as information on legal aspects, corporate, tax and other practical guidance that an investor of any area of the economy may require. CEI-RD has as a priority to ensure the entry and permanence of investors, as well as to encourage reinvestment of profits from these investments.
8 .- Are there special incentives available for investment?
Yes, there are special laws as well as tax laws that devote special incentives for foreign investment, as our legal framework gives the foreign investor an equal treatment to that given to the national investor. Therefore, there are special rules that benefit certain types of investment.
Firms producing goods and services for export established as Free Duty Zones (Law 80-90 of January 15, 1990 and the implementing regulation No.366-97 of August 29, 1997) will benefit from a special regime of customs controls and tax incentives of up to 100%.
The excellent business opportunities offered by this Law are available both for the domestic investor as well as for foreign investor.
Special Border Area Development, and it comprises the following provinces: Pedernales, Independencia, Elías Piña, Dajabón, Montecristi, Santiago Rodriguez, and Bahoruco.
Any company that is installed within any of the provinces cited above enjoys the following incentives and exemptions:
They are exempt from 100% of the payment of all internal taxes.
Exemption of Tariffs on raw materials, equipment and machinery, or any other type of tax for 20 years.
They are given, in addition, 50% exemption in the payment of free transit and use of ports and airports.
The reduction of fifty per cent (50%) of any tax, fee or contribution to the current date or to be established in the future, while they will have the 20-year exemption period in force under this Law.
They are given a period of five (5) years to any company that is established for the enjoyment of the full term of the exemption period. At the end of five (5) years, new businesses that are established only enjoy that part of the exemption period that it is in effect, counted from the day after the expiration of the five (5) years.
Promotion of Tourism Development for the tourist zones or hubs of low development and new tourist zones or hubs in the provinces and localities of great potential.
1 .- Tourist Zone No.4, Jarabacoa and Constanza;
2 .- Tourist Zone IV, expanded: Barahona, Bahoruco, Independencia, and Pedernales;
3.- Tourist Zone V, expanded: Montecristi, Dajabón, Santiago Rodríguez, and Valverde;
4 .- Tourist Zone VIII, expanded, covers the provinces of San Cristóbal and the Municipality of Palenque; The province of Peravia and Azua de Compostela:
5 .- Tourist Zone comprising the municipalities of Nagua and Cabrera;
6 .- Tourist Zone of the Province of Samaná;
7 .- The Province of Hato Mayor and its municipalities; the province of El Seybo and its municipalities; the Province of San Pedro de Macorís and its municipalities; the Province of Espaillat and the municipalities of: Higüerito, José Contreras, Villa Trina, and Jamao al Norte; the Provinces of Sánchez Ramírez and Monseñor Nouel; the municipality of San José de Las Matas; the Province of Monte Plata; and Guiguí, La Vega.
INCENTIVES GIVEN:
Companies based in the country which are benefiting from the incentives and benefits of this Law are exempt in a 100% of the tax on the following items:
A) National and municipal taxes that are levied to use and issuing building permits, including acts of purchase of the land, provided that they are within the purpose of this Law;
B) The import taxes and other taxes, such as rates, fees, surcharges, including the Impuesto Sobre las Transferencias de Bienes Industrializados y Servicios (Tax to the Transfers of Industrialized Goods and Services) (ITBIS), which was implemented on the equipment, materials and furniture necessary for the first equipment and putting into operation of the tourist facility in question;
C) National and international financings are exempt from paying taxes; they will be subjected of neither the withholdings nor the interests that they may generate;
D) The natural or legal persons may deduct up to 20% of their annual profits, if they are investing in a project within the scope of this Law;
E) All machinery and equipment needed to achieve a high quality of the products are exempted (ovens, incubators, treatment plants and laboratories for production control, among others), at the time of establishment;
F) There will not be new taxes, fees, charges, etc., within the period of tax exemption;
G) The benefits and incentives under this Law are limited to projects whose construction will begin after this Law is enacted;
Exemption Period.
These projects, businesses or tourism enterprises will have an exemption period of 10 years from the date of completion of construction work and equipping of the project under these incentives. It gives a period not exceeding in any case three years to start steadily and uninterrupted operation of the project approved.
9 .- Is there a package available that contains the laws applicable to foreign investors, written in the language of international business?
At the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD), we have developed the Investor's Guide, in CD-Card version, which is a complete collection of all procedures to which the potential investor will be subjected to successfully place his/her investment in the country.
Call to become the main tool for the guidance of the investor, their legal counsel, Dominican missions abroad and the business sector in general, the Investor's Guide of CEI-RD takes into account virtually all aspects of the legal landscape of the Dominican Republic, covering both regimes of general application such as immigration, taxes and the labor sector, companies, intellectual property and real estate; also, the areas of specific interest as Free Duty Zones, telecommunications, tourism and energy, with the inclusion of relevant laws and copies of the forms required in each case.
10 .- Are there conditions, restrictions or requirements regarding the use of foreign personnel in the workplace?
The labor law in the Dominican Republic provides that at least 80% of the total number of workers must be Dominicans. This provision does not apply, however, to officials with managerial or executive positions in the company.
In the Dominican labor law there are no restrictions on nationality to work in the country. For its part, Article 8, Section 12, of the Constitution establishes freedom of work.
11 .- Does the foreign investor have access to the same procedural remedies that has the local investor? Are there any special recourses for foreign investment? How do the courts function? Does the legal system is efficient and independent?
The foreign investor has access to local courts.
A) Law 16-95, on Foreign Investment, does not provide directly any special recourse. However, in negotiating our agreements there is a framework on Mutual Promotion and Protection of Investments. It sets apart from the local courts other alternatives, such as the CNUDMI (Comisión de las Naciones Unidas para el Derecho Mercantil Internacional) (United Nations Commission on International Trade Law) (UNCITRAL) and the additional mechanism of the CIADI (Centro Internacional de Arreglo de Diferencias Relativas a Inversiones) (International Centre for Settlement of Investment Disputes) (ICSID) for the solution of disputes between an investor and the Contracting State.
B) The Dominican Republic has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. (Arbitration)
C) From 1994 there have been made constitutional reforms to establish the Judiciary Power as a truly independent branch of Government; today the Dominican Republic enjoys a healthy and efficient Judiciary System.
12 .- What is the real rate of growth of the economy?
The Dominican Republic experienced the highest economic growth in the Latin American region in the period of 1996-2000. The average rate for the period was about 7.7%, and in the year 2002 the growth of the economy was around 4.3%, after recovering from the events in the international arena in 2001.
The Dominican economy as measured by the real Gross Domestic Product has maintained that level thanks to the dynamics of the sectors targeted to meet domestic demand, such as communications; manufacturing excluding local mills; trade; construction; transportation; among other economic sectors .
13 .- How much does it cost to do business in the Dominican Republic?
COST OF MAJOR FACTORS OF PRODUCTION IN THE DOMINICAN REPUBLIC, 2003.
Category: I. Wages:
1.1 .- Minimum Wage Private Sector. Cost in US$: 99.40.
1.2 .- Minimum Wage in Free Duty Zones. Cost in US$: 71.94.
Category: II .- Fuels:
2.1 .- Gasoline.
2.1.1 .- Premium Gasoline. Cost US$: 1.99/galon.
2.1.2 .- Regular Gasoline. Cost US$: 1.81/galon.
2.2 .- Gas Oil (Diesel).
2.2.1 .- Premium Diesel (Gas Oil). Cost US$: 1.47/galon.
2.2.2 .- Regular Diesel (Gas Oil). Cost US$: 1.37/galon.
2.3 .- Liquefied Petroleum Gas (LPG). Cost US$: 1.25/galon.
Category: III .- Water Service:
3.1 .- Water consumption by m3. Cost US$: 0.20/m3.
Category: IV .- Cost of Living of a Middle Class Family:
Cost in US$: 1.300-1.500 per month.
Category: V.- Electric Energy:
Cost in US$: 0.11/kwh. (Note: Energy prices reflect the subsidy provided for this service.)
Category: VI .- Telephone Services:
6.1 .- Residential Line. Cost in US$: 20.20/month.
6.2 .- Business Line. Cost in US$: 26.26/month.
6.3 .- International Calling. Cost in US$: 0.50-2.00/min.
6.4 .- Internet Service. Cost in US$: 27.27/month.
Category: VII .- Transportation:
7.1 .- Internal, Public . Cost in US$: 0.40 (round trip).
7.2 .- Internal, Private. Cost in US$: 3.50 (a destination).
Category: VIII.- Cost of Housing (rent):
Cost in US$: 1,100.00 to 3,000.00.
Category: IX.- Office Rent:
Cost in US$: 1,000.00.
Category: X.- Cost of Education:
10.1.- Basic Education. Cost in US$: 150.00-175.00/month.
Note: Prices calculated according to an average exchange rate of RD$49.50 x US$ 1.00. (November 2004).
(Translator's Note: The average exchange rate on October 20, 2007, is approximately RD$ 33.00 x US$ 1.00.)
14 .- What are the costs to be recognized as deductible for a company?
Considered expenses deductible from gross income:
Interest on debts and the costs that would be incurred in the establishment, renewal or cancellation, provided that these expenses are directly related to the business, maintenance and/or operation of taxable income-producing assets;
Taxes and fees that burden the assets that produce taxed income when these costs are necessary to obtain, maintain or preserve the taxed incomes and the surcharges have been paid. Except those taxes to be paid by the income tax, its surcharges, penalties and interest, the taxes, fees and rights incurred to build and preserve capital assets, except when they are calculated as part of the cost to be alienated of the property in question; also these taxes are added to the inheritance and donations;
Insurance premiums to cover risks on assets that produce benefits;
Extraordinary damages caused by accidents or force majeure or crimes of others, will be recognized as losses, which must be reduced by up to the limit for insurance or compensation perceived by the company;
They are also allowed deductions for the depreciation due to wear, depletion and seniority, as well as losses due to disuse, justifiable, of the property used in the operation of the business.
15 .- What are the exemptions contained in the Código Tributario (Tax Code) of the Dominican Republic, regarding to income?
The income that the Chamber of Commerce and Production receives;
The income received by religious institutions, when they are obtained by direct reasons of religion;
The revenues of the sports associations and their ownership of the buildings in which they operate their sports fields and facilities inherent to their purposes, provided that they do not pursue profit or exploit or authorize gambling;
The awards for accidents at work;
Amounts received by the beneficiary in compliance with life insurance contracts because of the death of the insured;
The compensation of notice and lay-off period paid in accordance with the provisions of the Código de Trabajo (Labor Code) and the law on the subject;
Dividends paid in shares from a capital company to its shareholders;
The annual incomes of natural persons or physical residents in the Dominican Republic to the amount of RD$120,000.00 Dominican pesos adjustable for inflation each year;
Interest earned by individuals in financial institutions regulated by the monetary authorities; as well as the Banco Nacional de la Vivienda (National Housing Bank) and the Savings and Loan Associations;
The gain obtained up to the sum of RD$ 500,000.00 Dominican pesos in the alienation of the house when the following conditions are met cumulatively: 1) That it has been owned by the alienator in the last three years prior to counting the time of alienation; that it has been their principal residence for the same period.
16 .- What is the maximum rate that applies to the income tax?
25%.
About Income Tax.
What are the different rates that apply to deductions at the source?
Lease or rental of any type of property: 20%.
Honorary commissions and others: 10%.
Payments made by the State and its dependencies: 1.5%.
Any other type of income that is not explicitly referred to: 10%.
Interest charged for the use of Credit Cards: 4%.
Interest paid or credited abroad: 15%.
17 .- What is the income of individuals? :
Scale for the year 2002:
Revenues up to RD$197,470.00. Fee: Exempted.
Revenues from RD$197,470.01 to RD$329118.00: Fee: 15% = RD$19,747.00.
Revenues from RD$329118.01 to RD$493676.00.
Fee: RD$19,747.00 plus 20% on the excess of RD$329,118.00.
Revenues from RD$493,676.01 onwards.
Fee: RD$52,660.01 plus 25% on the excess of that amount.
Note: This value is adjusted for inflation each year, based on the index of consumer prices from the Banco Central (Central Bank).
About Impuesto Sobre Tranferencias de Bienes Industrializados y Servicios (Tax Transfers of Industrialized Goods and Services) (ITBIS):
18 .- What is the rate of this tax?
16%
19 .- What are the goods and services that are exempted from this tax?
The products from the primary sector of agriculture, livestock, farm forest, hunting, fishing and mining to be transferred by the producer without any degree of processing or treatment, except for the essential treatment to preserve them in their natural state;
- Books and magazines;
-Educational materials for pre-college level;
-Supplies used by the printing industry;
-Fresh meat, chilled or frozen;
-Milk and dairy products, eggs, honey;
-Plants for sowing;
-Milling industry products;
-Coffee;
-Cereals, flour, grains worked;
-Fuels;
-Medicines;
-Livestock supplies;
-Fertilizers and their components.
Services exempted from the tax:
-Educational services, including cultural facilities: theater, ballet, opera, dance, folk groups, symphonic or chamber orchestra;
-Health services;
-Financial Services, excluding insurance;
-Services of pension plans and retirement;
-Services of ground transportation of people and cargo;
-Services of electricity, water and garbage collection;
-Services of housing rental; and
-Personal care services.
They are also exempted from ITBIS imports covered in the Régimen de Internación Temporal (Regime of Temporary Placement);
Imports of machinery and spare parts for them, raw materials and supplies and equipment and their spare parts, made by companies of the industrial Free Duty Zones for Export;
The final importation of samples and parcels exempted from paying import duties;
20 .- What are the deductions that are allowed in the ITBIS?
It may be deducted from the gross tax the amounts that have been made by this tax, within the same period that it has been advanced: to local suppliers for the purchase of goods and services burdened by the tax and customs, by the introduction in the country of the assets subject to this tax. When the total tax deduction is higher than the gross tax, the difference will be transferred to the following month periods.
Exporters reflecting tax credits advanced in their purchased supplies are entitled to seek repayment of loans within six months.
21 .- What are the fees for Impuesto Selectivo al Consumo (Selective Consumer Tax)?
The tax rates are: 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50% and 60%
A. What goods are exempted from this tax?
They are exempted from this tax the funeral cars, the pump cars, the ambulances and the heavy equipment for construction.
Translator’s Disclaimer: This translation is just intended for the purpose of giving general information about this legal document. It is not intended to be used in the courtrooms or in any legal matter.
CEI-RD (Centro de Exportación e Inversión de la República Dominicana) (Center for Export and Investment of the Dominican Republic).
Investors’ Frequently Asked Questions.
Investors Service Division.
November 2004.
1 .- What is the government's policy towards the private and public enterprises (national and foreign)?
The Dominican government encourages private investment both domestic and foreign. The State has been transferring into private hands the majority of the State-owned enterprises for the purpose of ensuring fair competition and to eliminate monopolies.
Are foreigners treated differently, compared with nationals? No. Article 6 of Law 16-95 establishes the principle of national treatment for foreign investors.
2 .- Does your country have an agreement regarding double taxation and a bilateral investment agreement with my country?
The Dominican Republic signed a Convention for Avoidance of Double Taxation with Canada in the year 1976, and we are currently under negotiation with the following countries: Chile, Trinidad and Tobago, Taiwan, Russia and Spain.
Bilateral Agreements for the Mutual Promotion and Protection of Investments, and Signed By the Dominican Republic.
Country / Regional Block: Spain.
Ratified by the National Congress: October 7, 1996.
Signed: March 16, 1995.
Comments: Approved September 9, 1996. In force.
Country / Regional Block: France.
Ratified by the National Congress: Adopted on June 3, 2000.
Signed: January 14, 1999.
Comments: Accepted by the National Congress. Resolution No. 177-02 of October 30, 2002.
Country / Regional Block: Republic of China (Taiwan).
Ratified by the National Congress: Message No. 4209 of March 30, 1999.
Signed: November 5, 1999.
Comments: Approved by Resolution No. 193-01 on November 27, 2001. In force.
Country / Regional Block: Chile.
Ratified by the National Congress: Approved on May 8, 2002.
Signed: November 28, 2000.
Comments: Approved by Resolution No. 63-02. In force.
Country / Regional Block: Ecuador.
Ratified by the National Congress: Message No. 7122 of June 21, 1999.
Signed: June 26, 1998.
Comments: In force.
Country / Regional Block: Cuba.
Ratified by the National Congress: Approved on January 9, 2001 by the Senate and rejected by the Chamber of Deputies on August 15, 2002.
Signed: November 15, 1999.
Comments: It is not in force.
Country / Regional Block: CARICOM (through the Free Trade Agreement with the Caribbean Community consists of: Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, Saint Lucia, Saint Vincent and Grenadines, Suriname, and Trinidad and Tobago.)
Ratified by the National Congress: February 28, 2001.
Signed: August 22, 1998.
Comments: In force for all of the CARICOM countries, except Guyana and Suriname.
Country / Regional Block: Central MCCA (through Free Trade Agreement with the Central American Common Market (MCCA for its initials in Spanish), composed of the following countries: Costa Rica, El Salvador, Honduras, Guatemala and Nicaragua.)
Ratified by the National Congress: March, 2001.
Signed: April 16, 1998.
Comments: In force for all of the Central American countries.
Country / Regional Block: Argentina.
Ratified by the National Congress: Not available.
Signed: March 16, 2001.
Comments: In force.
Country / Regional Block: Finland.
Ratified by the National Congress: Not available.
Signed: November 27, 2001.
Comments: In the National Congress for ratification.
Country / Regional Block: Morocco.
Ratified by the National Congress: Not available.
Signed: May 23, 2002.
Comments: In the National Congress for ratification.
Country / Regional Block: United Kingdom of Great Britain and Northern Ireland.
Ratified by the National Congress: Not available.
Signed: July 11, 2002.
Comments: In the National Congress for ratification.
Country / Regional Block: Swiss Confederation.
Ratified by the National Congress: Not available.
Signed: January 27, 2004.
Comments: In the National Congress for ratification.
Country / Regional Block: Free Trade Agreement with the United States and Central America (DR-CAFTA).
Ratified by the National Congress: Not available.
Signed: August 5, 2004.
Comments: Pending ratification by the congresses of the signatory countries. (Translator's Note: In force today, October 20, 2007).
