Fabio J Guzmán-Saladín and Fabio J Guzmán-Ariza of Guzmán Ariza explain why the Dominican Republic's FDI prospects continue to grow

For decades, the Dominican Republic has relied on foreign investment as an essential cornerstone of its economic development and growth. The Dominican government has always been vigilant of the international reputation the country holds in regards to the reliability of receiving and protecting foreign investments.

In this sense, the government has sought to ensure that the legal framework fosters a secure commercial and regulatory environment for investors to start businesses, perform business activities, and enforce contracts, while reducing unnecessary government regulatory intervention.

Moreover, in recent years, the government has also invested in improving local infrastructure and public services, not only to provide a secure investment climate, but also to ensure that investors will have available the infrastructure and services needed to thrive and grow their businesses.

The legal framework for foreign investment in the Dominican Republic was created in 1995 with the enactment of the Foreign Investment Law. This law established that foreign investments must be treated in the same legal manner as local investments. For instance, foreign investors wishing to do business in the Dominican Republic, either through the incorporation of new local corporate vehicles or by acquiring existing businesses, would not have to undergo any advance approval or registration process with the local government.

Nevertheless, both local and foreign investments must undergo advance regulatory approval on matters related to national security, public health and the environment.

On the other hand, the general legal framework for doing business in the Dominican Republic has undergone, in the last decades, remarkable progress with the enactment of new laws and amendments to existing regulations with the intent of modernising the judicial system, facilitating commerce, and fostering legal security. In this regard, the most important provisions have been the ones set out below.

Corporate regulations

The Company Law, which governs company formations, was enacted in December 2008 and amended by Law 31-11 in February 2011. The law is generally flexible, and imposes few capitalisation requirements, but unlike some countries, Dominican companies are subjected to the same tax treatment regardless of structure. Selecting the proper structure requires a knowledgeable attorney and consideration of the amount of the capital investment, company management, transferability of shares, and reporting formalities, among other factors.

Four structures in particular are used in the Dominican Republic. Within these four structures, an individual member's liability is limited to no more than the amount of that member's contribution to the company. In other words, if a company fails, a member stands to lose only that member's investment. None of the members, individually or collectively, are liable for the debt obligations of the company. Furthermore, the limited liability protection afforded to members of these structures is strictly observed under the law, except in the case of fraud or misrepresentation.

For instance, a corporation (Sociedad Anónima, abbreviated as SA) is ideal for large businesses and the only structure that can raise capital through a public stock offering.

The simplified corporation (Sociedad Anónima Simplificada, abbreviated as SAS) is best for medium to large-sized businesses which require special shareholder provisions for corporate governance purposes. With an SAS, capital may not be raised through a public offering except through debt instruments.

Alternatively, the most commonly used corporate structure is the limited liability company (Sociedad de Responsabilidad Limitada, abbreviated as SRL). The LLC is best for small to medium-sized businesses and large, family-owned businesses. With this structure, capital may not be raised through a public offering.

Finally, the individually owned company with limited liability (Empresa Individual de Responsabilidad Limitada, abbreviated as EIRL) is good for individually owned businesses.

Before the enactment of the Companys Law, the Mercantile Registry Law 03-02 created a centralised registration system of companies, managed by the local Chambers of Commerce throughout the Dominican Republic. The mercantile registries record the life of the company, whether a new company formation or the registration of a branch of a foreign company, from its incorporation to all other corporate activities involving capital increases, corporate restructurings, mergers, spin-offs and dissolutions.

Nonetheless, mergers and acquisitions are mainly regulated by the parties involved. The procedural stages and steps are outlined by the local law and supervised by the mercantile registry office, where all processes and documents must be registered. For companies operating in certain regulated sectors, such as electricity, telecommunications, banking, and insurance, or companies with publicly issued shares, it is mandatory to obtain authorisation from the corresponding regulatory agency to proceed with any type of capital restructuring or transfer. In all cases, tax authorities oversee all merger and capital restructuring processes.

