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