Under Negotiation: Colombia, Peru, Israel, Canada, Italy, Korea, Denmark, Norway, Sweden, Germany, Russian Federation, Czech Republic, Belgium, Austria, Venezuela, the Republic of Ukraine.
Agreement Negotiated definitely and pending of signature:
Kingdom of the Netherlands, dated October 11, 2002.
Trade Agreement of Partial Reach:
DR-Panama; it is in force at the moment.
3 .- What are the possible forms of corporate organizations?
In the Dominican Republic, the most widely used organizational form is the commercial joint stock company (compañía por acciones); this form of business organization can be called Compañía por Acciones (Stock Company) (C. A., or C. x A.), Compañía Anónima (Anonymous Company) (C.A.) or Sociedad Anónima (Anonymous Society) (S.A). It is the company of choice for carrying out acts of trade because of its limited liability.
By powers that the Law gives to it, the stock company is an entity that has its own legal personality, different from that of their partners. Therefore, it may be subject to exercise rights as well as duties, and like individuals it has a name, an address and a patrimony.
It is also possible to establish branches and subsidiaries of foreign companies in the country.
To open a branch, it is only needed to settle a home address in the Dominican Republic requesting that authorization to the Executive Power. The branch has no legal personality.
To establish a subsidiary with limited liability it is necessary to continue the process of establishing a company, which would require 7 partners, to pay its constitution taxes, to register a name, and to deposit the constituent documents in the Civil Registry and the corresponding Courts. The procedure costs about US$2,000.00 dollars.
4 .- Are there any special requirements or restrictions for a foreigner to acquire all the rights of ownership over his/her investment? Does he/she need to have a local partner?
Law 16-95, on Foreign Investment, gives investors and to the companies in which they take part, or which they are owners of, the same rights and duties that the laws give to Dominican domestic investors. It is not necessary to have a local partner, except for individual sectors such as Banking, Insurance and Air Transport, for which the laws require a Dominican shareholding of more than 50%.
5 .- Are there requirements for notification, registration, approval or authorization of foreign investment?
Any investor or foreign company, as soon as they have made their investment must register it with the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic (CEI-RD). For this purpose both individuals and corporations have to deposit the following documents:
A) Application for registration, specifying the name of the foreign investor, receiving local company, the amount of investment, RNC (Registro Nacional del Contribuyentes; National Registry of Taxpayers), sector of activity of the project, information on invested capital and the area where the investment has been made;
B) Proof of entry into the country of foreign currency or physical or tangible assets;
C) Documents establishing the commercial company or the authorization of the operation of branches by settling the home address.
6 .- How much complication are in the procedures? How long does they take?
This registration of the investment consists of a simplified procedure, where the investor deposits documents required by Law 16-95, on Foreign Investment, at the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD). After meeting these requirements it will immediately be issued to the applicant the Certificate of Registration of Foreign Direct Investment.
7 .- Is there a place where I can get help to fulfil these procedures?
There is the official help that the country gives to the investor; it can be gotten through the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD), established by Law 98-03 of June 17, 2003.
The Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD) has as its main purpose the promotion and encouragement of the Dominican exports and investment, for the purpose of boosting the country's competitive insertion in the international markets for goods and services. Besides promoting the country as a very good place for investment; it helps the investor in streamlining government procedures for the placement of investment, as well as information on legal aspects, corporate, tax and other practical guidance that an investor of any area of the economy may require. CEI-RD has as a priority to ensure the entry and permanence of investors, as well as to encourage reinvestment of profits from these investments.
8 .- Are there special incentives available for investment?
Yes, there are special laws as well as tax laws that devote special incentives for foreign investment, as our legal framework gives the foreign investor an equal treatment to that given to the national investor. Therefore, there are special rules that benefit certain types of investment.
Firms producing goods and services for export established as Free Duty Zones (Law 80-90 of January 15, 1990 and the implementing regulation No.366-97 of August 29, 1997) will benefit from a special regime of customs controls and tax incentives of up to 100%.
The excellent business opportunities offered by this Law are available both for the domestic investor as well as for foreign investor.
Special Border Area Development, and it comprises the following provinces: Pedernales, Independencia, Elías Piña, Dajabón, Montecristi, Santiago Rodriguez, and Bahoruco.
Any company that is installed within any of the provinces cited above enjoys the following incentives and exemptions:
They are exempt from 100% of the payment of all internal taxes.
Exemption of Tariffs on raw materials, equipment and machinery, or any other type of tax for 20 years.
They are given, in addition, 50% exemption in the payment of free transit and use of ports and airports.
The reduction of fifty per cent (50%) of any tax, fee or contribution to the current date or to be established in the future, while they will have the 20-year exemption period in force under this Law.
They are given a period of five (5) years to any company that is established for the enjoyment of the full term of the exemption period. At the end of five (5) years, new businesses that are established only enjoy that part of the exemption period that it is in effect, counted from the day after the expiration of the five (5) years.
Promotion of Tourism Development for the tourist zones or hubs of low development and new tourist zones or hubs in the provinces and localities of great potential.
1 .- Tourist Zone No.4, Jarabacoa and Constanza;
2 .- Tourist Zone IV, expanded: Barahona, Bahoruco, Independencia, and Pedernales;
3.- Tourist Zone V, expanded: Montecristi, Dajabón, Santiago Rodríguez, and Valverde;
4 .- Tourist Zone VIII, expanded, covers the provinces of San Cristóbal and the Municipality of Palenque; The province of Peravia and Azua de Compostela:
5 .- Tourist Zone comprising the municipalities of Nagua and Cabrera;
6 .- Tourist Zone of the Province of Samaná;
7 .- The Province of Hato Mayor and its municipalities; the province of El Seybo and its municipalities; the Province of San Pedro de Macorís and its municipalities; the Province of Espaillat and the municipalities of: Higüerito, José Contreras, Villa Trina, and Jamao al Norte; the Provinces of Sánchez Ramírez and Monseñor Nouel; the municipality of San José de Las Matas; the Province of Monte Plata; and Guiguí, La Vega.
INCENTIVES GIVEN:
Companies based in the country which are benefiting from the incentives and benefits of this Law are exempt in a 100% of the tax on the following items:
A) National and municipal taxes that are levied to use and issuing building permits, including acts of purchase of the land, provided that they are within the purpose of this Law;
B) The import taxes and other taxes, such as rates, fees, surcharges, including the Impuesto Sobre las Transferencias de Bienes Industrializados y Servicios (Tax to the Transfers of Industrialized Goods and Services) (ITBIS), which was implemented on the equipment, materials and furniture necessary for the first equipment and putting into operation of the tourist facility in question;
C) National and international financings are exempt from paying taxes; they will be subjected of neither the withholdings nor the interests that they may generate;
D) The natural or legal persons may deduct up to 20% of their annual profits, if they are investing in a project within the scope of this Law;
E) All machinery and equipment needed to achieve a high quality of the products are exempted (ovens, incubators, treatment plants and laboratories for production control, among others), at the time of establishment;
F) There will not be new taxes, fees, charges, etc., within the period of tax exemption;
G) The benefits and incentives under this Law are limited to projects whose construction will begin after this Law is enacted;
Exemption Period.
These projects, businesses or tourism enterprises will have an exemption period of 10 years from the date of completion of construction work and equipping of the project under these incentives. It gives a period not exceeding in any case three years to start steadily and uninterrupted operation of the project approved.
9 .- Is there a package available that contains the laws applicable to foreign investors, written in the language of international business?
At the Centro de Exportación e Inversión de la República Dominicana (Center for Export and Investment of the Dominican Republic) (CEI-RD), we have developed the Investor's Guide, in CD-Card version, which is a complete collection of all procedures to which the potential investor will be subjected to successfully place his/her investment in the country.
Call to become the main tool for the guidance of the investor, their legal counsel, Dominican missions abroad and the business sector in general, the Investor's Guide of CEI-RD takes into account virtually all aspects of the legal landscape of the Dominican Republic, covering both regimes of general application such as immigration, taxes and the labor sector, companies, intellectual property and real estate; also, the areas of specific interest as Free Duty Zones, telecommunications, tourism and energy, with the inclusion of relevant laws and copies of the forms required in each case.
10 .- Are there conditions, restrictions or requirements regarding the use of foreign personnel in the workplace?
The labor law in the Dominican Republic provides that at least 80% of the total number of workers must be Dominicans. This provision does not apply, however, to officials with managerial or executive positions in the company.
In the Dominican labor law there are no restrictions on nationality to work in the country. For its part, Article 8, Section 12, of the Constitution establishes freedom of work.
11 .- Does the foreign investor have access to the same procedural remedies that has the local investor? Are there any special recourses for foreign investment? How do the courts function? Does the legal system is efficient and independent?
The foreign investor has access to local courts.
A) Law 16-95, on Foreign Investment, does not provide directly any special recourse. However, in negotiating our agreements there is a framework on Mutual Promotion and Protection of Investments. It sets apart from the local courts other alternatives, such as the CNUDMI (Comisión de las Naciones Unidas para el Derecho Mercantil Internacional) (United Nations Commission on International Trade Law) (UNCITRAL) and the additional mechanism of the CIADI (Centro Internacional de Arreglo de Diferencias Relativas a Inversiones) (International Centre for Settlement of Investment Disputes) (ICSID) for the solution of disputes between an investor and the Contracting State.
B) The Dominican Republic has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. (Arbitration)
C) From 1994 there have been made constitutional reforms to establish the Judiciary Power as a truly independent branch of Government; today the Dominican Republic enjoys a healthy and efficient Judiciary System.
12 .- What is the real rate of growth of the economy?
The Dominican Republic experienced the highest economic growth in the Latin American region in the period of 1996-2000. The average rate for the period was about 7.7%, and in the year 2002 the growth of the economy was around 4.3%, after recovering from the events in the international arena in 2001.
The Dominican economy as measured by the real Gross Domestic Product has maintained that level thanks to the dynamics of the sectors targeted to meet domestic demand, such as communications; manufacturing excluding local mills; trade; construction; transportation; among other economic sectors .
13 .- How much does it cost to do business in the Dominican Republic?
COST OF MAJOR FACTORS OF PRODUCTION IN THE DOMINICAN REPUBLIC, 2003.
Category: I. Wages:
1.1 .- Minimum Wage Private Sector. Cost in US$: 99.40.
1.2 .- Minimum Wage in Free Duty Zones. Cost in US$: 71.94.
Category: II .- Fuels:
2.1 .- Gasoline.
2.1.1 .- Premium Gasoline. Cost US$: 1.99/galon.
2.1.2 .- Regular Gasoline. Cost US$: 1.81/galon.
2.2 .- Gas Oil (Diesel).
2.2.1 .- Premium Diesel (Gas Oil). Cost US$: 1.47/galon.
2.2.2 .- Regular Diesel (Gas Oil). Cost US$: 1.37/galon.
2.3 .- Liquefied Petroleum Gas (LPG). Cost US$: 1.25/galon.
Category: III .- Water Service:
3.1 .- Water consumption by m3. Cost US$: 0.20/m3.
Category: IV .- Cost of Living of a Middle Class Family:
Cost in US$: 1.300-1.500 per month.
Category: V.- Electric Energy:
Cost in US$: 0.11/kwh. (Note: Energy prices reflect the subsidy provided for this service.)
Category: VI .- Telephone Services:
6.1 .- Residential Line. Cost in US$: 20.20/month.
6.2 .- Business Line. Cost in US$: 26.26/month.
6.3 .- International Calling. Cost in US$: 0.50-2.00/min.
6.4 .- Internet Service. Cost in US$: 27.27/month.
Category: VII .- Transportation:
7.1 .- Internal, Public . Cost in US$: 0.40 (round trip).
7.2 .- Internal, Private. Cost in US$: 3.50 (a destination).
Category: VIII.- Cost of Housing (rent):
Cost in US$: 1,100.00 to 3,000.00.
Category: IX.- Office Rent:
Cost in US$: 1,000.00.
Category: X.- Cost of Education:
10.1.- Basic Education. Cost in US$: 150.00-175.00/month.
Note: Prices calculated according to an average exchange rate of RD$49.50 x US$ 1.00. (November 2004).
(Translator's Note: The average exchange rate on October 20, 2007, is approximately RD$ 33.00 x US$ 1.00.)
14 .- What are the costs to be recognized as deductible for a company?
Considered expenses deductible from gross income:
Interest on debts and the costs that would be incurred in the establishment, renewal or cancellation, provided that these expenses are directly related to the business, maintenance and/or operation of taxable income-producing assets;
Taxes and fees that burden the assets that produce taxed income when these costs are necessary to obtain, maintain or preserve the taxed incomes and the surcharges have been paid. Except those taxes to be paid by the income tax, its surcharges, penalties and interest, the taxes, fees and rights incurred to build and preserve capital assets, except when they are calculated as part of the cost to be alienated of the property in question; also these taxes are added to the inheritance and donations;
Insurance premiums to cover risks on assets that produce benefits;
Extraordinary damages caused by accidents or force majeure or crimes of others, will be recognized as losses, which must be reduced by up to the limit for insurance or compensation perceived by the company;
They are also allowed deductions for the depreciation due to wear, depletion and seniority, as well as losses due to disuse, justifiable, of the property used in the operation of the business.
15 .- What are the exemptions contained in the Código Tributario (Tax Code) of the Dominican Republic, regarding to income?
The income that the Chamber of Commerce and Production receives;
The income received by religious institutions, when they are obtained by direct reasons of religion;
The revenues of the sports associations and their ownership of the buildings in which they operate their sports fields and facilities inherent to their purposes, provided that they do not pursue profit or exploit or authorize gambling;
The awards for accidents at work;
Amounts received by the beneficiary in compliance with life insurance contracts because of the death of the insured;
The compensation of notice and lay-off period paid in accordance with the provisions of the Código de Trabajo (Labor Code) and the law on the subject;
Dividends paid in shares from a capital company to its shareholders;
The annual incomes of natural persons or physical residents in the Dominican Republic to the amount of RD$120,000.00 Dominican pesos adjustable for inflation each year;
Interest earned by individuals in financial institutions regulated by the monetary authorities; as well as the Banco Nacional de la Vivienda (National Housing Bank) and the Savings and Loan Associations;
The gain obtained up to the sum of RD$ 500,000.00 Dominican pesos in the alienation of the house when the following conditions are met cumulatively: 1) That it has been owned by the alienator in the last three years prior to counting the time of alienation; that it has been their principal residence for the same period.
16 .- What is the maximum rate that applies to the income tax?
25%.
About Income Tax.
What are the different rates that apply to deductions at the source?
Lease or rental of any type of property: 20%.
Honorary commissions and others: 10%.
Payments made by the State and its dependencies: 1.5%.
Any other type of income that is not explicitly referred to: 10%.
Interest charged for the use of Credit Cards: 4%.
Interest paid or credited abroad: 15%.
17 .- What is the income of individuals? :
Scale for the year 2002:
Revenues up to RD$197,470.00. Fee: Exempted.
Revenues from RD$197,470.01 to RD$329118.00: Fee: 15% = RD$19,747.00.
Revenues from RD$329118.01 to RD$493676.00.
Fee: RD$19,747.00 plus 20% on the excess of RD$329,118.00.
Revenues from RD$493,676.01 onwards.
Fee: RD$52,660.01 plus 25% on the excess of that amount.
Note: This value is adjusted for inflation each year, based on the index of consumer prices from the Banco Central (Central Bank).
About Impuesto Sobre Tranferencias de Bienes Industrializados y Servicios (Tax Transfers of Industrialized Goods and Services) (ITBIS):
18 .- What is the rate of this tax?
16%
19 .- What are the goods and services that are exempted from this tax?
The products from the primary sector of agriculture, livestock, farm forest, hunting, fishing and mining to be transferred by the producer without any degree of processing or treatment, except for the essential treatment to preserve them in their natural state;
- Books and magazines;
-Educational materials for pre-college level;
-Supplies used by the printing industry;
-Fresh meat, chilled or frozen;
-Milk and dairy products, eggs, honey;
-Plants for sowing;
-Milling industry products;
-Coffee;
-Cereals, flour, grains worked;
-Fuels;
-Medicines;
-Livestock supplies;
-Fertilizers and their components.
Services exempted from the tax:
-Educational services, including cultural facilities: theater, ballet, opera, dance, folk groups, symphonic or chamber orchestra;
-Health services;
-Financial Services, excluding insurance;
-Services of pension plans and retirement;
-Services of ground transportation of people and cargo;
-Services of electricity, water and garbage collection;
-Services of housing rental; and
-Personal care services.
They are also exempted from ITBIS imports covered in the Régimen de Internación Temporal (Regime of Temporary Placement);
Imports of machinery and spare parts for them, raw materials and supplies and equipment and their spare parts, made by companies of the industrial Free Duty Zones for Export;
The final importation of samples and parcels exempted from paying import duties;
20 .- What are the deductions that are allowed in the ITBIS?
It may be deducted from the gross tax the amounts that have been made by this tax, within the same period that it has been advanced: to local suppliers for the purchase of goods and services burdened by the tax and customs, by the introduction in the country of the assets subject to this tax. When the total tax deduction is higher than the gross tax, the difference will be transferred to the following month periods.
Exporters reflecting tax credits advanced in their purchased supplies are entitled to seek repayment of loans within six months.
21 .- What are the fees for Impuesto Selectivo al Consumo (Selective Consumer Tax)?
The tax rates are: 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50% and 60%
A. What goods are exempted from this tax?
They are exempted from this tax the funeral cars, the pump cars, the ambulances and the heavy equipment for construction.
Translator’s Disclaimer: This translation is just intended for the purpose of giving general information about this legal document. It is not intended to be used in the courtrooms or in any legal matter.
Monday, October 22, 2007
LEGISLATION IN THE FIELD OF TOURISM
Source: http://www.asiex.org.do/pais/tur_legislacion.htm
Dominican Republic.
Legislation in the Field of Tourism.
The growth and development of tourism in the Dominican Republic can not be attributed only to the beauty of its landscapes, or the construction of the infrastructure necessary for development. It was imperative to give the industry a number of incentives contained in legislation that would ensure its rapid growth. Law 153 of 1971 on Promotion and Incentive to Tourism Development can be viewed as a cornerstone in the development of this sector.