Recently, the Santo Domingo Chamber of Commerce created a one-stop shop, which minimises the company formation process substantially by serving as an intermediary for the commercial name registration with the national trademark office, the registration of the company bylaws with the mercantile registry, and for the issuance of the company's tax number with the Dominican tax authority.

Currency convertibility

The Monetary and Financial Code of the Dominican Republic enacted by Law 183-02 provides for the free convertibility of the Dominican Peso, the official local currency, facilitating transactions involving different currencies in the country. This code allows the market to establish the foreign exchange rates based on supply and demand. Since then, it has been possible to perform foreign exchange operations through the Dominican commercial banks or authorised exchange agents, with the only reporting requirement established by the laws being with respect to money laundering. There is a minimum requirement of time for which foreign currency must remain in a local bank account before being transferred abroad, but the term is minimal.

Financial and banking stability

After a major bank crisis in the mid-2000s, the Dominican government updated the banking regulations to assure increased levels of liquidity, improved financial oversight, and to avoid systemic risk. These new regulations also strengthened diversification rules in terms of sector risks, and focused on higher levels of reserves and solvency. Due to these changes, the financial sector has enjoyed steady growth, since it has been able to increase its granting of credit as a result of excess liquidity.

Access to local courts

Foreign litigation bonds have been eliminated as a barrier for foreigners to access the local judicial system. Moreover, our Corporate Law eliminated the need for a litigation bond for foreign companies wishing to initiate a lawsuit in Dominican courts. This is a very important step toward making justice available to all, whether nationals or foreigners. Additionally, along with other legal amendments and enactments, the judicial system is being modernised to effectively assure the protection of individual legal rights in the country.

Fair competition

The General Law on Competition was enacted in 2008 to create a legal and institutional framework for promoting free competition in the Dominican Republic. The purpose of this Law No 42-08 is to promote and protect effective competition to enhance the efficiency of the market for the benefit of consumers. In this sense, the law prohibits, among other things: any act or agreement between competitors with the purpose or effect of nullifying competition among them, or that aims to impose barriers to new competitors into the market; abuse of a dominant position in a market; or, any act or behaviour conducted in the commercial or business environment that may be contrary to good faith and business ethics. Infringements of the law by performing acts of unfair competition or abuse of a dominant market position are sanctioned with monetary fines, or criminal or civil penalties.


Law No 489-08 on Commercial Arbitration was enacted to modernise the regulations on alternative dispute resolution, specifically, arbitration. This law allows the parties to choose to have disputes deriving from an agreement executed in the Dominican Republic examined and ruled via arbitration. This law became necessary as a result of the Free Trade Agreement between the US, Central America and the Dominican Republic (DR-CAFTA).

The provisions on arbitration contained in local or international agreements executed in the country are enforceable and binding between the contracting parties. Similarly, the parties are free to choose the place of arbitration and the laws to govern an agreement. It is important to mention that the Dominican Republic is also a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the American Convention on International Commercial Arbitration (Panama Convention), among others.

Private International Law

With our new Private International Law enacted in December 2014, contracting parties will be able to choose the forum – judicial courts or arbitration – in which to solve their conflicts, and the law that will apply to parts of, or the entire agreement signed by them. In addition, it finally regulates the process for enforcing foreign judgments, be it arbitral awards or court rulings, in the Dominican Republic.

Renewable energy law

Law No 57-07 on Development of Renewable Sources of Energy created an array of incentives to encourage and regulate investment in projects which generate renewable energy. All projects of a public, private or mixed nature destined to build facilities for renewable energy production or reproduction of bio-fuels can benefit from the law with the following tax exemptions:

  • 100% tax exemption on importation of equipment and accessories necessary for the production, transmission and interconnection of renewable energy.
  • A ten-year exemption (not exceeding year 2020) from taxes on income derived from the generation and sale of electricity, hot water, steam power, bio-fuels or synthetic fuels generated from renewable energy sources.
  • five percent reduction of taxes applicable to external financing.
  • Tax incentives for auto energy producers up to 75% of the total cost of equipment investment against income tax.

Additionally, under the same law, all social interest institutions and NGOs will have access to financing at lower market rates for an amount of up to 75% of the total cost of the project.

