Some information about economy,
investment and tax regulation:
Multilateral relations of the Dominican Republic: member of OMC since
March 1995, the Dominican Republic engaged itself in a process of reform and
liberalization of his marketing policy. In order to be better integrated in the
regional economy (Central America), the country has agreements of free exchange
with the two regional blocks of the Caribbean and the Central America (Caricom
and CACM) since 2001. March 2004, extension to North America with an agreement
of free exchange, known under the name of "DR-CAFTA", which was signed
between the RD and the USA. The country profits from the agreements of trade
preferences signed with the United States (CBI and CBTPA), with the European
Union (agreement of Cotonou), as well as agreement SGP (Generalized System of
Preferences). The international institutions are present with the BID, the World
Bank & the IFC, the Delegation of the European Commission and the USAID.
Important challenges: the major problem concerning
energy is to solve the financial dead end related to the electric
sector, which generates an annual loss from 400 to 500 million
dollars. Unfortunately no fast solution is contemplated to
put an end to the vicious circle of a faulty service and of
the consumer who refuses to pay his invoice of electricity.
A strategic plan aiming to the sustainability of the sector
by the reduction of the losses, the improvement of the covering
of the invoices, the restrictions of the subsidies and the
renegotiation of the contracts must be implemented.
The problem of the debt: the ratio public
debt/GDP is acceptable (49, 1 % in 2005). According to
forecasts of the IMF, the national debt will decrease of
54,3 % of the GDP in 2003, to 44 % at the end of the year
2009, and will only represent 210 % of the public receipts
(comparing with 280 % in 2004). The internal debt: the
major components come from the debt with the electric sector
and the certificates of investments of the Central Bank.
The renewal of confidence made it possible to exploit the
rates (25, 5 % at the end of the year, instead of 60% in
July). The external debt: The RD succeeded in paying almost
all its arrears as well with the Club of Paris as to the
other multilateral financial backers.
Encouraging prospects: 2004 showed
a positive growth of 2 %, an inflation of 28, 7 % and a consolidated
public deficit lower
than 4 % of the GDP, the macroeconomic prospects at the horizon
for 2005-2007 are encouraging. It is one of the only countries of the
area to present
a solid industrial base, a successful tourist development
and transfers coming from Dominican people abroad (2,2 billion dollars
in 2004, nearly
12% of the GDP) who strongly contribute to balance while
giving a support for consumption.
Investment:
Being
one of the most stable countries of Caribbean and of the
Latin America, having a strategic geographical situation,
with a low standard of living and laws encouraging the
foreign investments, the Dominican Republic is a very attractive
country for the investors seeking for profit and safety.
Buying and selling: no restrictions concerning
the foreigners to acquire a good. In 1998 an order in Council
proclaims that the foreigners can acquire all the properties
they wish and they can obtain the title deed from it.
New tax exemption: the tourist areas with
a strong potential of development like Las Terrenas benefit
from this new law. All the profits can then be repatriated
in any country.
The purchase of real estate: for the moment,
there are no restrictive clauses for the purchase of a
real estate by a foreigner in Dominican Republic. You will
have to pay taxes varying from 5, 5 to 7, and 5 % of the
purchase price in order to be able to record the purchase
of the good. The acquisition of a real estate by a foreigner
obeys the same laws as those applicable to the national
people. In theory, showing the "Título de Propiedad" (Certificate
of Property) is enough to prove that the salesman has the
right to transfer the real estate.
The mortgages, loads or rights must be registered on the certificate. It is highly
advised to check directly the situation of the good at the office of "Registro
de Títulos" (Land Registry); they are public records in writing open
to any interested person. The system protects the purchaser against the possibility
of a sale or mortgage, authorized with anteriority and not yet recorded. Unfortunately,
there are many goods which have been sold several times because of a lack of
information.
Prices posted in dollars: the Dominican
economy readily accepts American dollars for some goods,
like houses and/or apartments as well as vehicles. It is
however possible to pay in Dominican Pesos.
Rights of inheritance: the foreigners can
inherit a real estate freely. The Dominican law on the inheritance
systematically issues a portion of the estate to devolve compulsorily
upon the heirs of the deceased.
The transfer of property: the purchaser
and the salesman must come up before notary in order
to subscribe a contract of purchase. The contract will
be presented at the local administration of taxes and
the contract of purchase as well as the title deed
(Certificado de título) of the salesman will
be deposited at the office of the Land Register.
Insurance of the title deed: the
State guarantees the validity of the title deed,
it is however possible (even necessary) to take an
insurance policy or a guarantee of property with
some private insurers.
The binding promise to sell: the
amount to be paid at the time of the signature of
the binding promise to sell is fixed between the
parties, who must choose it, and no legal provisions
do define this amount. The practice wants that generally
30 % of the total price is paid by the purchaser
at the time of the signature.
Borrowing: the rates are very high,
which is usual in Dominican Republic. As for the
real estate purchases, the rates in force vary between
18 and 24%.
Tax
regulation:
In the event of wishing to open a
business in Dominican Republic, you should know this:
ITBIS (VAT):
The law n°147-00 of December 2000, the ITBIS
(Impuesto sobre las Transferencias de Bienes Industrializados
y Servicios, Tax on the transfer of industrial goods
and services) is a value-added tax which applies to a
majority
of goods and services:
• Sales and imports of industrialized goods.
• Provisions of telephone services, cables, telex, cable
television or on closed loop, beepers, radio and all
the other products of the same kind.
• Provisions of services of bars, restaurants, discotheques,
cafeterias, hotels, motels, apart-hotels, flower delivery
and all other the products of the same kind.
• Hiring of movables: vehicles, equipment...
Exemptions: the taxes’ code (articles
343 and 344) draws up a list of local and imported products
not liable to the ITBIS. It includes the food consumed everyday,
seeds and grains, the medicines, the books and publications,
the teaching equipment, and the cigars. It also includes an
amount of services, the educational sector, including the cultural
field (theatre, opera, and dance), the health services, the
financial services (except insurances), the services related
to the surface transports (bus, taxis), and the services related
to the transport of the electric power. The public, religious,
educational and social institutions are also free from ITBIS.
Declaration of income: first of all
it is you must be registered at the National Register
of Taxpayers (RNC) in the 30 days as from the beginning
of the activities prone to the tax. Then, all the taxpayers
must provide the invoices inherent to the transfers of
goods and provisions of fixed and exonerated services.
The ISC (Selective Consumption
Tax):
The Selective Consumption Tax is applied to some products,
including alcoholic drinks, the carpets, the caviar,
the electrical appliances of domestic use, the
electronic products, the luxury watches & the jewels, the perfumes, the cigars & cigarettes,
the yachts, jet-skis, etc... Besides these products, the new law extends the
ISC to some services (telecommunications are struck with 10% of ISC, except from
the capital goods). Its rate lies between 10 and 78%.
The Tax regulation of the Companies: the
most recent tax reform has been just implemented
on October 1, 2004 by law 288-04.