At the present time it remains part of this legislation, but since the enactment of the Código Tributario (Tax Code) very important aspects of it were annulled.
It is good to note that this Law has fulfilled its mission in this process, and that the tourism sector has achieved a level of maturity required to continue its development and to maintain its competitiveness, without it.
The laws of tourism incentive prior to the entry into force of the Tax Code.
Law 153 of 1971 on the Promotion and Incentive of Tourism Development.
This Law laid the final groundwork for the development of tourism in the Dominican Republic. With it, and as embodied in Article 1, it was sought an accelerated process and streamlined the development of all factors that affect the tourism industry.
Within these factors it was provided a list, but not limited to, projects with profit potential, including hotels, motels, condominiums, apart-hotels, areas of free duty zones and sports clubs, among others. But Article 4 provided that this law did not benefit simple operations of buying and selling of land in tourist areas.
Tax incentives being given by Law 153 of 1971 for 10 years for natural persons or legal entities located in the country to invest in this sector, either through capital investments in domestic and / or foreign capital registered in accordance with Law 251 of 1964, as amended, or with loans in local currency or registered currencies were:
The exemption of 100% from income tax; from Law 71 of 1986 it was provided that the investment or reinvestment of profits or income could not exceed annually by such incentives 50% of its net taxable income. This provision was further amended by Regulation 407, 1988;
The tax exemptions on construction, the constitution of commercial companies or capital increases, national and municipal taxes on patents and public events;
The 100% exemption from taxes and import rights and other related taxes, including customs taxes, consolidated taxes and domestic consumption taxes on articles not available in quality and competitive prices, of domestic manufacture.
They also gave other incentives such as the possibility of receiving funding, ensuring repatriation of foreign exchange for repayment of principal and interests and security of a supply of foreign exchange for imports, among others.
To qualify for these benefits there were requirements like the presentation of a preliminary architectural and engineering project, economic feasibility studies, municipal and Urban Planning permits.
The implementation of this Law was in charge of the Directorio de Desarrollo Turístico (Board of Tourist Development), and the control and monitoring was done by the Dirección General de Turismo (General Directorate for Tourism), currently the Secretaría de Estado de Turismo (State Secretariat for Tourism). For the implementation of the Law it was promulgated the Regulation 1889 in 1980.
This Law was annulled with the coming into force of Law 11-92, which approved the Tax Code, specifically its Article 401. However, Article 394 remained in force for a certain period, exemptions to projects that have already been approved by the Directorio de Desarrollo Turístico (Board of Tourist Development), prohibiting the granting of new exemptions, except those which might be agreed to in contracts with the State approved by the National Congress.
The existing legislation.
Law 84 of 1979, which created the Secretaría de Estado de Turismo (State Secretariat for Tourism).
For a long time there was not a uniform approach on which institution should exercise governmental functions in the area of tourism. Hence, this activity often changed its affiliation within the official organizational chart. It was part of, among others, the Secretaría de Estado de Industria y Comercio (State Secretariat for Industry and Trade), the Secretaría de Estado de Economía Nacional (State Secretariat for National Economy), and the Gobernación Civil de Santo Domingo (Civil Governorship for Santo Domingo).
In 1969, under Law 541, it was established the Dirección Nacional de Turismo (National Directorate for Tourism), as an agency under the Executive Power. Among its duties, it was assigned to promote tourism, to monitor tourist services, to control the operation of travel and tourism agencies, to promote the official advertising, and to encourage the organization of the tourism sector.
The management and implementation of the tourism policy is based permanently from Law 84 of 1979, which created the Secretaría de Estado de Turismo (State Secretariat for Tourism), and amends to the necessary extent Law 541 of 1969. Among the priority functions of the Secretariat, we have:
To plan, schedule, organize, direct, promote, coordinate and assess tourism activities in the country, according to the goals and objectives of the national policy to be determined by the Executive Power;
To schedule and to promote the tourism industry and State and private investment in the sector;
To identify and to monitor tourist zones;
To guide the design and construction of infrastructure in the industry;
To launch promotional campaigns;
To control the tourism operators;
To create, with the approval of the Executive Power, national and international offices.
Similarly, the Law establishes the Corporación de Fomento de la Industria Turística y Desarrollo Turístico (Promotion Corporation for the Tourism Industry and Tourism Development) as an agency attached to the Secretaría de Estado de Turismo (State Secretariat for Tourism), which was established by Law 542 of 1969, which has as priority objective to coordinate the national activity for the development of the hotel business and tourism promotion in the country, promoting the acquisition, construction, financing, improvement, and maintenance of the hotel and tourism enterprises in general.
Another law that supports the institutional role of the State in the tourism sector is Law 121 of 1966, which creates the Comisiones de Turismo (Committees on Tourism) at national and provincial levels. These committees have the ability to make recommendations for construction of tourism infrastructure, and may intervene in the price range of tourist services.
Decrees on Tourist Zones or Tourist Hubs.
Since the beginning of an active national policy in the fields of tourism, it came up the need to establish what were the zones or hubs whose attractions made them eligible for developing viable tourism projects, and that they could also produce positive effects on the economies of these zones or hubs.
In the “Estudio para el Desarrollo Turístico de la República Dominicana” ("Study for the Tourism Development of the Dominican Republic") conducted in the year of 1967, it indicated for the first time the importance of establishing priority zones or tourist hubs in the country.
At the present time, the areas regarded as priorities for the development of tourism, described as "Tourist Zones" or “Tourist Hubs” are:
The expanded tourist zone of the Southern Region (Decree 322 in 1991) which covers the provinces of Barahona, Pedernales and Independencia, including Lago Enriquillo (Lake Enriquillo);
The Caribbean Coast tourist zone, which runs from Santo Domingo to La Romana;
The tourist hub of Puerto Plata, or the Amber Coast (Decree 2125 in 1972);
The tourist hub of the Northwestern Region (Decree 16 in 1993), which covers the provinces of Montecristi, Dajabón, Santiago Rodríguez and Valverde, except Montecristi National Park;
Macao-Bávaro (Decree 1256 in 1986);
Constanza and Jarabacoa (Decree 2729 in 1977);
Tourist zone of the Peninsula of Samaná;
Tourist zone of the province of Peravia (Decree 177 in 1995).
For the development of the Tourist Zones the State can perform the following actions:
To create infrastructure;
To provide incentives;
To declare as public utility the private real estate property located inside future project areas;
To get loans and funds from international financial institutions;
To lease or to sell State land;
To authorize the diversion of streets and to interrupt traffic;
To avoid speculative manoeuvers on the land in the zone.
Legislation on Gambling and Casinos.
Law 351 of 1964 considers that one way to contribute to the promotion of tourism and the influx of funds with which the State can finance the development of this sector is through the licensing process for the installation of gaming halls or casinos.
This law, amended several times, set out in its articles the following aspects:
The procedures and requirements for licensing;
The tax rules relating to casinos; according to Law 405, 1969, which amends Law 351, 1964, in this article, this activity is burdened with a flat tax of 20% on the annual profit that the casinos obtain;
It was commissioned to Secretaría de Estado de Turismo (State Secretariat for Tourism) to supervise these places.
The ability of casino gambling was expanded at the request of the private sector, allowing the use of slot machines on the condition that this game was banned for Dominicans (Law 96 of 1988). Its norms were laid down by Regulation 252, 1989.
This legislation, which regulates the activity of casinos and gambling, is completed with the following regulations:
Decree 3326 in 1978 states that the bets placed in casinos must be done and settled in U.S. dollars;
The eighth decision of the Junta Monetaria (Monetary Board), on February 19, 1987, requires casinos to redeem, at the Banco Central (Central Bank), the result of receipts for bets made in U.S. dollars;
Article 169 of the new Labor Code does not apply to such casinos as provided for in Articles 166 and 167 on closing during local holidays on the grounds of religion.
The Tax Code (Código Tributario).
As we have already pointed out, Article 401 of the Tax Code annulled Law 153 of 1971 on the Promotion and Incentive for the Tourism Development. Similarly, Article 394 established a transitional mechanism for the projects that were already being benefited by that law.
But the same article acknowledges the possibility that in the field of tourism, agro-industry, forestry and energy, through contracts with the Executive Power authorized by Congress, it can be granted exemptions on income earned from the proper exploitation of the activity or business, by the time and under the conditions deemed appropriate for the country's development. What it is noted in Article 394 of the Tax Code is part of the provisions of Article 110 of the Constitution of the Dominican Republic, as well as the powers it gives to the Chief Executive of the Nation, in paragraph 10 of Article 55 .
Legislation in the Field of Foreign Investment.
On November 20, 1995, it was adopted in the Dominican Republic the Law 16-95 on Foreign Investment, which annuls and replaces Law 861 of 1978. This Law substantially amends the regime of foreign direct investment made in the country, and seeks to place as far as possible to both domestic and foreign investors on an equal level in accordance with current trends in modernization and liberalization.
Law 16-95 provides for the right to repatriate the freely convertible foreign currency, after the payment of income tax and without prior authorization:
The entire investment, including capital gains;
All of the dividends declared during each tax year; and
The amounts needed to pay the duties, fees, or royalties arising from technology transfer contracts or technical services.
To benefit from the rights conferred by Law 16-95 it is necessary to register the investment in the Banco Central de la República Dominicana (Central Bank of the Dominican Republic). However, it is a very simple procedure that does not require prior approval.
Law 16-95 allows the registration of virtually all types of investments. In addition to the contributions in freely convertible currency, this investment may consist of:
Contributions in species, such as machinery, plant, equipment, spare parts, parts, among others;
Intangible technological contributions or resources from technology, such as trademarks, technical assistance, franchise and others;
Financial instruments issued abroad in accordance with the regulations for this purpose dictated by the Junta Monetaria del Banco Central (Monetary Board of the Central Bank).
Law 16-95 introduced another significant change regarding the destination of the investment, because it establishes that it can be done, not only in Dominican companies, but also in branches of foreign companies and in financial instruments issued by local companies. Also, it allows the registration of foreign investment in areas previously prohibited or restricted in accordance with the conditions and limitations established by the laws that regulate the related sector. The only activities in which foreign investment remains prohibited are:
Provisions and rights of toxic, hazardous and radioactive waste not produced in the country;
Activities that affect the balance of the environment or public health; and
Production of materials and equipment related to national defence and security, except where expressly authorized.
Translator’s Disclaimer: This translation is just intended for the purpose of giving general information about this legal document. It is not intended to be used in the courtrooms or in any legal matter.
Freddy Miranda
www.freddymiranda.com
Translated by Orlando Alcántara
Dominican Republic.
Legislation in the Field of Tourism.
The growth and development of tourism in the Dominican Republic can not be attributed only to the beauty of its landscapes, or the construction of the infrastructure necessary for development. It was imperative to give the industry a number of incentives contained in legislation that would ensure its rapid growth. Law 153 of 1971 on Promotion and Incentive to Tourism Development can be viewed as a cornerstone in the development of this sector.
At the present time it remains part of this legislation, but since the enactment of the Código Tributario (Tax Code) very important aspects of it were annulled.
It is good to note that this Law has fulfilled its mission in this process, and that the tourism sector has achieved a level of maturity required to continue its development and to maintain its competitiveness, without it.
The laws of tourism incentive prior to the entry into force of the Tax Code.
Law 153 of 1971 on the Promotion and Incentive of Tourism Development.
This Law laid the final groundwork for the development of tourism in the Dominican Republic. With it, and as embodied in Article 1, it was sought an accelerated process and streamlined the development of all factors that affect the tourism industry.
Within these factors it was provided a list, but not limited to, projects with profit potential, including hotels, motels, condominiums, apart-hotels, areas of free duty zones and sports clubs, among others. But Article 4 provided that this law did not benefit simple operations of buying and selling of land in tourist areas.
Tax incentives being given by Law 153 of 1971 for 10 years for natural persons or legal entities located in the country to invest in this sector, either through capital investments in domestic and / or foreign capital registered in accordance with Law 251 of 1964, as amended, or with loans in local currency or registered currencies were:
The exemption of 100% from income tax; from Law 71 of 1986 it was provided that the investment or reinvestment of profits or income could not exceed annually by such incentives 50% of its net taxable income. This provision was further amended by Regulation 407, 1988;
The tax exemptions on construction, the constitution of commercial companies or capital increases, national and municipal taxes on patents and public events;
The 100% exemption from taxes and import rights and other related taxes, including customs taxes, consolidated taxes and domestic consumption taxes on articles not available in quality and competitive prices, of domestic manufacture.
They also gave other incentives such as the possibility of receiving funding, ensuring repatriation of foreign exchange for repayment of principal and interests and security of a supply of foreign exchange for imports, among others.
To qualify for these benefits there were requirements like the presentation of a preliminary architectural and engineering project, economic feasibility studies, municipal and Urban Planning permits.
The implementation of this Law was in charge of the Directorio de Desarrollo Turístico (Board of Tourist Development), and the control and monitoring was done by the Dirección General de Turismo (General Directorate for Tourism), currently the Secretaría de Estado de Turismo (State Secretariat for Tourism). For the implementation of the Law it was promulgated the Regulation 1889 in 1980.
This Law was annulled with the coming into force of Law 11-92, which approved the Tax Code, specifically its Article 401. However, Article 394 remained in force for a certain period, exemptions to projects that have already been approved by the Directorio de Desarrollo Turístico (Board of Tourist Development), prohibiting the granting of new exemptions, except those which might be agreed to in contracts with the State approved by the National Congress.
The existing legislation.
Law 84 of 1979, which created the Secretaría de Estado de Turismo (State Secretariat for Tourism).
For a long time there was not a uniform approach on which institution should exercise governmental functions in the area of tourism. Hence, this activity often changed its affiliation within the official organizational chart. It was part of, among others, the Secretaría de Estado de Industria y Comercio (State Secretariat for Industry and Trade), the Secretaría de Estado de Economía Nacional (State Secretariat for National Economy), and the Gobernación Civil de Santo Domingo (Civil Governorship for Santo Domingo).
In 1969, under Law 541, it was established the Dirección Nacional de Turismo (National Directorate for Tourism), as an agency under the Executive Power. Among its duties, it was assigned to promote tourism, to monitor tourist services, to control the operation of travel and tourism agencies, to promote the official advertising, and to encourage the organization of the tourism sector.
The management and implementation of the tourism policy is based permanently from Law 84 of 1979, which created the Secretaría de Estado de Turismo (State Secretariat for Tourism), and amends to the necessary extent Law 541 of 1969. Among the priority functions of the Secretariat, we have:
To plan, schedule, organize, direct, promote, coordinate and assess tourism activities in the country, according to the goals and objectives of the national policy to be determined by the Executive Power;
To schedule and to promote the tourism industry and State and private investment in the sector;
To identify and to monitor tourist zones;
To guide the design and construction of infrastructure in the industry;
To launch promotional campaigns;
To control the tourism operators;
To create, with the approval of the Executive Power, national and international offices.
Similarly, the Law establishes the Corporación de Fomento de la Industria Turística y Desarrollo Turístico (Promotion Corporation for the Tourism Industry and Tourism Development) as an agency attached to the Secretaría de Estado de Turismo (State Secretariat for Tourism), which was established by Law 542 of 1969, which has as priority objective to coordinate the national activity for the development of the hotel business and tourism promotion in the country, promoting the acquisition, construction, financing, improvement, and maintenance of the hotel and tourism enterprises in general.
Another law that supports the institutional role of the State in the tourism sector is Law 121 of 1966, which creates the Comisiones de Turismo (Committees on Tourism) at national and provincial levels. These committees have the ability to make recommendations for construction of tourism infrastructure, and may intervene in the price range of tourist services.
Decrees on Tourist Zones or Tourist Hubs.
Since the beginning of an active national policy in the fields of tourism, it came up the need to establish what were the zones or hubs whose attractions made them eligible for developing viable tourism projects, and that they could also produce positive effects on the economies of these zones or hubs.
In the “Estudio para el Desarrollo Turístico de la República Dominicana” ("Study for the Tourism Development of the Dominican Republic") conducted in the year of 1967, it indicated for the first time the importance of establishing priority zones or tourist hubs in the country.
At the present time, the areas regarded as priorities for the development of tourism, described as "Tourist Zones" or “Tourist Hubs” are:
The expanded tourist zone of the Southern Region (Decree 322 in 1991) which covers the provinces of Barahona, Pedernales and Independencia, including Lago Enriquillo (Lake Enriquillo);
The Caribbean Coast tourist zone, which runs from Santo Domingo to La Romana;
The tourist hub of Puerto Plata, or the Amber Coast (Decree 2125 in 1972);
The tourist hub of the Northwestern Region (Decree 16 in 1993), which covers the provinces of Montecristi, Dajabón, Santiago Rodríguez and Valverde, except Montecristi National Park;
Macao-Bávaro (Decree 1256 in 1986);
Constanza and Jarabacoa (Decree 2729 in 1977);
Tourist zone of the Peninsula of Samaná;
Tourist zone of the province of Peravia (Decree 177 in 1995).
For the development of the Tourist Zones the State can perform the following actions:
To create infrastructure;
To provide incentives;
To declare as public utility the private real estate property located inside future project areas;
To get loans and funds from international financial institutions;
To lease or to sell State land;
To authorize the diversion of streets and to interrupt traffic;
To avoid speculative manoeuvers on the land in the zone.
Legislation on Gambling and Casinos.
Law 351 of 1964 considers that one way to contribute to the promotion of tourism and the influx of funds with which the State can finance the development of this sector is through the licensing process for the installation of gaming halls or casinos.
This law, amended several times, set out in its articles the following aspects:
The procedures and requirements for licensing;
The tax rules relating to casinos; according to Law 405, 1969, which amends Law 351, 1964, in this article, this activity is burdened with a flat tax of 20% on the annual profit that the casinos obtain;
It was commissioned to Secretaría de Estado de Turismo (State Secretariat for Tourism) to supervise these places.
The ability of casino gambling was expanded at the request of the private sector, allowing the use of slot machines on the condition that this game was banned for Dominicans (Law 96 of 1988). Its norms were laid down by Regulation 252, 1989.