Finally, all projects submitted through this law would be eligible to be awarded certificates or bonuses for reducing carbon emissions under the Kyoto Protocol. The governmental entity in charge of granting the tax incentives provided by the law is the National Energy Commission. This law has been the key to the establishment of several projects that generate renewable energy in the country, all of which have important participation by foreign investors.

Free-trade zone law

Free zones are restricted geographic areas reserved mainly for exporting companies to establish production of their goods or services, while enjoying special tax and customs regimes. Free zones represent an important pillar of the Dominican economy and an attractive investment opportunity for any investor interested in producing goods or services for foreign markets.

Free zones and free zone parks are governed and regulated by the special regime created in Law No 8-90, and operate under the surveillance of the National Free Zone Council. There are two types of free zones in the Dominican Republic, namely: industrial or service free zones (product manufacturing or assembly operations companies, call centres, and so on); and, free zones located along the Haitian border – governed by Law No 28-01, which creates a Special Free Zone for Border Development.

In summary, the fiscal advantages of free zone regimes, which have a duration of 15 years with an option to renew (except for free zones located on the border with Haiti, which have a duration of 20 years), are the following:

  • Income tax exemption;
  • Exemption from construction tax, tax on loan agreements and the registration and transfer of immovable property;
  • Exemption from business incorporation tax and the increase or corporate capital tax;
  • Exemption from municipal taxes;
  • Exemption from asset tax and value added tax;
  • Exemption from all import taxes, tariffs, customs duties and other related charges on raw materials, equipment or materials for construction, preparation or operation in the free zone;
  • Exemption from exports taxes or re-exports, with certain exceptions;
  • Exemption from patent tax;
  • Exemption from consular fees on imports destined for free zones;
  • Exemption from import taxes relating to equipment and tools necessary for installation and the operation of cafeterias, health care, medical care, child care, entertainment or amenities or other equipment for the welfare of the workforce;
  • Exemption from import taxes on transportation equipment, such as trucks, garbage trucks, vans, or minibuses to transport employees and workers to and from the workplace;
  • Exemption from the 50% of fees related to free transit and use of ports and airports;

Both importing to and exporting from a free zone have a special customs regime. A special body protects the customs of companies benefiting from the regime.

Movie industry law

The Dominican government adopted Law No. 108-10 to promote the production, creation, distribution and conservation of Dominican movies. One of the main incentives is a transferable tax credit equal to 25% of the expenses incurred in the country directly related to the pre-production, production and post-production of movies and video footage. This tax credit may be requested for partially or completely executed budgets, for expenditures of a minimum of $500,000. Expenses must be audited by a certified public accountant (CPA). Additionally, all goods and services directly related to the pre-production, production and post-production of movies and video footage are exempt from payment of the local value-added tax that applies on the sale and transfer of goods and services.

Only companies registered and authorised with the Dominican Republic Film Commission, which is the responsible regulatory governmental agency, are eligible for these benefits as well as others that are available in relation to low-cost financing.

Tourism development law

Law 158-01, amended by law 195-13, establishes a series of incentives to accelerate the development of the tourism industry in all the regions deemed of great potential for growth. In general terms, this law provides a tax exemption for a period of 15 years from the date of completion of the construction work and installation of equipment for a qualifying tourism project. Qualifying projects are exempt from payment of the following taxes:

  • income tax;
  • national and municipal taxes applicable to tourism construction operations, such as building permits, and including land purchase; and,
  • import taxes, and other fees, surcharges, and tariffs, including the local value added tax (VAT) applicable on the equipment, materials and furniture necessary for the initial equipment and operations of the tourism project.

Similarly, existing hotels that are at least 15 years old are eligible for tax exemptions on the value added tax (VAT) and any other taxes applicable to the equipment, materials, and machinery required for the modernisation and renovation of the hotel's facilities, if that works encompass at least 50% of its existing facilities.

The Tourism Promotion Council (CONFOTUR) is the governmental agency responsible for enforcing the law, and reviewing, approving or rejecting applications. Once approved, projects benefiting from the tourism incentives must begin construction within a three-year period, and its operations must not be interrupted to avoid the retrieval, ipso-facto, of the tax exemptions indicated above.

