Incentives for Foreign Investments in the Dominican Republic - Tourism promotion (Law 158-01)

The Dominican Republic is the number one tourist destination in the Caribbean, experiencing a record number of 4.1 million visitors in 2010. Three key strengths have driven growth: the size, quality and number of beaches; the country’s six international airports; and strong foreign direct investment in the infrastructure. Traditional tourism activities and complementary activities capable of servicing the sector offer the investor a diverse base for investment. Attractiveness to investors is further boosted by the government’s proactive policies that promote and protect investments in the sector and offer some of the lowest tax regimes in the region.

Law 158-01, dated October 9, 2001, complemented by its enabling regulations Decrees #1125-01 and #74-02, and amended in some minor details by Law #184-02, provides tax incentives to investments in underdeveloped regions that offer the most tourism potential in the Dominican Republic. These incentives, targeting primarily underdeveloped provinces and municipalities around the country but also including developed areas such as Punta Cana and Puerto Plata, grant priority to infrastructure construction, and provide channels for international financing and selling or leasing state-owned land for tourism. Tourism operations such as hotels, convention centers, cruise companies, theme parks, port and tourist infrastructure, golf courses, and complementary activities benefit from these current government incentives.

Tax exemptions extend for 10 years from the date of completion of construction or project installation, and include the following:
• Income Tax;
• Incorporation taxes and capitalization increases;
• Real property transfers upon presentment of a guarantee bond at 3% of the tax due;
• Real estate property tax (IPI);
• Contractor fees, duties, and quotas for project oversight;
• International financing taxes and withholdings granted to beneficiary companies;
• Import taxes and other import fees; and
• ITBIS (value added tax) on machinery, equipment, materials, and personal goods necessary for the project start up.
An additional incentive is a tax deduction of up to 20% on annual net taxable income on approved investments.

Projects must respect the environment, show sustainable and rational development, and be classified by the Ministry for Tourism to benefit from the tax exemptions and deduction. Classification requires an application, an approved environmental impact study, preliminarily approved architectural design and engineering details, a description of the promotional entity or investor, a marketing and promotion plan, and bank and commercial references. The submission is evaluated and recommendations are sent to the Tourism Promotion Council (CONFOTUR) which justifies its decisions with a formal resolution.

Incentives for Foreign Investments in the Dominican Republic - Law 16-95 about Foreign Investments

This law reifies the important equality provision of Article 25 in the new Constitution, providing equal treatment and non-discrimination to both national and foreign investments. The statute and its enabling regulation (Decree #380-96 as amended by Decree #163-97), grant foreign investors, who are contributing capital to companies operating in the Dominican Republic, unlimited access to the Dominican economy except for activities that negatively impact the local environment or public, or compromise national defense or security.

Capital contributions can be made through several channels and in a variety of forms. Accepted channels of contributions are: 1. directly to the Dominican operating company from sources outside the country, 2. directly by reinvesting profits derived from the registered Dominican foreign investment back into that same operating company, and 3. indirectly from profits derived from one registered Dominican foreign investment and invested in a different Dominican operating company. Acceptable forms of contributions as foreign investment can be liquid currency, general contributions, financial instruments, or intangible technological property and knowledge.