This legislation, which regulates the activity of casinos and gambling, is completed with the following regulations:
Decree 3326 in 1978 states that the bets placed in casinos must be done and settled in U.S. dollars;
The eighth decision of the Junta Monetaria (Monetary Board), on February 19, 1987, requires casinos to redeem, at the Banco Central (Central Bank), the result of receipts for bets made in U.S. dollars;
Article 169 of the new Labor Code does not apply to such casinos as provided for in Articles 166 and 167 on closing during local holidays on the grounds of religion.
The Tax Code (Código Tributario).
As we have already pointed out, Article 401 of the Tax Code annulled Law 153 of 1971 on the Promotion and Incentive for the Tourism Development. Similarly, Article 394 established a transitional mechanism for the projects that were already being benefited by that law.
But the same article acknowledges the possibility that in the field of tourism, agro-industry, forestry and energy, through contracts with the Executive Power authorized by Congress, it can be granted exemptions on income earned from the proper exploitation of the activity or business, by the time and under the conditions deemed appropriate for the country's development. What it is noted in Article 394 of the Tax Code is part of the provisions of Article 110 of the Constitution of the Dominican Republic, as well as the powers it gives to the Chief Executive of the Nation, in paragraph 10 of Article 55 .
Legislation in the Field of Foreign Investment.
On November 20, 1995, it was adopted in the Dominican Republic the Law 16-95 on Foreign Investment, which annuls and replaces Law 861 of 1978. This Law substantially amends the regime of foreign direct investment made in the country, and seeks to place as far as possible to both domestic and foreign investors on an equal level in accordance with current trends in modernization and liberalization.
Law 16-95 provides for the right to repatriate the freely convertible foreign currency, after the payment of income tax and without prior authorization:
The entire investment, including capital gains;
All of the dividends declared during each tax year; and
The amounts needed to pay the duties, fees, or royalties arising from technology transfer contracts or technical services.
To benefit from the rights conferred by Law 16-95 it is necessary to register the investment in the Banco Central de la República Dominicana (Central Bank of the Dominican Republic). However, it is a very simple procedure that does not require prior approval.
Law 16-95 allows the registration of virtually all types of investments. In addition to the contributions in freely convertible currency, this investment may consist of:
Contributions in species, such as machinery, plant, equipment, spare parts, parts, among others;
Intangible technological contributions or resources from technology, such as trademarks, technical assistance, franchise and others;
Financial instruments issued abroad in accordance with the regulations for this purpose dictated by the Junta Monetaria del Banco Central (Monetary Board of the Central Bank).
Law 16-95 introduced another significant change regarding the destination of the investment, because it establishes that it can be done, not only in Dominican companies, but also in branches of foreign companies and in financial instruments issued by local companies. Also, it allows the registration of foreign investment in areas previously prohibited or restricted in accordance with the conditions and limitations established by the laws that regulate the related sector. The only activities in which foreign investment remains prohibited are:
Provisions and rights of toxic, hazardous and radioactive waste not produced in the country;
Activities that affect the balance of the environment or public health; and
Production of materials and equipment related to national defence and security, except where expressly authorized.
Translator’s Disclaimer: This translation is just intended for the purpose of giving general information about this legal document. It is not intended to be used in the courtrooms or in any legal matter.
Freddy Miranda
www.freddymiranda.com
Translated by Orlando Alcántara
Wednesday, September 26, 2007
MISCONCEPTIONS
MISCONCEPTIONS.
What role does experience play in the legal scope? We ask the question to call the attention on the fact that the legal dynamics are always changing. In our case, we work with the specialty in the area of investment in real estate properties with special concentration in the tourist sector. In this sphere, our laws have changed quite a lot from 1998. We have had five or six tax reforms and one law of incentives, as well as changes in the construction regulations. For that reason, we repeat the question: What role does experience play?
We understand that it is vital to have the knowledge that gives the studies of cases and the practical insight but, for us, most important in investment consultancy is the modern wonder of synergy. This capacity to unite efforts with financial consultants, accountants, surveyors and other lawyers is what truly allows us to concentrate the best ideas in guiding those people who wish to invest in our wonderful island. The concept of synergy is intimately related to the concept of proaction or proactivity. As well, opposed to proaction or proactivity, there is the concept of reaction or reactivity. Synergy implies that one plus one is equal to three. That is to say, the whole is greater than its parts when proactive forces are united after a well-defined common goal.
Within these ideas there are the organization of the properties or the protection through companies by shares, the opening of banking accounts in the Dominican Republic, and the signing and consultancy of document for the purchase of properties, such as promises of sale and transaction (buying and selling) contracts.
The object of this article is to sum up as much as we can the ideas which we consider that can help to define the business goals of the investors and their level of risk. What is the main or cardinal rule to be able to evaluate if some type of risk in the purchase of a property in the Dominican Republic exists? We are going to try to offer guidance on this law - or rather laws- through the aspects that we consider that are handled in an incorrect way even by some Dominican lawyers. This is what we call “misconceptions”. These are criteria that do not go hand in hand with the practical or legal reality.
In all the areas of life a series of criteria or principles exists for getting what we call good performance. In golf, for example, we must start off a series of foundations to manage to direct the ball to the objective. This is what we called directionality. This sense of the goal is what it really constitutes the matter of investment. If we want something, we must ask ourselves the right questions, and soon we will get the answers. In this sense, I try to reunite some laws or foundations of real estate investment for our reading investors; foundations that without a doubt will allow them to come to orient their goals and to make their investments with greater awareness of the surrounding risks. It is necessary to take into account that directionality is different from intentionality. For example, the intention can be to travel towards a city that is located towards the East, but if we go towards the West, we will never get to that city.
Misconceptions:
I. - I MUST BE DOMINICAN, LIVE IN THE COUNTRY OR CREATE A DOMINICAN CORPORATION TO BE ABLE TO BUY A PROPERTY IN THE DOMINICAN REPUBLIC.
We suggest you to review -for greater information on the options to get the Dominican residency as a foreign investor- the Decree 950-01, of September, 2001, and also the recent Law 171-07, of July, 2007, on Incentives for Pensioners and Revenue Earners of Foreign Source (this last document is published at http://freddymiranda.blogspot.com in English).
This is one of the most common mistakes of some foreign investors; to think that we do not have a legislation that regulates foreign investment. In our website, which can be visited at www.freddymiranda.com and our blog at http://freddymiranda.blogspot.com, we have summarized the principles that govern foreign investment. The main objective of this legislation, number 16-95, is to grant an equal treatment to foreigners. Consequently, a foreigner, physical or moral person, has the same rights granted to the Dominican citizens; among them, the right to acquire real estate properties.
This allows us to answer the question about the need of acquiring properties through Dominican companies. It is not mandatory for a foreigner to buy through Dominican companies. A known principle like the one about territoriality - according to which in order to acquire rights in a territory it is necessary to have some type of legal bond with that territory- is not applicable because -as we indicated- the law of foreign investment protects the real estate investment or of another type made by foreigners in the Dominican territory.
Which would be then the limitation? The only control to which the foreign investors are put under is to the registry of their investment when they have the intentions to repatriate their capitals. In the case of the investment in real estate properties, the property registries (Registries of Titles) keep a list of the foreign companies that acquire real estate property in the country. So that in most of the cases the investment as such is not registered. This explains on a great scale this misconception, its origin and its lack of understanding in some foreign countries; especially in the United States.
II. - THE OPTION TO PURCHASE.
The option is well-known as a promise of sale. It is a contract by means of which the developer or the seller is committed to sell real estate property or to give real estate property in agreement with blueprints, specifications and a special design in benefit of another party that is called the buyer, in this case the foreign investor.
With respect to this case, as we are going to explain ahead, a definitive purchase does not take place, or that one in which the sale price is given and the developer or seller, according to the case, gives a property. What it does take place is an obligation to give this real estate property in a certain time, and the buyer must pay a difference of the price at that time.
Generally, this contract modality takes control of a deposit that in our Law it is named as signal or earnest (“arras”), and must in principle establish obligations for both parties. It is what we recommend to the foreign investors; that is to say, to demand that the promise of sale is not only for the investor to buy the property, but for the seller or developer to sell or to give, according to the case (the houses in pre-construction will have to be constructed to be given) the promised or offered goods in the promise.
Being clarified this point and starting off to our recommendation to demand bilateral promises (those in that both parties must conduct the operation) it is left the question about this promise in this contract, if it constitutes a true business, which takes us to the following mistaken criterion.
III. - THE OPTION TO PURCHASE IS NOT A COMPLETE TRANSACTION AND, THEREFORE, IT DOES NOT HAVE A CLOSING.
This is a misconception that has been extended by the practice stimulated by some lawyers who include restrictive clauses (“restricted covenants”) in the writing of the options in the contracts to the transfer of the property rights.
In the matter of already registered rights and finished goods, houses, villas, or apartments this makes sense because everywhere in the world the buyer must pay the price of the sale to have absolute rights on the real estate property. However, as far as it deals with rights that are based on properties to be built, whose object is a blueprint, that is to say, the pre-construction market, can we come up with the same logic taking into account that the goods must be previously built? This is the story of the hen and the egg, or the egg and the hen. In first term, the buyer seems not to have a way out because he would not be a proprietor of the goods until he pays, but it is the case that to settle the sale price in principle there must be a real estate property that constitutes an object of a selling and buying operation. So that in our opinion the investor must firstly demand that the builder or developer has to commit himself/herself to finish the goods that are the object of the real estate property so that its acquisition can be delayed or the operation is closed at that moment.
This it is a complex subject, but our message related to this topic is simple. In our Law, the union of two people to decide the purchase of goods it is a true closing of the transaction in the sense that the buyer acquires a special right on those goods although he/she has not paid, at least in principle (there are exceptions like the clauses that exist to which we have previously called as “restricted covenants”), and therefore, the buyer can demand to the seller the completion of the goods or the delivery or execution sometimes of the definitive contract only with the signature of a promise of sale.
The ideal scenario is that your lawyer advises you on the content of the promise of transaction (buying and selling) being essential in order to write the following clauses in benefit of the investor: a) a final price without variation, especially in pre-construction; b) a delivery and date to sign the definitive contract, or at least a calendar of payment with dates of building; and c) in principle, the acceptance that the promise - if it is for both parties- will be subjected to what it is established in the Dominican Civil Code (Código Civil Dominicano).
IV. - OPTIONS AGAINST THE BREACH OF CONTRACT BY THE DEVELOPER.
Another one of the frequent questions and also a source of great confusions is the completion of the option contract of purchasing in the face of a breach of contract on the part of the builder or developer in the conditions of the promise of sale. This happens in a collapse of the project that prevents to finish or to build the goods object of the promise; that is to say, a villa, town home, or apartment.
Here we are before a classic case of possible scenarios: a) legal proceeding on a registered land; b) rescind the contract by mutual consent with the builder or developer; c) establishment of measures that prevent to the builder or developer to sell the land on which would be constructed the real estate property, villa, apartment, or house.
Let us begin with option (b) for being the easiest to explain. In an ideal system, it is recommended to proceed in revoking the transaction (buying and selling) contract, in order to get the return of the paid sums in advance and to negotiate a penalty by the resulting damage of the loss of possible banking interests suffered by you as an investor. However, the problem appears when the transaction (buying and selling) has been made with the sums paid in advance not as a payment of the price of transaction (buying and selling) but as “arras” or signal (“earnest deposit”). In this case and except for restrictions in the contract, the one who has received the signal or deposit as earnest will be forced to give back the double of the sums. This is one of the matters that are preferable to negotiate with the developers before the signature of the promise.
As far as options (a) and (c), we want to unite them for the aims to offer our ideas and recommendations. In the first place, the purpose is in both cases of trying to prevent the transfer of land or lot that would serve as the basis of the construction. In that case, when a legal proceeding is opened or a civil lawsuit begins, the first thing that we do, after beginning the lawsuit of course, it is to take an act before the Recorder of Titles (Registrador de Títulos) in order to restrain the possible sale of the real estate property and a fraud to the rights of the investors. This means that if we prevent the sale of the real estate property, we would be allowing that the buyer keeps his/her proportional rights on the real estate property; proportional because you have only paid (“earnest deposit”) a part of the price. This instalment does not mean that you can claim absolute rights on the real estate property, but to legally act against the development company, since you are deserving or has rights on all of the property to recover the part that you paid for or deposited for the sale of the real estate property.[1]
In summary, you have options to protect yourself from the breach of contract by the developer/seller in the promise of sale. The Dominican law has a very advanced system. However, keep in mind that the ideal is to avoid the legal processes, since the courts worldwide operate with slowness.
V. - TO INCORPORATE OR NOT TO INCORPORATE ABROAD OR IN THE DOMINICAN REPUBLIC.
We have covered elsewhere in our website the subject of the incorporation of companies (www.dr-realestateinvestment.com.do/dr_investor.html), and the fact that in our opinion they continue to be the best option in order to protect that money that so hard has been earned by you and that you try to invest in the Dominican Republic. So we will concentrate ourselves in the steps necessary to incorporate a company in our country first and abroad in a second term.
In our mission as lawyers, and in our vision as a law firm, the idea of being a little irreverent is assumed, trying to look for ways that although they have already been walked (we do not want to reinvent the wheel) are for a greater benefit to our clients; the game is a little like that of an anti-guru. In effect, in our country, we have found the recommendation of some lawyers and law firms -some of them with good prestige- that advise without no type of doubt as a first option the constitution of a Dominican company in order to buy real estate property. We feel aversion towards that advice due to the difficulty in constituting a company in the Dominican Republic.
The incorporation of a Dominican company requires by law the participation of at least seven (7) shareholders. These shareholders may not have an equal participation, being some of them practically “nomines” or “partners” who only participate in the company to complete the legal quorum. However, this supposes a tremendous degree of difficulty for you, foreign investor, who are buying your second home or who simply want to acquire goods to sell and do not want to be bound to other shareholders. In some cases, these companies already are constituted (“shelf companies”), but this supposes at least the transfer of stocks and change of the directors, which has to be registered in the Registry of Companies (Registro de Sociedades) by the Law of Mercantile Registry (Ley de Registro Mercantil), and the new shareholders must as well be registered in the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (“Internal Revenue Service” –IRS- in the United States). In synthesis, a true setback and an inconceivable obstacle for an investor mainly specialized in the area of real estate.
Once that this decision has been surpassed about submitting oneself to the joint control of other people whom have nothing to do with the purchase of one’s property, but that they would be used simply to fulfil the Dominican law, we are faced with the true bureaucratic proceeding that allows the incorporation of a company in the Dominican Republic.
The following steps have been baptized as a critical route for the incorporation of a company in the Dominican Republic:
1) Availability and Registry of Commercial Names. This is the preliminary registry, which allows to know if a chosen corporative name for constituting a company is free to be used. This proceeding, made with ease in almost all Central America and the Caribbean, takes at least three days.
2) Elaboration of the social articles of incorporation. Once we have the name available, a project of articles of incorporation is put under the consideration of the members. Like in the rest of the world, these articles of incorporation can be standardized, and they can be submitted according to the general practice. Nevertheless, in our country the partners sign it, as well as the list of subscribers or shareholders with their participation in the company; this is, the number of stocks that they will have in the company.
3) Payment of taxes on capital.
4) Elaboration, signature and registry of the certified declaration by the Notary Public. This is the document that serves to certify that the shareholders have the capital necessary to constitute the company.
5) Elaboration and signature of the Constituent Assembly.
6) Submitting of the documents in the Chamber of Commerce, “Law of Mercantile Registry”, or registry of companies.
7) Submitting of these documents at the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (Internal Revenue Service - IRS- in the United States).
It is easy to notice the difficulty for a foreign investor who has just a short time to analyze his/her investment, and to see the acquired property, to wait for this type of such a slow process. The only possibility of accelerating the process for a foreign investor is the acquisition of a “shelf” company or previously constituted company. However, in this case, it is necessary to register the changes of shareholders and of the proprietor and this also takes some time to be done; at least seven (7) working days.
Now we are going to compare the incorporation of a company abroad:
1. If the company has been previously founded, the change of shareholders and Board of Directors can be made in a day, and the delivery of the company from the foreign State takes other two or three days, which means that you can have your company in a maximum of seven (7) working days.
2. In case that the client decided to constitute a company with a name of his/her preference, the availability of the name can be had in a maximum of 24 hours, and the incorporation will follow the same process, and you, investor, can have your company in the same previous term, or perhaps in one more day, but always less than the time taken to incorporate a company in the Dominican Republic.
3. The steps to follow would be the following ones: a) To give an address for the Board of Directors and the company, although this can be facilitated by the lawyer; b) To determine the amount of participation of each shareholder in the company; that is to say, if it will be a company of a sole shareholder (100% of the stocks in the name of one person) or, in the case of spouses, if the stocks will be divided on a 50/50 basis between each one of them; c) Finally, it is enough with determining the person who will take the position of Director of the company or if a board or group of people is going to be in charge of the day-to-day working routine of the company. The Directors, for those ones who are not familiar with the handling of societies, are those physical people or companies represented by physical people that control the signature of documents, the payment of accounts and, in short, all the administrative aspects in a company. In our country the companies are controlled by several people. Abroad, especially in the tax havens, such as Belize, British Virgin Islands, Panama, Anguilla, etc., these companies can have up to a single Director for the handling of the corporative subjects in the case of you, investor interested in buying properties in the Dominican Republic, the signature of corresponding contracts, definitive option or as we previously explained.
Surely you will ask about the disadvantages to incorporate a foreign company to buy a real estate property in the Dominican Republic. In effect, two inconveniences or disadvantages exist that, in our opinion, are surmountable: a) the foreign companies require of an annual payment to maintain themselves in good order or “good standing”; and b) the company must be registered in the country for the aims to transfer the property and payment of the property tax.
a) Annual rate. The average annual rate, as well as the wages and expenses of the offices that maintain the registries of your company, oscillates between US$1,200 and US$1,500; these values can be reduced still more depending on factors that are not the object of this article. Nevertheless, if you compare the fact that in our country it is mandatory in our country for the Dominican companies to keep or to submit monthly declarations although they are not operating, to register the company in the social security, and other obligations, you will notice that you have to pay to an Authorized Public Accountant the wages for this work plus the payment of the annual declaration. Consequently, it is more advantageous in my opinion to defer this cost. Up to what moment? This takes us to the second of the disadvantages to incorporate a company in a tax haven.
b) The registry in the country. Your company must be re-addressed in the country to be able to fulfil the diverse tax commitments such as payment of taxes on the property and tax transfer. This proceeding represents for you, intelligent investor, an additional cost. So you will ask: So why to incur in this additional cost? The answer is that being the option to purchase the more frequent document, or the main contract to buy properties in development (pre-construction) it is not convenient to document or to make transparent its operation in the Dominican Republic. It is for this reason that we recommend to defer the moment from registry of your company. Once having an address in the country, your company is subject to formal duties with the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (“Internal Revenue Service” –IRS- in the United States). The formal duties mean reports that will have to make your company on its status; this is so if it is operating or making businesses in the country or not.
