Document(1)

Doing business in the Dominican Republic 1.

DOING BUSINESS

in the DOMiniCAn

RePUBLiC

25th eDitiOn

2. Pellerano & Herrera

DOING BUSINESS IN THE DOMINICAN REPUBLIC

this Legal Guide is a publication of the Dominican Republic law

firm Pellerano & herrera. it has been prepared for those interes-

ted in investing in the Dominican Republic and provides infor-

mation about the country, the laws that regulate its economy

and society, and mostly the Dominican investment climate. this

Guide allows readers to identify the wide variety of investment

opportunities in the country and the legal framework that go-

verns investments and investors’ commercial activities.

this Guide does not constitute legal advice or a legal opinion

about any specific matter; should legal advice or other professio-

nal assistance be required, the services of a competent profes-

sional should be sought. the information contained in this Guide

has been updated as of September 2011.

This Guide is regularly updated online at www.phlaw.com. ©1952-2011 Pellerano & Herrera. All rights reserved.


ABOUT THE FIRM

Pellerano & herrera has been the leading law firm in the Dominican Republic for more than twenty years.

the firm has represented parties in virtually all of the country’s major business transactions and projects

and it regularly provides advice to prominent international companies and entities that are interested in

beginning to do business in the Dominican Republic, and to those that are already operating.

the firm is well regarded for providing pragmatic and constructive legal advice to its clients, always striving

to add value in the process of meeting their business goals. Pellerano & herrera is committed to innovation

and to the application of best practices, and the firm’s attorneys focus on identifying new opportunities for

its clients and designing legal strategies accordingly. the firm is a “green” office, embracing policies aimed

at minimizing its impact on the environment.

EXPERIENCE

Pellerano & herrera regularly advises international clients on transactions involving acquisitions, joint ven-

tures, project finance, and tax planning, among other matters. it also advises multinational companies and oth-

ers on the process of entering the Dominican market in a wide range of industries. the firm has well-known

corporate finance and capital market practice and has successfully participated in bond issuance, LBOs and

project finance transactions that have allowed the entrance of highly recognized industries to the market.

Moreover, Pellerano & herrera has a strong and successful litigation practice – considered one of the best in

the country – with vast experience in sophisticated civil and commercial lawsuits, civil rights actions, issues

of constitutional law, alternative dispute resolution, business, insurance, and intellectual property litigation.

Attorneys at Pellerano & herrera regularly perform pro bono work for those who seek to improve the educa-

tional standards and general welfare of their community, the country, and the world in general. Attorneys at

the firm also pursue significant pro bono work aimed at the protection of civil rights in the Dominican Repub-

lic, such as freedom of the press, the right to information, freedom of expression and dissemination of beliefs.


AREAS OF PRACTICE

Antitrust and Unfair Competition; Banking and Finance; Capital Markets; Copyrights; Corporate; Dealership

and Distribution; Dispute Resolution; energy; environmental Law; Family Law; Franchising; Government; immi-

gration; infrastructure; insurance; intellectual Property; international Agreements; Labor and Social Security;

Litigation; Maritime; Mergers and Acquisitions; Mining; Oil and Gas; Patents; Project and Structured Finance;

Real estate; Sports Law; Sustainable Development; taxation; telecommunications; tourism; transportation.

RESOURCES

the firm’s key resources include its multidisciplinary team of lawyers, recognized as the most comprehensive

and sophisticated in the country, and a state-of-the-art infrastructure that allows its attorneys to use the most

up-to-date technology to be in contact with their clients and to provide prompt solutions to their legal problems.

the firm has an innovative e-business platform from which it provides personal legal services interactively

through the Web. in addition, it has the most comprehensive legal information system in the country, contain-

ing the entire Dominican legislative and judicial history.

Pellerano & herrera is the exclusive Dominican law firm member of Lex

Mundi, the world’s leading association of independent law firms. the

firm’s membership to Lex Mundi, which has member firms in more than

100 countries, provides a global reach and access to legal resources that

enhance the firm’s ability to serve its clients’ needs around the world.

Pellerano & herrera is also part of important networks and specialized associations in taxation, corporate,

labor, environment and intellectual property practice, such as Lataxnet, ius Laboris, international trademark

Association (intA), interamerican Association of intellectual Property (ASiPi), World Services Group, the

Bomchil Group, Club de Abogados, international Business Law Consortium (iBLC), and Legal Sector Alliance.


AWARDS AND RECOGNITIONS

Pellerano & herrera is among the first local firms ranked in Chambers and Partners, and the only one with sev-

eral attorneys ranked in the highest individual bands. Chambers wrote: “Pellerano & herrera is the best firm in

the country. it has years of experience; the attorneys are open-minded and creative, provide an excellent ser-

vice and can handle the most specialized transactions. this powerhouse attracts the client loyalty and market

devotion normally only seen in the upper echelons of the legal markets in London or new York.”

