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.

WHY TO INVEST IN DOMINICAN REPUBLIC

Thanks to the largest economy in Central America and the Caribbean, the Dominican Republic is known for its positive attitude towards foreign investments. According to the World Bank, the Dominican Republic was ranked as the largest Foreign Direct Investment (FDI) recipient in the Caribbean in 2012. In 2012, FDI flows into the Dominican Republic grew 59% on the back of the acquisition by Anheuser-Busch InBev of Cervecería Nacional Dominicana, the country’s largest brewer, for more than US$1.23 billion. Even without this acquisition, however, FDI in the Dominican Republic would have been up on 2011, driven by increased investments in electricity, manufacturing and mining. Investment was also up in manufacturing in export processing zones, tourism and real estate.

The Dominican Republic is easily reachable from most countries in the Caribbean and is served by eight international airports. Expressways and roads make it easy to travel to all three coasts of the country, the south, east and north.

Other plus for doing business in the country is its abundant work force, including both non-skilled and highly skilled staff. There is a young and talented population, including a large number of bilingual workers.

Outside economic reasons, the climate, natural and cultural attractions of the Dominican Republic make it a perfect place to live and raise a family. A leading world tourism destination, the country has more than 65,000 hotel rooms and 26 golf courses at beach, city and mountain destinations. There is also a plenty of attractions like excellent shopping with goods from all around the world, sophisticated restaurants and nightlife.