VI. - ANOTHER MISCONCEPTION: SIGNING OF DOCUMENTS ABROAD.
One of the most common practices in the modern world is the signing of documents anywhere in the planet to make them valid in a certain country. It is frequent nowadays to be sleeping whereas their buyers or sellers are abroad discussing and signing documents related to the purchase and sale of properties or products.
This world-wide practice has in the Dominican Republic an important limitation: our country is not a signatory State to the convention of apostilles; agreement that allows to the consulates or diverse offices to guarantee the signature of documents when these are signed abroad. This generates a tremendous confusion among most of the foreign investors. How do you proceed then?
Firstly, you will have to understand that -although in our country there is a law that protects the digital signature of documents- this legislation is not still so well recognized in practice. Consequently, you will have in principle to follow the tedious consular proceeding when you want to validate the signing of documents that will be executed or will be valid in the country. This is very important because if you, intelligent investor, have to take your case before the courts it is not convenient for you to have documents of purchase of your real estate property, apartment or house, that it is not properly certified and executed with the validity required by the Dominican laws. And which are those requirements of validity? Simply it is one, and it is that the document that serves as a prove is legally signed by the person against who you want to make it valid. This is what it is known as prove requirement. This means that your contract can be accepted, but if the signature of the seller (promotional agent or developer) in this case is under debate you will have a risk on your investment, because the operation could be rejected by the Dominican judicial system.
Secondly, and to follow with our recommendations, you must make sure to guarantee the signature of documents proceeding with their legalization, at least in principle by a Notary Public of your State or country of origin. Do not trust the apostille system of documents because not all the Dominican instances, offices or courts will accept them as valid. Once obtained this legalization, the most common accepted practice according to consular laws that control the consular and diplomatic offices abroad is the one to have the Dominican Consul to certify the signature of this Notary Public through the confirmation that has to be made by an office of your State in favor of this Notary Public authorizing him/her to sign valid documents, as a general rule the secretary of your county (County Clerk).
Finally, thirdly, if you were to proceed to the digital signature of documents you must make sure that the same ones (the companies of the developer and the buyer) are in encrypted documents or programs that do not allow their modification and can soon prove in the Dominican courts with ease the authenticity of those documents. This is so for the improbable case of a legal action against the seller or developer in the case of real estate in pre-construction.
VII. - THE PAYMENT OF TRANSFER AND PROPERTY TAXES.
We have already said that our country has experienced strong changes in the structure of taxes and the amounts to pay or taxable rates. Within those reforms, the most recent affects -but in a positive sense- the transfer tax of real estate property.
The transfer of property is a topic of confusion for certain investors, mainly those of an American origin. The source of this confusion is the poor quality of information received, and in addition, the fact that both systems of registry of the property differ.
The basic differences, continuing with the American market (probably the greatest investor in the matter of houses in pre-construction) are in the tax basis, that is, the amount to be calculated on the payment of taxes and in the system of registry.
Our system is not based on a chain of acquirers, but in a true registry and title issuance where it matters little who was the last acquirer. The registry has a list or information mainly on that which can affect the transfer, sales transfer or getting the certificate of the title.
The buyer has, then, to get a certificate of title that is issued through the Registry of Titles of the place where the real estate property is located. To such aims a definitive contract of transaction (selling and buying) with the value of transfer is due to be registered. This value is the one that creates the greatest confusions to the investor.
Our tax system offers in many cases a true advantage to the national or international investor. This is the one that -although it does not allow it specifically- admits that the value for the payment of the tax of transfer is the value registered by them (the investors), appraised by themselves (the investors) for the payment of the tax to the property, today so much changed and with so many names that we do not know how to really call it, but that in summary, It would be taxed on the Assets of appraised value the companies and Tax on the Real Estate Property (Impuesto a la Propiedad Inmobiliaria -IPI-) for the physical people.
This tax is paid on the basis of the value of appraisal of the real estate property that -as we said- represents certain type of advantage because it can be (and thus it happens in many cases) that the value of transaction of the real estate property is greater than the value of appraisal of the real estate property and as an investor you take the advantage of this reduction in the payment of taxes. The way of taking advantage of this advantage supposes experience and practical knowledge, so it is the reason why you are advised to contract the services of a good accountant or an experienced lawyer.
The tax to the property for the investors who follow our gold advice to protect their real estate properties through the incorporation of national or foreign commercial companies is called Tax on the Assets (Impuestos sobre los Activos), and it implies to maintain the company in order regarding to its accounting or financial registries, this is, expenses and income. The aid of an accountant to benefit from the few advantages that grant the tax laws and norms is essential in our opinion.
VIII. - MAINTENANCE OF COMPANIES.
We have insisted on synergy, proactivity and directionality, and in the coordination of two disciplines like the accountant and the lawyer so that you can leverage on the advantages (the very little advantages) that you could receive from the Dominican tax system. One of the reasons in our opinion that it is in the limits of stubbornness, is that -after the changes in the tax legislation- the commercial companies, which have not escaped to those changes, must be kept in good order and with their registries of accounting operations fit to the norms of the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (“Internal Revenue Service” –IRS- in the United States).
Why does this topic of the maintenance of companies create so much confusion? The reason is in the routine. In the past one got used to presenting the declarations of income tax of companies that were created to protect real estate property as companies without operations. This practice supposed that the company hid part of its real tax situation, such as income and expenses.
In the last change introduced to the system of tax payment to the property settled down that the companies reported without operations, this is without taxes to pay on the income (Impuesto Sobre la Renta (ISR) -Income Tax in the United States-) are forced to pay at least 1% on its assets like a minimum payment.
The direct consequence is that you must: a) make sure that your real estate property appears registered correctly in the accounting registries of your company; b) that in principle you can report the greatest amount of real expenses of the company, in special those that can be subject of the total tax deduction to be paid; and c) guarantee and indeed verify that the tax is paid on the real estate property so that it can benefit from the possible reduction of the income tax, or the revenue earned.
We recommend that you get legal advice, because we have not dealt with this subject here with all its depth, but –moreover- it is good that you, intelligent investor, get aware of what the laws have changed, and nowadays you will take advantage of, perhaps, we do not guarantee it, more of the order than of the lack of control in the registries of the necessary operations for the maintenance of your property. Do not be satisfied with a routine answer, and you will surely find routes to get the greatest benefit from your money and your main assets: the real estate property, your second home, or your investment.
In another article that will count with the collaboration of one of our partners, we will approach the topic of the Dominican residence for investors and the opening and handling of banking accounts.
LEGAL DISCLAIMER: The present document and its opinions do not constitute a definitive legal advice. The opinions that contain this article are based on the experience of the author, and the fact of wisely having made all the diligences necessary to obtain the legal data that it contains making sure that this information corresponds with the reality of the market and, by all means, comply with the laws. If you wish greater protection, we always advise you to contract the services of a lawyer, so that you may prefer our law firm or another legal adviser.
[1] Some conditions to establish a lawsuit about real estate properties when it deals of future developments are found in the new law of lands, but we don’t refer to them because they are not the object of this article.
What role does experience play in the legal scope? We ask the question to call the attention on the fact that the legal dynamics are always changing. In our case, we work with the specialty in the area of investment in real estate properties with special concentration in the tourist sector. In this sphere, our laws have changed quite a lot from 1998. We have had five or six tax reforms and one law of incentives, as well as changes in the construction regulations. For that reason, we repeat the question: What role does experience play?
We understand that it is vital to have the knowledge that gives the studies of cases and the practical insight but, for us, most important in investment consultancy is the modern wonder of synergy. This capacity to unite efforts with financial consultants, accountants, surveyors and other lawyers is what truly allows us to concentrate the best ideas in guiding those people who wish to invest in our wonderful island. The concept of synergy is intimately related to the concept of proaction or proactivity. As well, opposed to proaction or proactivity, there is the concept of reaction or reactivity. Synergy implies that one plus one is equal to three. That is to say, the whole is greater than its parts when proactive forces are united after a well-defined common goal.
Within these ideas there are the organization of the properties or the protection through companies by shares, the opening of banking accounts in the Dominican Republic, and the signing and consultancy of document for the purchase of properties, such as promises of sale and transaction (buying and selling) contracts.
The object of this article is to sum up as much as we can the ideas which we consider that can help to define the business goals of the investors and their level of risk. What is the main or cardinal rule to be able to evaluate if some type of risk in the purchase of a property in the Dominican Republic exists? We are going to try to offer guidance on this law - or rather laws- through the aspects that we consider that are handled in an incorrect way even by some Dominican lawyers. This is what we call “misconceptions”. These are criteria that do not go hand in hand with the practical or legal reality.
In all the areas of life a series of criteria or principles exists for getting what we call good performance. In golf, for example, we must start off a series of foundations to manage to direct the ball to the objective. This is what we called directionality. This sense of the goal is what it really constitutes the matter of investment. If we want something, we must ask ourselves the right questions, and soon we will get the answers. In this sense, I try to reunite some laws or foundations of real estate investment for our reading investors; foundations that without a doubt will allow them to come to orient their goals and to make their investments with greater awareness of the surrounding risks. It is necessary to take into account that directionality is different from intentionality. For example, the intention can be to travel towards a city that is located towards the East, but if we go towards the West, we will never get to that city.
Misconceptions:
I. - I MUST BE DOMINICAN, LIVE IN THE COUNTRY OR CREATE A DOMINICAN CORPORATION TO BE ABLE TO BUY A PROPERTY IN THE DOMINICAN REPUBLIC.
We suggest you to review -for greater information on the options to get the Dominican residency as a foreign investor- the Decree 950-01, of September, 2001, and also the recent Law 171-07, of July, 2007, on Incentives for Pensioners and Revenue Earners of Foreign Source (this last document is published at http://freddymiranda.blogspot.com in English).
This is one of the most common mistakes of some foreign investors; to think that we do not have a legislation that regulates foreign investment. In our website, which can be visited at www.freddymiranda.com and our blog at http://freddymiranda.blogspot.com, we have summarized the principles that govern foreign investment. The main objective of this legislation, number 16-95, is to grant an equal treatment to foreigners. Consequently, a foreigner, physical or moral person, has the same rights granted to the Dominican citizens; among them, the right to acquire real estate properties.
This allows us to answer the question about the need of acquiring properties through Dominican companies. It is not mandatory for a foreigner to buy through Dominican companies. A known principle like the one about territoriality - according to which in order to acquire rights in a territory it is necessary to have some type of legal bond with that territory- is not applicable because -as we indicated- the law of foreign investment protects the real estate investment or of another type made by foreigners in the Dominican territory.
Which would be then the limitation? The only control to which the foreign investors are put under is to the registry of their investment when they have the intentions to repatriate their capitals. In the case of the investment in real estate properties, the property registries (Registries of Titles) keep a list of the foreign companies that acquire real estate property in the country. So that in most of the cases the investment as such is not registered. This explains on a great scale this misconception, its origin and its lack of understanding in some foreign countries; especially in the United States.
II. - THE OPTION TO PURCHASE.
The option is well-known as a promise of sale. It is a contract by means of which the developer or the seller is committed to sell real estate property or to give real estate property in agreement with blueprints, specifications and a special design in benefit of another party that is called the buyer, in this case the foreign investor.
With respect to this case, as we are going to explain ahead, a definitive purchase does not take place, or that one in which the sale price is given and the developer or seller, according to the case, gives a property. What it does take place is an obligation to give this real estate property in a certain time, and the buyer must pay a difference of the price at that time.
Generally, this contract modality takes control of a deposit that in our Law it is named as signal or earnest (“arras”), and must in principle establish obligations for both parties. It is what we recommend to the foreign investors; that is to say, to demand that the promise of sale is not only for the investor to buy the property, but for the seller or developer to sell or to give, according to the case (the houses in pre-construction will have to be constructed to be given) the promised or offered goods in the promise.
Being clarified this point and starting off to our recommendation to demand bilateral promises (those in that both parties must conduct the operation) it is left the question about this promise in this contract, if it constitutes a true business, which takes us to the following mistaken criterion.
III. - THE OPTION TO PURCHASE IS NOT A COMPLETE TRANSACTION AND, THEREFORE, IT DOES NOT HAVE A CLOSING.
This is a misconception that has been extended by the practice stimulated by some lawyers who include restrictive clauses (“restricted covenants”) in the writing of the options in the contracts to the transfer of the property rights.
In the matter of already registered rights and finished goods, houses, villas, or apartments this makes sense because everywhere in the world the buyer must pay the price of the sale to have absolute rights on the real estate property. However, as far as it deals with rights that are based on properties to be built, whose object is a blueprint, that is to say, the pre-construction market, can we come up with the same logic taking into account that the goods must be previously built? This is the story of the hen and the egg, or the egg and the hen. In first term, the buyer seems not to have a way out because he would not be a proprietor of the goods until he pays, but it is the case that to settle the sale price in principle there must be a real estate property that constitutes an object of a selling and buying operation. So that in our opinion the investor must firstly demand that the builder or developer has to commit himself/herself to finish the goods that are the object of the real estate property so that its acquisition can be delayed or the operation is closed at that moment.
This it is a complex subject, but our message related to this topic is simple. In our Law, the union of two people to decide the purchase of goods it is a true closing of the transaction in the sense that the buyer acquires a special right on those goods although he/she has not paid, at least in principle (there are exceptions like the clauses that exist to which we have previously called as “restricted covenants”), and therefore, the buyer can demand to the seller the completion of the goods or the delivery or execution sometimes of the definitive contract only with the signature of a promise of sale.
The ideal scenario is that your lawyer advises you on the content of the promise of transaction (buying and selling) being essential in order to write the following clauses in benefit of the investor: a) a final price without variation, especially in pre-construction; b) a delivery and date to sign the definitive contract, or at least a calendar of payment with dates of building; and c) in principle, the acceptance that the promise - if it is for both parties- will be subjected to what it is established in the Dominican Civil Code (Código Civil Dominicano).
IV. - OPTIONS AGAINST THE BREACH OF CONTRACT BY THE DEVELOPER.
Another one of the frequent questions and also a source of great confusions is the completion of the option contract of purchasing in the face of a breach of contract on the part of the builder or developer in the conditions of the promise of sale. This happens in a collapse of the project that prevents to finish or to build the goods object of the promise; that is to say, a villa, town home, or apartment.
Here we are before a classic case of possible scenarios: a) legal proceeding on a registered land; b) rescind the contract by mutual consent with the builder or developer; c) establishment of measures that prevent to the builder or developer to sell the land on which would be constructed the real estate property, villa, apartment, or house.
Let us begin with option (b) for being the easiest to explain. In an ideal system, it is recommended to proceed in revoking the transaction (buying and selling) contract, in order to get the return of the paid sums in advance and to negotiate a penalty by the resulting damage of the loss of possible banking interests suffered by you as an investor. However, the problem appears when the transaction (buying and selling) has been made with the sums paid in advance not as a payment of the price of transaction (buying and selling) but as “arras” or signal (“earnest deposit”). In this case and except for restrictions in the contract, the one who has received the signal or deposit as earnest will be forced to give back the double of the sums. This is one of the matters that are preferable to negotiate with the developers before the signature of the promise.
As far as options (a) and (c), we want to unite them for the aims to offer our ideas and recommendations. In the first place, the purpose is in both cases of trying to prevent the transfer of land or lot that would serve as the basis of the construction. In that case, when a legal proceeding is opened or a civil lawsuit begins, the first thing that we do, after beginning the lawsuit of course, it is to take an act before the Recorder of Titles (Registrador de Títulos) in order to restrain the possible sale of the real estate property and a fraud to the rights of the investors. This means that if we prevent the sale of the real estate property, we would be allowing that the buyer keeps his/her proportional rights on the real estate property; proportional because you have only paid (“earnest deposit”) a part of the price. This instalment does not mean that you can claim absolute rights on the real estate property, but to legally act against the development company, since you are deserving or has rights on all of the property to recover the part that you paid for or deposited for the sale of the real estate property.[1]
In summary, you have options to protect yourself from the breach of contract by the developer/seller in the promise of sale. The Dominican law has a very advanced system. However, keep in mind that the ideal is to avoid the legal processes, since the courts worldwide operate with slowness.
V. - TO INCORPORATE OR NOT TO INCORPORATE ABROAD OR IN THE DOMINICAN REPUBLIC.
We have covered elsewhere in our website the subject of the incorporation of companies (www.dr-realestateinvestment.com.do/dr_investor.html), and the fact that in our opinion they continue to be the best option in order to protect that money that so hard has been earned by you and that you try to invest in the Dominican Republic. So we will concentrate ourselves in the steps necessary to incorporate a company in our country first and abroad in a second term.
In our mission as lawyers, and in our vision as a law firm, the idea of being a little irreverent is assumed, trying to look for ways that although they have already been walked (we do not want to reinvent the wheel) are for a greater benefit to our clients; the game is a little like that of an anti-guru. In effect, in our country, we have found the recommendation of some lawyers and law firms -some of them with good prestige- that advise without no type of doubt as a first option the constitution of a Dominican company in order to buy real estate property. We feel aversion towards that advice due to the difficulty in constituting a company in the Dominican Republic.
The incorporation of a Dominican company requires by law the participation of at least seven (7) shareholders. These shareholders may not have an equal participation, being some of them practically “nomines” or “partners” who only participate in the company to complete the legal quorum. However, this supposes a tremendous degree of difficulty for you, foreign investor, who are buying your second home or who simply want to acquire goods to sell and do not want to be bound to other shareholders. In some cases, these companies already are constituted (“shelf companies”), but this supposes at least the transfer of stocks and change of the directors, which has to be registered in the Registry of Companies (Registro de Sociedades) by the Law of Mercantile Registry (Ley de Registro Mercantil), and the new shareholders must as well be registered in the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (“Internal Revenue Service” –IRS- in the United States). In synthesis, a true setback and an inconceivable obstacle for an investor mainly specialized in the area of real estate.
