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.

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