Deal of the Year in Project Finance 2010, from Latin Lawyer, for Pellerano & herrera’s work with Barrick Gold

Corporation and the Pueblo Viejo Mine Financing, January 2011.

Most Admired Law Firm in the Dominican Republic in a survey from Revista Mercado, the most prestigious

business magazine in the country, for the second consecutive year, December 2010.

Pellerano & herrera recognized as one of the country’s top brands by Superbrands UK, november 2010.

Law Firm of the Year in the Dominican Republic, at the Chambers Latin America Awards for excellence, for

the second consecutive year, September 2010.

Largest Law Firm in the Dominican Republic, by Marcasur, the leading intellectual property publication in Lat-

in America, for the second consecutive year, May 2010.

Private equity Deal of the Year, from the international Financial Law Review (iFLR) for Pellerano & herrera’s

work as legal counsel to the buyers in the acquisition of the Dominican Republic’s airports, the first leverage

buyout in the country, March 2009.


tABLe OF COntentS

9 THE DOMINICAN REPUBLIC’S MODERN LEGAL SYSTEM 10 SeCURitieS MARKet 11 MOnetARY AnD FinAnCiAL SYSteMS 11 FOReiGn inVeStMent 11 PROMOtiOn OF nAtiOnAL COMPetitiVeneSS 12 the nAtiOnAL MOVie inDUStRY 13 INTERNATIONAL COMMERCE AND REGIONAL INTEGRATION 14 iMPORtS 14 eXPORtS 14 PReFeRentiAL ACCeSS tO the UniteD StAteS MARKet 15 AGReeMent With the eUROPeAn UniOn 15 ReGiOnAL ALLiAnCeS 17 FinAnCinG SOURCeS 17 BiLAteRAL AGReeMentS FOR the PROMOtiOn AnD PROteCtiOn OF inVeStMentS

18 PRIMARY INVESTMENT INDUSTRIES IN THE DOMINICAN REPUBLIC 19 TELECOMMUNICATIONS 19 BANKING 20 INSURANCE 20 FREE ZONES 21 TOURISM 21 AGRICULTURE 22 MINING 22 ELECTRICITY 23 AVIATION 23 CONSTRUCTION

24 BUSINESS ORGANIZATIONS 25 CORPORATION 26 SIMPLIFIED CORPORATION 26 LIMITED LIABILITY COMPANIES (SRL) 27 INDIVIDUAL ENTERPRISE OF LIMITED LIABILITY (E.I.R.L.) 27 FOREIGN ENTITIES 27 OTHER PROVISIONS OF LAW RELATING TO BUSINESS ORGANIZATIONS

28 LEGAL FRAMEWORK FOR COMMERCIAL ACTIVITIES 29 TAX SYSTEM 29 inCOMe tAX (iSR) 29 CAPitAL GAinS 30 WithhOLDinG 30 tAX On the tRAnSFeR OF inDUStRiALiZeD GOODS AnD SeRViCeS (itBiS) 30 ReAL eStAte PROPeRtY tAX 31 tAX On ASSetS 31 tAX On the inCORPORAtiOn OF COMPAnieS 31 SeLeCtiVe tAX On COnSUMPtiOn 31 tAX On the tRAnSFeR OF ReAL eStAte 32 tAX On the tRAnSFeR OF MOtOR VehiCLeS 32 SPeCiAL inCentiVeS FOR FOReiGn PenSiOneRS AnD thOSe LiVinG On An PenSiOn 32 LABOR LAWS 32 QUOtAS FOR DOMiniCAn eMPLOYeeS 32 WORK PeRiODS 33 PAiD LeAVe 33 VACAtiOnS 33 SeXUAL hARASSMent 33 MAteRnitY PROteCtiOn 33 MiniMUM WAGe 33 OVeRtiMe, niGht WORK, AnD hOLiDAYS 34 eMPLOYee BeneFitS 34 teRMinAtiOn OF LABOR COntRACtS 34 SOCiAL SeCURitY OBLiGAtiOnS 35 ENVIRONMENTAL LAW 35 INTELLECTUAL PROPERTY PROTECTION 36 PAtentS 36 tRADeMARKS 37 tRADenAMeS 38 COPYRiGhtS 39 COMMERCIAL AGREEMENTS 40 FinAnCiAL tRAnSACtiOnS 40 MORtGAGeS 41 PLeDGeS OF ASSetS 41 PURChASe OF ReAL eStAte PROPeRtY 42 ELECTRONIC COMMERCE