Once that this decision has been surpassed about submitting oneself to the joint control of other people whom have nothing to do with the purchase of one’s property, but that they would be used simply to fulfil the Dominican law, we are faced with the true bureaucratic proceeding that allows the incorporation of a company in the Dominican Republic.
The following steps have been baptized as a critical route for the incorporation of a company in the Dominican Republic:
1) Availability and Registry of Commercial Names. This is the preliminary registry, which allows to know if a chosen corporative name for constituting a company is free to be used. This proceeding, made with ease in almost all Central America and the Caribbean, takes at least three days.
2) Elaboration of the social articles of incorporation. Once we have the name available, a project of articles of incorporation is put under the consideration of the members. Like in the rest of the world, these articles of incorporation can be standardized, and they can be submitted according to the general practice. Nevertheless, in our country the partners sign it, as well as the list of subscribers or shareholders with their participation in the company; this is, the number of stocks that they will have in the company.
3) Payment of taxes on capital.
4) Elaboration, signature and registry of the certified declaration by the Notary Public. This is the document that serves to certify that the shareholders have the capital necessary to constitute the company.
5) Elaboration and signature of the Constituent Assembly.
6) Submitting of the documents in the Chamber of Commerce, “Law of Mercantile Registry”, or registry of companies.
7) Submitting of these documents at the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (Internal Revenue Service - IRS- in the United States).
It is easy to notice the difficulty for a foreign investor who has just a short time to analyze his/her investment, and to see the acquired property, to wait for this type of such a slow process. The only possibility of accelerating the process for a foreign investor is the acquisition of a “shelf” company or previously constituted company. However, in this case, it is necessary to register the changes of shareholders and of the proprietor and this also takes some time to be done; at least seven (7) working days.
Now we are going to compare the incorporation of a company abroad:
1. If the company has been previously founded, the change of shareholders and Board of Directors can be made in a day, and the delivery of the company from the foreign State takes other two or three days, which means that you can have your company in a maximum of seven (7) working days.
2. In case that the client decided to constitute a company with a name of his/her preference, the availability of the name can be had in a maximum of 24 hours, and the incorporation will follow the same process, and you, investor, can have your company in the same previous term, or perhaps in one more day, but always less than the time taken to incorporate a company in the Dominican Republic.
3. The steps to follow would be the following ones: a) To give an address for the Board of Directors and the company, although this can be facilitated by the lawyer; b) To determine the amount of participation of each shareholder in the company; that is to say, if it will be a company of a sole shareholder (100% of the stocks in the name of one person) or, in the case of spouses, if the stocks will be divided on a 50/50 basis between each one of them; c) Finally, it is enough with determining the person who will take the position of Director of the company or if a board or group of people is going to be in charge of the day-to-day working routine of the company. The Directors, for those ones who are not familiar with the handling of societies, are those physical people or companies represented by physical people that control the signature of documents, the payment of accounts and, in short, all the administrative aspects in a company. In our country the companies are controlled by several people. Abroad, especially in the tax havens, such as Belize, British Virgin Islands, Panama, Anguilla, etc., these companies can have up to a single Director for the handling of the corporative subjects in the case of you, investor interested in buying properties in the Dominican Republic, the signature of corresponding contracts, definitive option or as we previously explained.
Surely you will ask about the disadvantages to incorporate a foreign company to buy a real estate property in the Dominican Republic. In effect, two inconveniences or disadvantages exist that, in our opinion, are surmountable: a) the foreign companies require of an annual payment to maintain themselves in good order or “good standing”; and b) the company must be registered in the country for the aims to transfer the property and payment of the property tax.
a) Annual rate. The average annual rate, as well as the wages and expenses of the offices that maintain the registries of your company, oscillates between US$1,200 and US$1,500; these values can be reduced still more depending on factors that are not the object of this article. Nevertheless, if you compare the fact that in our country it is mandatory in our country for the Dominican companies to keep or to submit monthly declarations although they are not operating, to register the company in the social security, and other obligations, you will notice that you have to pay to an Authorized Public Accountant the wages for this work plus the payment of the annual declaration. Consequently, it is more advantageous in my opinion to defer this cost. Up to what moment? This takes us to the second of the disadvantages to incorporate a company in a tax haven.
b) The registry in the country. Your company must be re-addressed in the country to be able to fulfil the diverse tax commitments such as payment of taxes on the property and tax transfer. This proceeding represents for you, intelligent investor, an additional cost. So you will ask: So why to incur in this additional cost? The answer is that being the option to purchase the more frequent document, or the main contract to buy properties in development (pre-construction) it is not convenient to document or to make transparent its operation in the Dominican Republic. It is for this reason that we recommend to defer the moment from registry of your company. Once having an address in the country, your company is subject to formal duties with the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (“Internal Revenue Service” –IRS- in the United States). The formal duties mean reports that will have to make your company on its status; this is so if it is operating or making businesses in the country or not.
VI. - ANOTHER MISCONCEPTION: SIGNING OF DOCUMENTS ABROAD.
One of the most common practices in the modern world is the signing of documents anywhere in the planet to make them valid in a certain country. It is frequent nowadays to be sleeping whereas their buyers or sellers are abroad discussing and signing documents related to the purchase and sale of properties or products.
This world-wide practice has in the Dominican Republic an important limitation: our country is not a signatory State to the convention of apostilles; agreement that allows to the consulates or diverse offices to guarantee the signature of documents when these are signed abroad. This generates a tremendous confusion among most of the foreign investors. How do you proceed then?
Firstly, you will have to understand that -although in our country there is a law that protects the digital signature of documents- this legislation is not still so well recognized in practice. Consequently, you will have in principle to follow the tedious consular proceeding when you want to validate the signing of documents that will be executed or will be valid in the country. This is very important because if you, intelligent investor, have to take your case before the courts it is not convenient for you to have documents of purchase of your real estate property, apartment or house, that it is not properly certified and executed with the validity required by the Dominican laws. And which are those requirements of validity? Simply it is one, and it is that the document that serves as a prove is legally signed by the person against who you want to make it valid. This is what it is known as prove requirement. This means that your contract can be accepted, but if the signature of the seller (promotional agent or developer) in this case is under debate you will have a risk on your investment, because the operation could be rejected by the Dominican judicial system.
Secondly, and to follow with our recommendations, you must make sure to guarantee the signature of documents proceeding with their legalization, at least in principle by a Notary Public of your State or country of origin. Do not trust the apostille system of documents because not all the Dominican instances, offices or courts will accept them as valid. Once obtained this legalization, the most common accepted practice according to consular laws that control the consular and diplomatic offices abroad is the one to have the Dominican Consul to certify the signature of this Notary Public through the confirmation that has to be made by an office of your State in favor of this Notary Public authorizing him/her to sign valid documents, as a general rule the secretary of your county (County Clerk).
Finally, thirdly, if you were to proceed to the digital signature of documents you must make sure that the same ones (the companies of the developer and the buyer) are in encrypted documents or programs that do not allow their modification and can soon prove in the Dominican courts with ease the authenticity of those documents. This is so for the improbable case of a legal action against the seller or developer in the case of real estate in pre-construction.
VII. - THE PAYMENT OF TRANSFER AND PROPERTY TAXES.
We have already said that our country has experienced strong changes in the structure of taxes and the amounts to pay or taxable rates. Within those reforms, the most recent affects -but in a positive sense- the transfer tax of real estate property.
The transfer of property is a topic of confusion for certain investors, mainly those of an American origin. The source of this confusion is the poor quality of information received, and in addition, the fact that both systems of registry of the property differ.
The basic differences, continuing with the American market (probably the greatest investor in the matter of houses in pre-construction) are in the tax basis, that is, the amount to be calculated on the payment of taxes and in the system of registry.
Our system is not based on a chain of acquirers, but in a true registry and title issuance where it matters little who was the last acquirer. The registry has a list or information mainly on that which can affect the transfer, sales transfer or getting the certificate of the title.
The buyer has, then, to get a certificate of title that is issued through the Registry of Titles of the place where the real estate property is located. To such aims a definitive contract of transaction (selling and buying) with the value of transfer is due to be registered. This value is the one that creates the greatest confusions to the investor.
Our tax system offers in many cases a true advantage to the national or international investor. This is the one that -although it does not allow it specifically- admits that the value for the payment of the tax of transfer is the value registered by them (the investors), appraised by themselves (the investors) for the payment of the tax to the property, today so much changed and with so many names that we do not know how to really call it, but that in summary, It would be taxed on the Assets of appraised value the companies and Tax on the Real Estate Property (Impuesto a la Propiedad Inmobiliaria -IPI-) for the physical people.
This tax is paid on the basis of the value of appraisal of the real estate property that -as we said- represents certain type of advantage because it can be (and thus it happens in many cases) that the value of transaction of the real estate property is greater than the value of appraisal of the real estate property and as an investor you take the advantage of this reduction in the payment of taxes. The way of taking advantage of this advantage supposes experience and practical knowledge, so it is the reason why you are advised to contract the services of a good accountant or an experienced lawyer.
The tax to the property for the investors who follow our gold advice to protect their real estate properties through the incorporation of national or foreign commercial companies is called Tax on the Assets (Impuestos sobre los Activos), and it implies to maintain the company in order regarding to its accounting or financial registries, this is, expenses and income. The aid of an accountant to benefit from the few advantages that grant the tax laws and norms is essential in our opinion.
VIII. - MAINTENANCE OF COMPANIES.
We have insisted on synergy, proactivity and directionality, and in the coordination of two disciplines like the accountant and the lawyer so that you can leverage on the advantages (the very little advantages) that you could receive from the Dominican tax system. One of the reasons in our opinion that it is in the limits of stubbornness, is that -after the changes in the tax legislation- the commercial companies, which have not escaped to those changes, must be kept in good order and with their registries of accounting operations fit to the norms of the General Directorate of Internal Taxes (Dirección General de Impuestos Internos) (DGII) (“Internal Revenue Service” –IRS- in the United States).
Why does this topic of the maintenance of companies create so much confusion? The reason is in the routine. In the past one got used to presenting the declarations of income tax of companies that were created to protect real estate property as companies without operations. This practice supposed that the company hid part of its real tax situation, such as income and expenses.
In the last change introduced to the system of tax payment to the property settled down that the companies reported without operations, this is without taxes to pay on the income (Impuesto Sobre la Renta (ISR) -Income Tax in the United States-) are forced to pay at least 1% on its assets like a minimum payment.
The direct consequence is that you must: a) make sure that your real estate property appears registered correctly in the accounting registries of your company; b) that in principle you can report the greatest amount of real expenses of the company, in special those that can be subject of the total tax deduction to be paid; and c) guarantee and indeed verify that the tax is paid on the real estate property so that it can benefit from the possible reduction of the income tax, or the revenue earned.
We recommend that you get legal advice, because we have not dealt with this subject here with all its depth, but –moreover- it is good that you, intelligent investor, get aware of what the laws have changed, and nowadays you will take advantage of, perhaps, we do not guarantee it, more of the order than of the lack of control in the registries of the necessary operations for the maintenance of your property. Do not be satisfied with a routine answer, and you will surely find routes to get the greatest benefit from your money and your main assets: the real estate property, your second home, or your investment.
In another article that will count with the collaboration of one of our partners, we will approach the topic of the Dominican residence for investors and the opening and handling of banking accounts.
LEGAL DISCLAIMER: The present document and its opinions do not constitute a definitive legal advice. The opinions that contain this article are based on the experience of the author, and the fact of wisely having made all the diligences necessary to obtain the legal data that it contains making sure that this information corresponds with the reality of the market and, by all means, comply with the laws. If you wish greater protection, we always advise you to contract the services of a lawyer, so that you may prefer our law firm or another legal adviser.
[1] Some conditions to establish a lawsuit about real estate properties when it deals of future developments are found in the new law of lands, but we don’t refer to them because they are not the object of this article.
Thursday, September 6, 2007
New Legislation for Pensioniers and Revenue Earners
Web page:
http://www.dgii.gov.do/legislacion/pdf/leyes/Ley171-07.pdf
Translator’s Disclaimer: This translation is just intended for the purpose of giving general information about this legal document. It is not intended to be used in the courtrooms or in any legal matter.
Law No. 171-07 on Special Incentives for the Pensioners and Revenue Earners[1] of Foreign Source (sobre Incentivos Especiales a los Pensionados y Rentistas de Fuente Extranjera).
El Congreso Nacional (The National Congress)
In the Name of the Republic
Law No. 171-07.
CONSIDERING: That Law No. 16-95 on Foreign Investment (de Inversión Extranjera), of November 20th, 1995, establishes the principle of the national treatment inspired in the necessity that the investors, both foreigner ones as well as national ones, might have similar rights and duties in the matter of investment;
CONSIDERING: That the role that has to be played by the government in order to facilitate the flow of investments towards the country makes it necessary to implement a joint strategy of the public institutions for the execution of coherent actions oriented to the promotion of those investments, optimizing the efforts that had been made and their competitive advantages;
CONSIDERING: That the Dominican State recognizes that the investments in currency or capitals from the foreign countries contribute to the collective development and well-being of the country through the dynamism that it is generated in the economic and productive national activity;
CONSIDERING: That the Dominican Republic has natural, cultural, technological, and human resources that are enough in order to launch itself as a suitable place for the pensioners and revenue earners[2] (rentistas) interested in the country as a retirement and jubilation destiny;
CONSIDERING: That the countries of Central America and the Caribbean region have developed this program in their territories with highly satisfactory results.
SEEN: Law No. 14-93, of August 26th, 1993, on Customs Duty of the Dominican Republic (sobre Arancel de Aduanas de la República Dominicana) (whereof the tax payment for home appliances and personal goods are exempted);
SEEN: Law No. 168, of May 27th, 1967, on Partial Tax Exemption of Motor Vehicles (sobre Exoneración Parcial de Impuestos de Vehículos de Motor), amended by Law No. 146-00, on Customs Duty Reform and Tax Compensation (sobre Reforma Arancelaria y Compensación Fiscal);
SEEN: Law No. 16-95, of November 20th, 1995, on Foreign Investment (sobre Inversión Extranjera);
SEEN: Law No. 11-92, of May 16th, 1992, which establishes the Código Tributario (Taxes Code), and its amendments;
SEEN: Decree No. 950-01, of September 20th, 2001, which creates the Residency Permit due to Investment (Permiso de Residencia a través de la Inversión), establishing the Regulations for Implementing Articles 5, 6 and 7 of the Law No. 95, of Immigration (de Migración), of April 24th, 1939;
SEEN: Decree No. 756-03, of August 12th, 2003, which gives special incentives to the pensioners or retired people of a foreign source.
HAS GIVEN THE FOLLOWING LAW:
TITLE I.
DEFINITIONS, OBJECT, AND CONDITIONS.
ARTICLE 1.- For the purpose of implementing the present law, the following definitions are given:
1.- Pensioners or Retired People: Foreign or Dominican people who are beneficiaries of a monthly income from a pension or retirement plan of a government, official organism, or private company of foreign origin, who have stated their intention of changing their permanent residency to this country, and to receive their pension or retirement benefits in the Dominican Republic;
1.- Pension: Rents of foreign origin coming from income that it is utility or benefit, that renders a good or activity, and all of the benefits; utilities that are generated or earned of materialized patrimony, not justified by the taxpayer, whatsoever it is its nature, origin, or denomination;
1.- Revenue Earners (Rentistas): Those people who enjoy stable and permanent rents, whose main capital is generated or originated from a foreign country due to any of the following reasons:
1.- Deposits and/or investments in established banks abroad;
1.- Money transfers coming from banking or financial institutions abroad;
1.- Investments in established companies abroad;
1.- Money transfers generated from real estate property[3];
1.- Interests received out of titles issued in foreign currency generated abroad, that are located in financial institutions authorized legally for operating in the Dominican Republic;
1.- Benefits obtained by investments in titles issued in foreign and/or national currency, with the State or its institutions, whenever the capital has been generated abroad, and that a currency exchange has been done in any of the financial institutions of this country;
1.- Interest, rents or dividends from real estate and non-real estate investments done in the Dominican Republic, whose principal capital has been generated or earned mainly abroad.
ARTICLE 2.- Main Objective of the Law. The pensioners as well as the revenue earners (rentistas) who comply with the requirements and conditions established through the present law, will be able to get the same benefits and exemptions given to the foreign investors and resident citizens abroad, through the following legal dispositions:
1.- Program of Residency due to Investment (Programa de Residencia por Inversión), created through Decree No. 950, of September 20th, 2001, which allows to the foreign investors to obtain the permanent residency in a period of 45 days;
1.- Law No. 14-93, of August 26th, 1993, on Customs Duty of the Dominican Republic (sobre Arancel de Aduanas de la República Dominicana), which gives exemptions to the payment of taxes for home appliances and personal goods;
1.- Law No. 168, of May 27th, 1967, on Partial Tax Exemption of Motor Vehicles (sobre Exoneración Parcial de Impuestos de Vehículos de Motor).
Additionally, the pensioners and revenue earners (rentistas) who get protected under the present law will have the following benefits, according to the conditions and stipulations stated in this law:
1.- Tax exemption on real estate transfers, for the first acquired property.
1.- Tax exemption for 50% on mortgages, when the creditors are financial institutions duly regulated by the Monetary and Financial Law (Ley Monetaria y Financiera);
1.- Tax exemption for 50% on the real estate property, whenever this applies;
1.- Tax exemptions that burden the payment of dividends and interests, generated in the country or abroad;
1.- Tax exemption for 50% on the Gain of Capital, whenever the revenue earner (rentista) is the major stockholder of the company that it is subjected to the payment of this tax, and that such company is not endeavored in commercial or industrial activities.
ARTICLE 3.- Minimum Amount of the Pension or Monthly Revenue. For the purpose of acquiring the preferential regime established in the present law, the pensioner will have to receive a monthly income of no less than one thousand, five hundred dollars, United States’ currency (US$1,500.00); and the revenue earner (rentista) will have to receive a monthly sum of two thousand U. S. dollars (US$2,000.00), or its equivalent in national currency.