Other economic sectors which have seen a considerable inflow of foreign investment, and whose legislation is being reviewed with a view to modernisation and amendments, are:


Over the last few years, mining has been growing in economic importance to the Dominican Republic. Traditionally, nickel-iron, marble and quarry products, such as sand, coarse sand and lime sulphate have been extracted in important quantities in the Dominican Republic. Recently, Barrick Gold Corporation made the largest foreign investment in the Dominican Republic's history, with its $4 billion gold and silver mining project.

Private parties, whether local or foreign, can undertake minerals exploration or extraction activities by obtaining a concession from the government. The law provides an application process specifying the documentation needed for obtaining a concession, and there are no restrictions or special conditions in relation to foreign companies, except that they need to incorporate a local subsidiary to become the local recipient of the concession.

Nevertheless, with the recent incorporation of a special Ministry of Energy and Mines, we expect some regulatory changes in the near future related to the legal framework which will govern all concession processes related to the mining industry.


The Dominican Republic is a net importer of energy. The Dominican electricity sector is subsidised by the central government, given the high cost of production and its correlation with international fluctuations of oil prices. Traditionally, there has been a strong presence of foreign investors in the sector, especially as independent power producers. In this sense, the sector has also been an important source of foreign exchange for the local economy. Regulation of the sector is in a state of review and the Dominican government has made commitments to reduce the subsidies, in part with an integral electricity reform and the development of projects such as a $2 billion coal-carbon plant project.


The Dominican Republic was one of the first countries in Latin America to have a privatised telephone service and has seen a great amount of foreign investment in the last decades. Among a variety of factors, the sector has grown due the proliferation of pre-paid cellular plans and handsets and an increase in internet and data services. The sector has a strong and modern legal framework with the most important law being the General Telecommunications Law No 153-98. The governing entity is the Dominican Telecommunications Institute (INDOTEL).

In general terms, the country has made great efforts to ensure the proper protection of foreign investment, to facilitate local and international trade, and to continue the updating of the local legal framework to keep attracting investment and helping the local economy to grow in a steadfast manner. The government recognises that in addition to maintaining its momentum in modernising our laws, it needs to ensure their proper enforcement under the local judicial system, and ensure that the governmental entities supervising the different sectors work alongside the market participants to foster constant and healthy improvement.


  First published by our sister publication IFLR magazine. Take your free trial today.


Fabio J Guzmán-Saladín
Guzmán Ariza
Santo Domingo

About the author

Fabio Guzmán-Saladín is the main contact within the firm for several multinational and multilateral investment banks interested in financing opportunities in the country, for restructuring of projects and M&A transactions. He is also the team leader of the corporate department, which is tailored to addressing an international corporate clientele, with experience in numerous highly-regulated industries, such as energy and telecommunications.

He has represented several market leading construction companies in the negotiation and resolution of labour disputes, as well as multinationals in the Dominican Republic in complex contract negotiations with local government entities. He also has experience representing free trade zone companies in their negotiations with workers' unions. He received his LL.B. at PUCMM (summa cum laude, 2007); an associate degree in business administration, international business, with honours, 2005; and obtained an MBA at IE Business School in 2008.


Fabio J Guzmán-Ariza
Guzmán Ariza
Santo Domingo

About the author

As a law practitioner, Fabio Guzmán-Ariza has long and in-depth experience in servicing the needs of international investors in the Dominican Republic, especially in the areas of civil law and real estate law.

He has served for more than a decade as the host and moderator of the DR1 legal forum, the oldest and most popular Dominican legal forum available on the internet. He is a numerary member of the Dominican Academy of Letters and founder and president of the foundation supporting the Academy.

He is a graduate of the Massachusetts Institute of Technology and the Pontificia Universidad Católica Madre y Maestra (LL.B., summa cum laude, 1981) where he headed his law class. He is a former professor of civil law and dean of the law faculty at the Universidad Católica Nordestana. Presently, he is the editor-in-chief and director of publications of Gaceta Judicial, the leading legal journal and publisher in the Dominican Republic.