43 LEGAL FRAMEWORK APPLICABLE TO FOREIGNERS 44 ENTRY AND DEPARTURE 44 entRY ReQUiReMentS 44 DOMiniCAn ReSiDenCe 44 DOMiniCAn CitiZenShiP 45 IMPORTANT ASPECTS OF FAMILY LAW 45 MARRiAGe 45 DiVORCe 45 ADOPtiOn 46 SUCCeSSiOnS 46 FOREIGNERS AND THE DOMINICAN PENAL LAW 46 DePORtAtiOn 46 eXtRADitiOn 46 FOReiGn PARtieS BeFORe DOMiniCAn COURtS 47 ARBitRAtiOn


DOING BUSINESS IN THE DOMINICAN REPUBLIC

the Dominican Republic offers multiple business and investment opportunities as a result of a variety of fac-

tors, such as its enviable geographical location, current legal framework, economic stability, and infrastructure.

its location, in the center of the Caribbean, allows it to access the north, South, and Central American

markets with relative ease, as well as to serve as a bridge between those markets and europe to trade

goods and services.

the country’s legal system also is an incentive for investment. in recent years, the Dominican economy has

been supported by a continuous process of regulatory modernization, which has led to a variety of mea-

sures aimed at opening and commercially integrating the economy into the international markets. having

recognized that the Dominican market depends on international economic integration, the Dominican gov-

ernment has opted to generate a legal foundation that allows for sustained economic stability and growth

as well as freedom and security in the commercialization of goods and services to the economy’s differ-

ent participants.

Additionally, the Dominican Republic has a widespread, developed and growing physical infrastructure

adjusted to the requirements of a society focused on the production and commercialization of goods and

services. the Dominican roadways are among the best in the region, connecting practically all areas of the

country. the country has modern, broad, and efficient airport and port systems formed by eight internation-

al airports and a dozen significant seaports located close to key production centers. Also, the Dominican

Republic’s modern telecommunications system is one of the country’s main competitive advantages.


POLITICAL AND ECONOMIC SITUATION

the Dominican Republic is a democracy, and recent elections have taken place with absolute transparency,

without any doubts as to their legitimacy, and with large voter turnout. the traditional political leadership has

been slowly replaced by a new generation of young leaders who aspire to develop a viable economy encom-

passing global competition, a responsible public sector, and a strong alliance with the private sector.

the primary variables affecting the Dominican Republic’s international economy are tourism and industrial free

zones; the significant elements of the country’s domestic economy are communications, construction, elec-

tricity, commerce, and transportation.

During the last few years, the Dominican Republic has had an enviable macroeconomic stability. the results

over the last year illustrate this:

1. A growth rate of 7.8% of Gross Domestic Product.

2. A stable exchange rate between RD$36.50 and RD$37.80 for each US$1 with depreciation of ap-

proximately 3%.

3. An accumulated inflation rate of 6.2%.


the DOMiniCAn RePUBLiC’S

MODERN LEGAL SYSteM


During the 1990s, the Dominican Republic initiated the first wave of reforms to modernize the country’s

legal system and the economic framework under which corporate vehicles operate in the country. the

country’s goals were to: (i) promote the flow of foreign capital into the country; (ii) adapt the economy

to international competition; and (iii) facilitate regional competition. this process is still ongoing, with a

second wave having been initiated this decade to continue to modernize the legal system’s regulation of

specific industries, such as the banking and monetary systems, including the strengthening of corporate

governance, competition, and consumer protection.

the main reforms that have taken place include new laws with respect to industrial property, intellectual

property including copyright, exports, the environment, fiscal and customs reform, a special legislation to

attract retirees and baby-boomers, trusts and the development of low cost real estate projects, money laun-

dering, risk prevention in financial institutions, among others. Legislative measures relating to the entry into

force of the DR-CAFtA also have been adopted, especially with respect to intellectual property protection.

Social reforms have occupied a large part of the legislative agenda, including the country’s adoption of a

Social Security law. Finally, the Dominican Constitution was amended recently with the goal of moderniz-

ing the State and its organizational structure as well as essential regulations.

the most significant reforms that have taken place over the last few years to promote the modernization of

the Dominican economy and to protect local and foreign investment are discussed below.

SeCURitieS MARKet

Legislation regulating the securities market seeks to promote the development of the local stock exchange and to

encourage the purchase and sale of securities in a secure, modern and transparent climate. the law establishes

the legal framework defining what shall be considered a private placement of securities and regulating the pub-

lic offering of securities, from their issuance to its placement in the market, the supervision of the various mar-

ket participants and their operations. the law regulates self-regulated participants, such as the stock exchange,

products markets, and securities intermediaries, as well as other market participants, such as clearing houses,

centralized deposits of securities, rating agencies, investment funds, fund managers, mutual funds, and securi-

tization companies. the law also establishes sanctions for violations of the rules by persons and participants in

the securities market. Likewise, it creates the governmental entities in charge of supervising and regulating the

system and its agents: the Securities Superintendence and the Securities national Council.


