As business owner you need to know the ground rules for playing in the Dominican Republic. Over the last five years, we’ve realized that foreign investors have lots of information on how to do business in Dominican Republic. Unfortunately most of it biased or wrong.
The present article is intended, and designed, to be a self-help tool for the business owner who wants an up-to date guide to the basic financial, legal, and tax ground rules that apply to most businesses operating in the Dominican Republic. You will find useful information on how to set up a Dominican corporation, a subsidiary, a branch, hiring personnel and more. For more and precise information, please contact us fmiranda@fgasoc.com.do. Also, for your queries relating to trademark (presently under construction)www.trademark-registration.com.do; for real estate, www.Dominican-real estate.com.do, for information about traveling or staying in Dominican Republic, www.Dominican-residence.com.do.
To invest in the Dominican Republic, you can form what we call a “per share” company, similar to LLCs of the United States, because your liability (responsibility in French legislation) is limited to the amount of your investment. It is possible, also, to enter into a partnership. In a partnership the associates have to face personally business liabilities during the life of same.
While considering, or doubting which form of corporation is easier to establish in the Dominican Republic, we suggest a branch. You may bring your foreign corporation to the Dominican Republic, and fix domicile, get tax payer ID, and registration with the Ministry of commercial concerns. You can also form your own “per share” company in the Dominican Republic. To set up said corporation you must pay taxes, have a minimum of seven members and obtain registration with Internal Revenue Office.
It is mandatory to have a minimum quota of national investment? Legislation 16-95 establishes equal treatment for nationals and foreign investors. Nevertheless we do have regulated fields, such as mining, insurance, telecommunication, etc.
Reporting issues.
When you do business through a corporation with a capital over RD$500,000.00, you must have an “organized accounting system”, which means that a certified Public Accountant must certify your financial statement for preparation of income tax. Taxes? What is my tax liability as foreign investor?
The rule. All income of Dominican source or income from sources outside the Dominican Republic that proceed from investments and financial profits are liable to Dominican taxes. And…home company’s expenses, are these, deductibles from the taxable income of a Dominican branch or subsidiary?
Branch’s expenses can be deducted from the taxable income. The subsidiary, however, is not allow to deduct home company’s expenses.
Am I liable to capital gains? Yes at 25% of your net income. However, your capital losses can be compensated when they exceed the capital profits obtained on a same fiscal year. The remaining balance can be compensated with the capital gains obtained in subsequent activities.
And…individual taxes? A) As a resident in the Dominican Republic, your tax will fall upon your income of Dominican source, or income of sources outside the Dominican Republic that proceed from investments and financial profits; B) For non residents, taxes will fall upon your income of Dominican source; C) residents are liable to taxes for the amounts perceived after the third year or taxable period after they have established their residence in the Dominican Republic.
You need the assistant of a good Attorney to set up your residence and to help you with your tax statement, because we do not have tax treaties to allow the foreigners to obtain a tax refund when they leave the Dominican Republic.
How long can I stay in Dominican Republic without paying income tax? If you stay in the Dominican Republic for more than 128 days, in a continuous or irregular manner, during a fiscal period, the Government will treat you as a resident and you are liable to personal taxes, for you income coming from Dominican sources. But…
I am just working in the Dominican Republic, am I still liable to pay taxes for benefits paid or received in my Country of origin?Services provided in the Dominican Republic and paid in your Country are subject to Dominican taxes. Only Christmas’s salaries are tax-exempt.
For information about hiring personnel in the Dominican Republic, free zones incentives, import and export, contact Freddy Miranda at fmiranda@fgasoc.com.do, and get a free consultation.
The author is an Attorney of Figueroa Guilamo & Associates. Dominican Republic. www.fgasoc.com.do www.Dominican-Residence.com.do www.Dominican-RealEstate.com.do, www.Trademark-Registration.com.do
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