PARAGRAPH.- For each dependant defined in Article 5 of the present law, who applies jointly with the main applicant, it will be required an additional monthly income of the sum of two hundred and fifty U.S. dollars (US$250.00).
ARTICLE 4.- In order to qualify for this program, the main applicant will not be required to have a minimum age, simply he/she will have to comply with the requirements of the present law.
TITLE II.
OF THE RESIDENCY PERMIT DUE TO INVESTMENT.
ARTICLE 5.- Beneficiaries. Under the protection of the dispositions of the present law, the pensioners and revenue earners[4] (rentistas) defined in Article 1 of the present law will be able to apply for the Program of Residency Permit due to Investment (Programa de Permiso de Residencia por Inversión); as well as his/her spouse and single sons and daughters under the age of 18 years-old, disabled ones who are of age, or the ones of age who can prove that they are studying at an university, and that they depend financially on the main applicant. In the same way, the minors under guardianship of the titleholder or his/her spouse can also be included when they are under a fully recognizable guardianship.
ARTICLE 6.- Application Procedure. The foreigners who acquire the category of resident pensioners and resident revenue earners (rentistas) through the Program of Residency Permit due to Investment (Programa de Permiso de Residencia a través de la Inversión) will have to comply with all the requirements for these purposes at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración).
PARAGRAPH I.- In the case of pensioners, the applicants will have to show a certificate of the government, the official organism or the private company of foreign origin where they rendered their services, duly translated into Spanish by a judicial translator, legalized by the Dominican consular office from the country of origin of the document. Such certificate will have to include the general data of the applicant, the time that he/she stayed on the company, position that he/she held, and the amount of money received as a pension.
PARAGRAPH II.- In the case of revenue earners (rentistas), these ones will have to prove that they enjoy these permanent and stable rents generated or coming from abroad for a period of no less than five years, through a copy of the contract of the revenue duly translated into Spanish by a judicial translator, legalized by the Dominican consular office from the country of origin of the document. At the same time, they will have to show the income’s receipt of the money to the country, through a copy of the check(s) or notice(s) of money transfer from the financial entity(ies) established abroad.
ARTICLE 7.- Once the documents have been deposited at the foreign investment window, the personnel in charge will proceed to verify and to purge the validity of them, according to the established requirements in the present law, and to send them at the shortest time to the Director of Immigration (Director de Migración) for the purpose of approving them. In the positive case, the General Directorate of Immigration (Dirección General de Migración) will issue an approval letter of the application for the Residency Permit due to Investment (Permiso de Residencia a través de la Inversión), whereof will be stated that the application has been satisfactorily accepted, and it is authorized the issuance of a residency card in a minimum period of time of forty-five (45) working days, beginning at the date after receiving the application.
ARTICLE 8.- Renewal of the Residency Permit. After the expiration of one year of validity of the residency permit, the pensioner and/or revenue earner (rentista) will be able to apply for a renewal at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración). For such purposes, the interested party will have to deposit the following documents:
1.- Renewal form of the residency permit for pensioners and/or revenue earners (rentistas).
1.- Copy of identification card.
1.- Certificate of no background files[5] issued by the Prosecuting Attorney’s Office (Procuraduría Fiscal) of the Judicial District (Distrito Judicial) where the applicant belongs or by the National Police (Policía Nacional) of the Dominican Republic.
1.- Expired Residency Card.
PARAGRAPH I.- The pensioners and revenue earners (rentistas) will have to deposit at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración) the documents that prove that they have received their pensions or revenues in the national territory for the same period of time that they received the previous residency permit.
PARAGRAPH II.- Once that the renewal application has been approved, the General Directorate of Immigration (Dirección General de Migración) will issue a residency card in a minimum period of time of eight (8) working days, beginning at the date of the application. The residency card will have an expiration period of two (2) years, or the time given by the General Directorate of Immigration (Dirección General de Migración), and it could be renewed at the time of expiration.
ARTICLE 9.- Loss of the Residency Card. In the case of loss of the residency card, the interested party will have to fill up and show at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración) the application form due to loss, with two (2) photos, size of 2 inches by 2 inches, and loss certificate issued by the National Police (Policía Nacional).
ARTICLE 10.- Tax Exemption for the Pension or Revenue Received. The sums of money declared as income in order to enjoy the benefits of this law will be exempted from the Income Tax (Impuestos Sobre la Renta) (Article 271 of the Taxes Code (Código Tributario) is amended).
TITLE III.
ON THE BENEFITS OF THE LAW NO. 14-93, WHICH GIVES AN EXEMPTION FROM THE PAYMENT OF TAXES FOR HOME APPLIANCES AND PERSONAL GOODS OF THE FOREIGNERS WHO COME TO THE DOMINICAN REPUBLIC TO LIVE PERMANENTLY.
ARTICLE 11.- The pensioners and revenue earners (rentistas) whose residency applications have been approved according to the dispositions of the present law will have the benefit of the exemption of the customs duty for the imports of personal and home appliances as well as equipment used in their occupations or professions, according to what it is established by the Law No. 14-93, which gives an exemption from the payment of taxes for home appliances and personal goods to the foreigners that come to the country to live permanently. In addition to the standard requirements and formalities of the General Directorate of Customs (Dirección General de Aduanas) for the application of the Law No. 14-93, the pensioners and revenue earners (rentistas) will have to include in their application a copy of their Permanent Residency Card (Tarjeta de Residencia Definitiva).
PARAGRAPH I.- The pensioners and revenue earners (rentistas) whose applications of Residency due to Investment (Residencia por Inversión) have been appropriately approved by the General Directorate of Immigration (Dirección General de Migración), which are in the waiting process for the issuance of the residency card will be able to begin the procedures of applying for the benefits of the Law 14-93 before the General Directorate of Customs (Dirección General de Aduanas). For these purposes, it will be necessary to show a certified copy of the Approval Letter of the Residency due to Investment (Carta de Aprobación de la Residencia por Inversión), issued by the General Director of Immigration (Director General de Migración).
This document will have to be filed with all the standard requirements of the General Directorate of Customs (Dirección General de Aduanas) for the enjoyment of the benefits of the Law 14-93.
PARAGRAPH II.- The dispositions of the present article will benefit only and exclusively the pensioners and revenue earners (rentistas) who have a Residency due to Investment (Residencia por Inversión) application form appropriately approved by the General Directorate of Immigration (Dirección General de Migración). Therefore, the benefits stated on the Law No. 14-93 will be applied neither to the spouses nor to the dependants of the applicant.
PARAGRAPH III.- All of the exempted goods like home appliances will not be able to be taken away without previously paying for the applicable attributes[6] to the Dominican State.
TITLE IV.
ON THE BENEFITS OF THE LAW NO. 168, ON PARTIAL TAX EXEMPTION OF MOTOR VEHICLES, MODIFIED BY THE LAW NO. 146-00, ON CUSTOMS DUTY REFORM AND TAX COMPENSATION.
ARTICLE 12.- The pensioners and revenue earners (rentistas), and their respective spouses[7], whose permanent residency applications have been approved according to the dispositions of the present law, will benefit from the Regime of Partial Tax Exemption of Motor Vehicles (Régimen de Exoneración Parcial de Impuestos de Vehículos de Motor), established by the Law No. 168, of May 24th, 1967, amended by the Law No. 146-00, on Customs Duty Reform and Tax Compensation (Reforma Arancelaria y Compensación Fiscal).
In addition to the standard requirements and formalities of the General Directorate of Customs (Dirección General de Aduanas) for implementing the Regime of Partial Tax Exemption of Motor Vehicles (Régimen de Exoneración Parcial de Impuestos de Vehículos de Motor), the interested party will have to include in his/her application form a copy of his/her permanent residency card.
PARAGRAPH I.- The pensioners and revenue earners (rentistas), and their respective spouses, whose applications of Residency due to Investment (Residencia por Inversión) have been appropriately approved by the General Directorate of Immigration (Dirección General de Migración), which are in the waiting process of the issuance of the residency card will be able to begin the procedures of applying for the benefits of the Law 168 before the General Directorate of Customs (Dirección General de Aduanas). For these purposes, it will be necessary to show a certified copy of the Approval Letter of the Residency due to Investment (Carta de Aprobación de la Residencia por Inversión), issued by the General Director of Immigration (Director General de Migración). This document will have to be filed with all the standard requirements of the General Directorate of Customs (Dirección General de Aduanas) for the enjoyment of the benefits of the Law 168, amended by the Law No. 146-00, on Customs Duty Reform and Tax Compensation (Reforma Arancelaria y Compensación Fiscal), which establishes the Partial Tax Exemption of Motor Vehicles (Exoneración Parcial de Impuestos de Vehículos de Motor).
PARAGRAPH II.- The motor vehicles that enjoy the benefits of the present disposition will not be able neither to be sold nor transferred to a third party in a period of time of five (5) years, beginning on the date of their arrival to the country, except in the case that the difference of the total rights and applicable taxes are paid.
PARAGRAPH III. For the purpose of implementing the present disposition it will be understood as motor vehicles:
Automobile: It is allowed to the applicant to import one (1) automobile under the benefits of this program; even though, the vehicles which are acquired in the local market will be exempted from the payment of the Transfer Tax to Industrialized Goods and Services (Impuesto de Transferencia de Bienes Industrializados y Servicios) (ITBIS), as well as the Selective Tax on Consumption (Impuesto Selectivo al Consumo[8]).
TITLE V.
ON THE EXEMPTION FROM THE PAYMENT OF TAXES ON TRANSFER, MORTGAGES, TAX ON THE REAL ESTATE PROPERTY, AND GAIN OF CAPITAL.
ARTICLE 13.- The pensioners and revenue earners (rentistas), and their respective spouses, whose permanent residency applications have been approved according to the dispositions of the present law, will benefit from the exemption from the payment of taxes on real estate operations for the first property that they acquire. At the same time, and while their Residency Permit due to Investment (Permiso de Residencia por Inversión) is valid, they will benefit of the exemption of the 50% of the tax on documents and Real Estate Property Tax (Impuesto sobre la Propiedad Inmobiliaria). At the same time, they will be exempted from the payment of the 50% of the mortgages taxes. Therefore, for the beneficiaries of this law and while their Residency Permit due to Investment (Permiso de Residencia por Inversión) is valid the following taxes are modified in the established proportions:
1.- Law No. 18-88, of January 19th, 1988, and its amendments;
1.- Law No. 145-02, of September 9th, 2002, which amends the Law No. 18-88;
1.- Law No. 3341, of July 13th, 1952, on Real Estate Operations (sobre Operaciones Inmobiliarias), and its amendments, including the Law No. 288-04, of September 28th, 2004;
1.- Law No. 33-91, of November 8th, 1991;
1.- Law No. 80-99, of July 29th, on Documents.
ARTICLE 14.- All of the real estate properties acquired by the pensioners and revenue earners (rentistas), under the protection of this law, at the moment of their sale to a third party, will be exempted from the payment of the 50% of the tax on gain of capital.
TITLE VI.
POSSIBILITY OF DOING REMUNERATED WORKS IN THE COUNTRY.
ARTICLE 15.- The pensioners and revenue earners (rentistas) protected under this law will be able to endeavor themselves in remunerated works. Even though, the wages earned for that activity will be subjected to the payment of the applicable taxes to the Dominican State, like any other national employee, according to the principle of equal treatment established on the Law No. 16-95, of November 20th, 1995, on Foreign Investment (sobre Inversión Extranjera).
TITLE VII.
GENERAL DISPOSITIONS.
ARTICLE 16.- The benefits of this law protect in an equal way the Dominican citizens who are persioners or retired people, by governmental institutions of other countries, and for those ones who do not have that character can prove that they receive rents or revenues according to the terms that Article 1 of the present law establishes, and who have lived permanently abroad no less than ten (10) years.
PARAGRAPH.- The foreign residents in this country who acquire the condition of pensioners and/or revenue earners (rentistas) will be able to obtain the benefits of this law.
ARTICLE 17.- In the case of death of the main applicant, the acquired rights by him/her as beneficiary will be adjudicated to the spouse, or by default to any other dependant, defined in Article 5 of this law, whenever these ones comply with the legal requirements that were requested to the main applicant, established on Articles 3 and 6 of this law.
ARTICLE 18.- Sanctions due to Violation of the Present Law. The persons who apply in order to be beneficiaries of this law and who on a conscious manner provide false information in order to benefit themselves of the concessions that this law gives will be liable of sanctions, and they will have to pay a fine of an equivalent sum of the double amount of applicable taxes which they have to pay to the Dominican tax authorities.
ARTICLE 19.- The present law annuls any other disposition that might be contrary to the purpose of its implementation.
GIVEN in the Meeting Hall of the Deputies’ Chamber (Sala de Sesiones de la Cámara de Diputados), Palace of the National Congress (Palacio del Congreso Nacional), in Santo Domingo de Guzmán, Distrito Nacional, capital city of the Dominican Republic, at the 10th day of the month of April of the year two thousand and seven (2007); at the 164th year of the Independence, and the 144th year of the Restoration (Restauración).
Julio César Valentín Jiminián
President
María Cleofia Sánchez Lora
Secretary
Teodoro Ursino Reyes
Secretary
GIVEN in the Meeting Hall of the Senate (Sala de Sesiones del Senado), Palace of the National Congress (Palacio del Congreso Nacional), in Santo Domingo de Guzmán, Distrito Nacional, capital city of the Dominican Republic, at the 19th day of the month of June of the year two thousand and seven (2007); at the 164th year of the Independence, and the 144th year of the Restoration (Restauración).
Reinaldo Pared Pérez
President
Amarilis Santana Cedano
Secretary
Luis René Canaán Rojas
Ad-Hoc Secretary
LEONEL FERNÁNDEZ
President of the Dominican Republic
In the exercise of the attributions that confer me the Article 55 of the Constitution of the Republic.
I PROMULGATE the present Law, and I give the order to publish it in the Official Gazette for its knowledge and enactment.
GIVEN in Santo Domingo de Guzmán, Distrito Nacional, capital city of the Dominican Republic, at the 13th day of the month of July of the year two thousand and seven (2007); at the 164th year of the Independence, and the 144th year of the Restoration (Restauración).
LEONEL FERNÁNDEZ.
[1] Translator’s Note: A bondholder is a specific case of revenue earner.
[2] Translator’s Note: There is a mistake on the original text since the Word “and” is missing.
[3] Translator’s Note: The Word “abroad” is missing in the original. According to the context, this Law is dealing with income generated from a foreign source.
[4] Translator’s Note: There is no consistency in the original text when it refers to the pensioners and revenue earners. Sometimes they are called “pensioners and/or revenue earners”, which is the correct way of referring to them. Most of the time, they are called “pensioners and revenue earners”.
[5] Translator’s Note: Criminal Records.
[6] Translator’s Note: Instead of “attributes”, this Law could be speaking of “tributos” (taxes) in the original text.
[7] Translator’s Note: This Law should also mention the “dependants” of the main applicant in some articles like in this one.
[8] Translator’s Note: The original text has a mistake when naming this tax. It wrongly calls it “Impuesto sobre el Selectivo al Consumo”.
http://www.dgii.gov.do/legislacion/pdf/leyes/Ley171-07.pdf
Translator’s Disclaimer: This translation is just intended for the purpose of giving general information about this legal document. It is not intended to be used in the courtrooms or in any legal matter.
Law No. 171-07 on Special Incentives for the Pensioners and Revenue Earners[1] of Foreign Source (sobre Incentivos Especiales a los Pensionados y Rentistas de Fuente Extranjera).
El Congreso Nacional (The National Congress)
In the Name of the Republic
Law No. 171-07.
CONSIDERING: That Law No. 16-95 on Foreign Investment (de Inversión Extranjera), of November 20th, 1995, establishes the principle of the national treatment inspired in the necessity that the investors, both foreigner ones as well as national ones, might have similar rights and duties in the matter of investment;
CONSIDERING: That the role that has to be played by the government in order to facilitate the flow of investments towards the country makes it necessary to implement a joint strategy of the public institutions for the execution of coherent actions oriented to the promotion of those investments, optimizing the efforts that had been made and their competitive advantages;
CONSIDERING: That the Dominican State recognizes that the investments in currency or capitals from the foreign countries contribute to the collective development and well-being of the country through the dynamism that it is generated in the economic and productive national activity;
CONSIDERING: That the Dominican Republic has natural, cultural, technological, and human resources that are enough in order to launch itself as a suitable place for the pensioners and revenue earners[2] (rentistas) interested in the country as a retirement and jubilation destiny;
CONSIDERING: That the countries of Central America and the Caribbean region have developed this program in their territories with highly satisfactory results.
SEEN: Law No. 14-93, of August 26th, 1993, on Customs Duty of the Dominican Republic (sobre Arancel de Aduanas de la República Dominicana) (whereof the tax payment for home appliances and personal goods are exempted);
SEEN: Law No. 168, of May 27th, 1967, on Partial Tax Exemption of Motor Vehicles (sobre Exoneración Parcial de Impuestos de Vehículos de Motor), amended by Law No. 146-00, on Customs Duty Reform and Tax Compensation (sobre Reforma Arancelaria y Compensación Fiscal);
SEEN: Law No. 16-95, of November 20th, 1995, on Foreign Investment (sobre Inversión Extranjera);
SEEN: Law No. 11-92, of May 16th, 1992, which establishes the Código Tributario (Taxes Code), and its amendments;
SEEN: Decree No. 950-01, of September 20th, 2001, which creates the Residency Permit due to Investment (Permiso de Residencia a través de la Inversión), establishing the Regulations for Implementing Articles 5, 6 and 7 of the Law No. 95, of Immigration (de Migración), of April 24th, 1939;
SEEN: Decree No. 756-03, of August 12th, 2003, which gives special incentives to the pensioners or retired people of a foreign source.
HAS GIVEN THE FOLLOWING LAW:
TITLE I.
DEFINITIONS, OBJECT, AND CONDITIONS.
