Doing Business in the Dominican Republic
- What is the current business climate in your jurisdiction, including major political, economic, and/or legal activities on the horizon in your country that could have a big impact on businesses?
The Dominican Republic has been one of the fastest-growing economies in Latin America and the largest in the Caribbean for several years. GDP is projected to grow by 5.5% in 2021 despite the COVID-19 pandemic, primarily thanks to tourism, remittances, foreign direct investment, mining revenues, free-trade zones, and telecommunications. The country provides tax incentives for investments in tourism, renewable energy, film production, Haiti-Dominican Republic border development, and the industrial sector.
In January 2020, the government announced a special incentive plan to promote high-quality investments in tourism and infrastructure in the country's southwest region. Additionally, The Special Zones for Border Development Law, extends incentives for direct investments in manufacturing projects in the Haiti-Dominican Republic border for 30 years. These incentives include the exemption of income tax on the net taxable income of the projects, the exemption of sales tax, the exemption of import duties and tariffs and other related charges on imported equipment and machinery, as well as on imports of lubricants and fuels (except gasoline) used in the processes.
In February 2020, the Dominican government enacted the Public-Private Partnerships (PPP) Law to establish a regulatory framework for PPPs initiation, selection, award, contracting, execution, monitoring, and termination. This law was created to promote the development of infrastructure and other projects in the country and provides:
- Forty-year concession contracts.
- Five-year exemptions of the tax on the transfer of goods and services (ITBIS).
- Accelerated depreciation and amortization regimes.
The Dominican Republic is also a signatory of the Central America Free Trade Agreement-Dominican Republic (CAFTA-DR), which promotes trade between the USA, Central America, and the Dominican Republic.
- From what countries do you see the most inbound investment? What about outbound?
(i) Most Inbound Investments - USA, Canada, Spain, Mexico, Brazil, France, Italy, Netherlands.
(ii) Most Outbound Investments - Haiti, USA, Puerto Rico, and Panamá
- In what industries/sectors are you seeing the most opportunity for foreign investment?
During the last decade, foreign investment has mainly been directed towards the commercial, tourism, real estate, and mining sectors. However, in the past two years, foreign investment increased primarily due to investments in the communications and electricity sectors.
We continue to see opportunities in the mining and electricity sectors, specifically renewable energy and natural gas. Tourism still looks promising, particularly specialized tourism such as health-related or golf-related. There is also opportunity in the logistics/hub sector, given the country's geographical region.
- What advantages and pitfalls should others know about doing business in your country?
ADVANTAGES:
- Bilateral agreements to promote and protect FDIs
- Laws that incentivize a variety of sectors
- Various Free-Trade Agreements
- Strategic location
- First place in competitiveness in the region by the World Economic Forum
- Incentivize and promote PPPs
- Economic, social and political stability
PITFALLS:
- Taxes
- Governmental bureaucracy for some regulated sectors
- Country's electric deficiencies
- Labor regulation
- What is one cultural fact or custom about your country that others should know when doing business there?
The Dominican Republic is known for its hospitality and being welcoming.
Originally published Aug 25, 2021.
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