ARTICLE 1.- For the purpose of implementing the present law, the following definitions are given:
1.- Pensioners or Retired People: Foreign or Dominican people who are beneficiaries of a monthly income from a pension or retirement plan of a government, official organism, or private company of foreign origin, who have stated their intention of changing their permanent residency to this country, and to receive their pension or retirement benefits in the Dominican Republic;
1.- Pension: Rents of foreign origin coming from income that it is utility or benefit, that renders a good or activity, and all of the benefits; utilities that are generated or earned of materialized patrimony, not justified by the taxpayer, whatsoever it is its nature, origin, or denomination;
1.- Revenue Earners (Rentistas): Those people who enjoy stable and permanent rents, whose main capital is generated or originated from a foreign country due to any of the following reasons:
1.- Deposits and/or investments in established banks abroad;
1.- Money transfers coming from banking or financial institutions abroad;
1.- Investments in established companies abroad;
1.- Money transfers generated from real estate property[3];
1.- Interests received out of titles issued in foreign currency generated abroad, that are located in financial institutions authorized legally for operating in the Dominican Republic;
1.- Benefits obtained by investments in titles issued in foreign and/or national currency, with the State or its institutions, whenever the capital has been generated abroad, and that a currency exchange has been done in any of the financial institutions of this country;
1.- Interest, rents or dividends from real estate and non-real estate investments done in the Dominican Republic, whose principal capital has been generated or earned mainly abroad.
ARTICLE 2.- Main Objective of the Law. The pensioners as well as the revenue earners (rentistas) who comply with the requirements and conditions established through the present law, will be able to get the same benefits and exemptions given to the foreign investors and resident citizens abroad, through the following legal dispositions:
1.- Program of Residency due to Investment (Programa de Residencia por Inversión), created through Decree No. 950, of September 20th, 2001, which allows to the foreign investors to obtain the permanent residency in a period of 45 days;
1.- Law No. 14-93, of August 26th, 1993, on Customs Duty of the Dominican Republic (sobre Arancel de Aduanas de la República Dominicana), which gives exemptions to the payment of taxes for home appliances and personal goods;
1.- Law No. 168, of May 27th, 1967, on Partial Tax Exemption of Motor Vehicles (sobre Exoneración Parcial de Impuestos de Vehículos de Motor).
Additionally, the pensioners and revenue earners (rentistas) who get protected under the present law will have the following benefits, according to the conditions and stipulations stated in this law:
1.- Tax exemption on real estate transfers, for the first acquired property.
1.- Tax exemption for 50% on mortgages, when the creditors are financial institutions duly regulated by the Monetary and Financial Law (Ley Monetaria y Financiera);
1.- Tax exemption for 50% on the real estate property, whenever this applies;
1.- Tax exemptions that burden the payment of dividends and interests, generated in the country or abroad;
1.- Tax exemption for 50% on the Gain of Capital, whenever the revenue earner (rentista) is the major stockholder of the company that it is subjected to the payment of this tax, and that such company is not endeavored in commercial or industrial activities.
ARTICLE 3.- Minimum Amount of the Pension or Monthly Revenue. For the purpose of acquiring the preferential regime established in the present law, the pensioner will have to receive a monthly income of no less than one thousand, five hundred dollars, United States’ currency (US$1,500.00); and the revenue earner (rentista) will have to receive a monthly sum of two thousand U. S. dollars (US$2,000.00), or its equivalent in national currency.
PARAGRAPH.- For each dependant defined in Article 5 of the present law, who applies jointly with the main applicant, it will be required an additional monthly income of the sum of two hundred and fifty U.S. dollars (US$250.00).
ARTICLE 4.- In order to qualify for this program, the main applicant will not be required to have a minimum age, simply he/she will have to comply with the requirements of the present law.
TITLE II.
OF THE RESIDENCY PERMIT DUE TO INVESTMENT.
ARTICLE 5.- Beneficiaries. Under the protection of the dispositions of the present law, the pensioners and revenue earners[4] (rentistas) defined in Article 1 of the present law will be able to apply for the Program of Residency Permit due to Investment (Programa de Permiso de Residencia por Inversión); as well as his/her spouse and single sons and daughters under the age of 18 years-old, disabled ones who are of age, or the ones of age who can prove that they are studying at an university, and that they depend financially on the main applicant. In the same way, the minors under guardianship of the titleholder or his/her spouse can also be included when they are under a fully recognizable guardianship.
ARTICLE 6.- Application Procedure. The foreigners who acquire the category of resident pensioners and resident revenue earners (rentistas) through the Program of Residency Permit due to Investment (Programa de Permiso de Residencia a través de la Inversión) will have to comply with all the requirements for these purposes at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración).
PARAGRAPH I.- In the case of pensioners, the applicants will have to show a certificate of the government, the official organism or the private company of foreign origin where they rendered their services, duly translated into Spanish by a judicial translator, legalized by the Dominican consular office from the country of origin of the document. Such certificate will have to include the general data of the applicant, the time that he/she stayed on the company, position that he/she held, and the amount of money received as a pension.
PARAGRAPH II.- In the case of revenue earners (rentistas), these ones will have to prove that they enjoy these permanent and stable rents generated or coming from abroad for a period of no less than five years, through a copy of the contract of the revenue duly translated into Spanish by a judicial translator, legalized by the Dominican consular office from the country of origin of the document. At the same time, they will have to show the income’s receipt of the money to the country, through a copy of the check(s) or notice(s) of money transfer from the financial entity(ies) established abroad.
ARTICLE 7.- Once the documents have been deposited at the foreign investment window, the personnel in charge will proceed to verify and to purge the validity of them, according to the established requirements in the present law, and to send them at the shortest time to the Director of Immigration (Director de Migración) for the purpose of approving them. In the positive case, the General Directorate of Immigration (Dirección General de Migración) will issue an approval letter of the application for the Residency Permit due to Investment (Permiso de Residencia a través de la Inversión), whereof will be stated that the application has been satisfactorily accepted, and it is authorized the issuance of a residency card in a minimum period of time of forty-five (45) working days, beginning at the date after receiving the application.
ARTICLE 8.- Renewal of the Residency Permit. After the expiration of one year of validity of the residency permit, the pensioner and/or revenue earner (rentista) will be able to apply for a renewal at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración). For such purposes, the interested party will have to deposit the following documents:
1.- Renewal form of the residency permit for pensioners and/or revenue earners (rentistas).
1.- Copy of identification card.
1.- Certificate of no background files[5] issued by the Prosecuting Attorney’s Office (Procuraduría Fiscal) of the Judicial District (Distrito Judicial) where the applicant belongs or by the National Police (Policía Nacional) of the Dominican Republic.
1.- Expired Residency Card.
PARAGRAPH I.- The pensioners and revenue earners (rentistas) will have to deposit at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración) the documents that prove that they have received their pensions or revenues in the national territory for the same period of time that they received the previous residency permit.
PARAGRAPH II.- Once that the renewal application has been approved, the General Directorate of Immigration (Dirección General de Migración) will issue a residency card in a minimum period of time of eight (8) working days, beginning at the date of the application. The residency card will have an expiration period of two (2) years, or the time given by the General Directorate of Immigration (Dirección General de Migración), and it could be renewed at the time of expiration.
ARTICLE 9.- Loss of the Residency Card. In the case of loss of the residency card, the interested party will have to fill up and show at the foreign investment window of the General Directorate of Immigration (Dirección General de Migración) the application form due to loss, with two (2) photos, size of 2 inches by 2 inches, and loss certificate issued by the National Police (Policía Nacional).
ARTICLE 10.- Tax Exemption for the Pension or Revenue Received. The sums of money declared as income in order to enjoy the benefits of this law will be exempted from the Income Tax (Impuestos Sobre la Renta) (Article 271 of the Taxes Code (Código Tributario) is amended).
TITLE III.
ON THE BENEFITS OF THE LAW NO. 14-93, WHICH GIVES AN EXEMPTION FROM THE PAYMENT OF TAXES FOR HOME APPLIANCES AND PERSONAL GOODS OF THE FOREIGNERS WHO COME TO THE DOMINICAN REPUBLIC TO LIVE PERMANENTLY.
ARTICLE 11.- The pensioners and revenue earners (rentistas) whose residency applications have been approved according to the dispositions of the present law will have the benefit of the exemption of the customs duty for the imports of personal and home appliances as well as equipment used in their occupations or professions, according to what it is established by the Law No. 14-93, which gives an exemption from the payment of taxes for home appliances and personal goods to the foreigners that come to the country to live permanently. In addition to the standard requirements and formalities of the General Directorate of Customs (Dirección General de Aduanas) for the application of the Law No. 14-93, the pensioners and revenue earners (rentistas) will have to include in their application a copy of their Permanent Residency Card (Tarjeta de Residencia Definitiva).
PARAGRAPH I.- The pensioners and revenue earners (rentistas) whose applications of Residency due to Investment (Residencia por Inversión) have been appropriately approved by the General Directorate of Immigration (Dirección General de Migración), which are in the waiting process for the issuance of the residency card will be able to begin the procedures of applying for the benefits of the Law 14-93 before the General Directorate of Customs (Dirección General de Aduanas). For these purposes, it will be necessary to show a certified copy of the Approval Letter of the Residency due to Investment (Carta de Aprobación de la Residencia por Inversión), issued by the General Director of Immigration (Director General de Migración).
This document will have to be filed with all the standard requirements of the General Directorate of Customs (Dirección General de Aduanas) for the enjoyment of the benefits of the Law 14-93.
PARAGRAPH II.- The dispositions of the present article will benefit only and exclusively the pensioners and revenue earners (rentistas) who have a Residency due to Investment (Residencia por Inversión) application form appropriately approved by the General Directorate of Immigration (Dirección General de Migración). Therefore, the benefits stated on the Law No. 14-93 will be applied neither to the spouses nor to the dependants of the applicant.
PARAGRAPH III.- All of the exempted goods like home appliances will not be able to be taken away without previously paying for the applicable attributes[6] to the Dominican State.
TITLE IV.
ON THE BENEFITS OF THE LAW NO. 168, ON PARTIAL TAX EXEMPTION OF MOTOR VEHICLES, MODIFIED BY THE LAW NO. 146-00, ON CUSTOMS DUTY REFORM AND TAX COMPENSATION.
ARTICLE 12.- The pensioners and revenue earners (rentistas), and their respective spouses[7], whose permanent residency applications have been approved according to the dispositions of the present law, will benefit from the Regime of Partial Tax Exemption of Motor Vehicles (Régimen de Exoneración Parcial de Impuestos de Vehículos de Motor), established by the Law No. 168, of May 24th, 1967, amended by the Law No. 146-00, on Customs Duty Reform and Tax Compensation (Reforma Arancelaria y Compensación Fiscal).
In addition to the standard requirements and formalities of the General Directorate of Customs (Dirección General de Aduanas) for implementing the Regime of Partial Tax Exemption of Motor Vehicles (Régimen de Exoneración Parcial de Impuestos de Vehículos de Motor), the interested party will have to include in his/her application form a copy of his/her permanent residency card.
PARAGRAPH I.- The pensioners and revenue earners (rentistas), and their respective spouses, whose applications of Residency due to Investment (Residencia por Inversión) have been appropriately approved by the General Directorate of Immigration (Dirección General de Migración), which are in the waiting process of the issuance of the residency card will be able to begin the procedures of applying for the benefits of the Law 168 before the General Directorate of Customs (Dirección General de Aduanas). For these purposes, it will be necessary to show a certified copy of the Approval Letter of the Residency due to Investment (Carta de Aprobación de la Residencia por Inversión), issued by the General Director of Immigration (Director General de Migración). This document will have to be filed with all the standard requirements of the General Directorate of Customs (Dirección General de Aduanas) for the enjoyment of the benefits of the Law 168, amended by the Law No. 146-00, on Customs Duty Reform and Tax Compensation (Reforma Arancelaria y Compensación Fiscal), which establishes the Partial Tax Exemption of Motor Vehicles (Exoneración Parcial de Impuestos de Vehículos de Motor).
PARAGRAPH II.- The motor vehicles that enjoy the benefits of the present disposition will not be able neither to be sold nor transferred to a third party in a period of time of five (5) years, beginning on the date of their arrival to the country, except in the case that the difference of the total rights and applicable taxes are paid.
PARAGRAPH III. For the purpose of implementing the present disposition it will be understood as motor vehicles:
Automobile: It is allowed to the applicant to import one (1) automobile under the benefits of this program; even though, the vehicles which are acquired in the local market will be exempted from the payment of the Transfer Tax to Industrialized Goods and Services (Impuesto de Transferencia de Bienes Industrializados y Servicios) (ITBIS), as well as the Selective Tax on Consumption (Impuesto Selectivo al Consumo[8]).
TITLE V.
ON THE EXEMPTION FROM THE PAYMENT OF TAXES ON TRANSFER, MORTGAGES, TAX ON THE REAL ESTATE PROPERTY, AND GAIN OF CAPITAL.
ARTICLE 13.- The pensioners and revenue earners (rentistas), and their respective spouses, whose permanent residency applications have been approved according to the dispositions of the present law, will benefit from the exemption from the payment of taxes on real estate operations for the first property that they acquire. At the same time, and while their Residency Permit due to Investment (Permiso de Residencia por Inversión) is valid, they will benefit of the exemption of the 50% of the tax on documents and Real Estate Property Tax (Impuesto sobre la Propiedad Inmobiliaria). At the same time, they will be exempted from the payment of the 50% of the mortgages taxes. Therefore, for the beneficiaries of this law and while their Residency Permit due to Investment (Permiso de Residencia por Inversión) is valid the following taxes are modified in the established proportions:
1.- Law No. 18-88, of January 19th, 1988, and its amendments;
1.- Law No. 145-02, of September 9th, 2002, which amends the Law No. 18-88;
1.- Law No. 3341, of July 13th, 1952, on Real Estate Operations (sobre Operaciones Inmobiliarias), and its amendments, including the Law No. 288-04, of September 28th, 2004;
1.- Law No. 33-91, of November 8th, 1991;
1.- Law No. 80-99, of July 29th, on Documents.
ARTICLE 14.- All of the real estate properties acquired by the pensioners and revenue earners (rentistas), under the protection of this law, at the moment of their sale to a third party, will be exempted from the payment of the 50% of the tax on gain of capital.
TITLE VI.
POSSIBILITY OF DOING REMUNERATED WORKS IN THE COUNTRY.
ARTICLE 15.- The pensioners and revenue earners (rentistas) protected under this law will be able to endeavor themselves in remunerated works. Even though, the wages earned for that activity will be subjected to the payment of the applicable taxes to the Dominican State, like any other national employee, according to the principle of equal treatment established on the Law No. 16-95, of November 20th, 1995, on Foreign Investment (sobre Inversión Extranjera).
TITLE VII.
GENERAL DISPOSITIONS.
ARTICLE 16.- The benefits of this law protect in an equal way the Dominican citizens who are persioners or retired people, by governmental institutions of other countries, and for those ones who do not have that character can prove that they receive rents or revenues according to the terms that Article 1 of the present law establishes, and who have lived permanently abroad no less than ten (10) years.
PARAGRAPH.- The foreign residents in this country who acquire the condition of pensioners and/or revenue earners (rentistas) will be able to obtain the benefits of this law.
ARTICLE 17.- In the case of death of the main applicant, the acquired rights by him/her as beneficiary will be adjudicated to the spouse, or by default to any other dependant, defined in Article 5 of this law, whenever these ones comply with the legal requirements that were requested to the main applicant, established on Articles 3 and 6 of this law.
ARTICLE 18.- Sanctions due to Violation of the Present Law. The persons who apply in order to be beneficiaries of this law and who on a conscious manner provide false information in order to benefit themselves of the concessions that this law gives will be liable of sanctions, and they will have to pay a fine of an equivalent sum of the double amount of applicable taxes which they have to pay to the Dominican tax authorities.
ARTICLE 19.- The present law annuls any other disposition that might be contrary to the purpose of its implementation.
GIVEN in the Meeting Hall of the Deputies’ Chamber (Sala de Sesiones de la Cámara de Diputados), Palace of the National Congress (Palacio del Congreso Nacional), in Santo Domingo de Guzmán, Distrito Nacional, capital city of the Dominican Republic, at the 10th day of the month of April of the year two thousand and seven (2007); at the 164th year of the Independence, and the 144th year of the Restoration (Restauración).
Julio César Valentín Jiminián
President
María Cleofia Sánchez Lora
Secretary
Teodoro Ursino Reyes
Secretary
GIVEN in the Meeting Hall of the Senate (Sala de Sesiones del Senado), Palace of the National Congress (Palacio del Congreso Nacional), in Santo Domingo de Guzmán, Distrito Nacional, capital city of the Dominican Republic, at the 19th day of the month of June of the year two thousand and seven (2007); at the 164th year of the Independence, and the 144th year of the Restoration (Restauración).
Reinaldo Pared Pérez
President
Amarilis Santana Cedano
Secretary
Luis René Canaán Rojas
Ad-Hoc Secretary
LEONEL FERNÁNDEZ
President of the Dominican Republic
In the exercise of the attributions that confer me the Article 55 of the Constitution of the Republic.
I PROMULGATE the present Law, and I give the order to publish it in the Official Gazette for its knowledge and enactment.
GIVEN in Santo Domingo de Guzmán, Distrito Nacional, capital city of the Dominican Republic, at the 13th day of the month of July of the year two thousand and seven (2007); at the 164th year of the Independence, and the 144th year of the Restoration (Restauración).
LEONEL FERNÁNDEZ.
[1] Translator’s Note: A bondholder is a specific case of revenue earner.
[2] Translator’s Note: There is a mistake on the original text since the Word “and” is missing.
[3] Translator’s Note: The Word “abroad” is missing in the original. According to the context, this Law is dealing with income generated from a foreign source.
[4] Translator’s Note: There is no consistency in the original text when it refers to the pensioners and revenue earners. Sometimes they are called “pensioners and/or revenue earners”, which is the correct way of referring to them. Most of the time, they are called “pensioners and revenue earners”.
[5] Translator’s Note: Criminal Records.
[6] Translator’s Note: Instead of “attributes”, this Law could be speaking of “tributos” (taxes) in the original text.
[7] Translator’s Note: This Law should also mention the “dependants” of the main applicant in some articles like in this one.
[8] Translator’s Note: The original text has a mistake when naming this tax. It wrongly calls it “Impuesto sobre el Selectivo al Consumo”.
Subscribe to:
Posts (Atom)