Among its most important provisions, the law creates an income tax exemption (for domestic and foreign indi-

viduals and business entities) for the profits resulting from investments made in fixed instruments and other in-

vestments physically placed in the local market.

MOnetARY AnD FinAnCiAL SYSteMS

the regulations applicable to the Dominican monetary and financial system seek to maintain price stability

at the national level and to regulate financial intermediaries to guarantee a sound and well supervised bank-

ing system. the monetary system is under the control and regulation of the Monetary and Financial Admin-

istration, which is comprised by the Monetary Board, the Central Bank, and the Bank Superintendence. to

protect the public from arbitrary acts of the Monetary and Financial Administration, the law also created a

Monetary and Financial tribunal.

With the goal of promoting and making financial operations more flexible, the law establishes the principle of

free convertibility of the national currency with other currencies. toward that end, it also provides that par-

ties have the right to make transactions in foreign currency in accordance with general contracting rules and

that debts will be paid in the currency the parties have agreed. Likewise, the law establishes the free deter-

mination of interest rates, which parties can establish based upon market conditions.

FOReiGn inVeStMent

Dominican law provides for equality in the treatment of foreign and national investments. the only restric-

tions on foreign investment are those where national security matters are implicated.

to promote foreign investment in the country and to enhance exports, the Center for export and investment

(Cei-RD) has been created. its mission is to promote exports and to attract foreign and national capital by im-

proving the general export and investment climate.

PROMOtiOn OF nAtiOnAL COMPetitiVeneSS

With the goal of promoting the competitiveness of the country’s industries, the Dominican government

has recently:

1. Created the national Council on Competition, which is in charge of formulating, implementing, and

developing competitive strategies for the Dominican economy.


2. enacted a law that regulates the behavior of business agents to promote free competition and to pre-

vent distortions resulting from unfair business practices.

3. Adopted a law to promote and defend competition.

4. Created a new institutional framework that allows the competitive development of the manufactur-

ing industry and proposed policies and programs that stimulate the renewal and innovation of this

industry.

5. Provided a new set of rules applicable to business organizations to modernize corporate governance

and structures for doing business in the country.

the nAtiOnAL MOVie inDUStRY

the Dominican Republic has long been interested in stimulating the development, production, dissemination,

and preservation of Dominican films as a means of communication and cultural diversity. now, it has a Cin-

ema Law that creates the General Directorate of Cinema (DGCine) and the intersectoral Council for the Pro-

motion of the Film industry in the Dominican Republic (CiPAC), which is the highest authority within DGCine.

the law also provides two kinds of incentives for the film industry. First, there are loans for industry participants

obtained from the Film Promotion Fund (FOnPROCine), which is administered by the CiPAC; these loans are

financed by funds allocated from the country’s budget as well as obtained from the collection of taxes relat-

ed to the industry. the law also provides important financial incentives, such as the deduction of investments

made in film projects from income taxes, as well as tax exemptions enjoyed when reinvesting in the industry,

building new cinemas, and establishing film studios in the country. Foreign films produced in the country also

enjoy tax exemptions and customs incentives for the temporary importation of film equipment. Similarly, in-

comes from technical services in the industry enjoy significant tax breaks.


INTERNATIONAL COMMeRCe

AnD REGIONAL inteGRAtiOn


international commerce plays an important role in today’s world, and, of course, in the Dominican economy.

the government and private sector have made significant efforts to strengthen this dimension of the Domin-

ican economy, achieving, in general, very positive results. Significant interest has been paid to the develop-

ment of industrial free zones and to matters related to competition. efforts toward regional integration have

culminated in the adoption of bilateral and multilateral agreements with several countries.

iMPORtS

the country imports products from all over the world, but especially from the United States. During the

period from January to October 2010, total imports increased to US$12,268.9 million, which represents a

growth of 25.3% with respect to the same period of the prior year.

Customs taxes are determined in accordance with international standards. the Dominican Republic utiliz-

es the harmonized Commodity Description and Coding System that is used internationally.

Customs taxes are calculated and paid in Dominican pesos. the official exchange rate at the moment of

payment is used to determine how to convert currencies to pay import tariffs. Apart from import tariffs, im-

porters must pay, depending on the goods being imported, a Selective Consumption tax and a tax on the

transfer of industrialized Goods and Services (itBiS).

eXPORtS

the Dominican Republic exports a great diversity of finished and semi-finished products. A large part of the

products exported are manufactured in industrial free zones, including electric components, jewelry, and med-

icine. traditional exports include sugar, coffee, cocoa, and tobacco. the country also exports some minerals.

the main destinations for exports are the United States (including Puerto Rico), the United Kingdom, holland,

Canada, haiti, Belgium, Luxembourg, South Korea, and the netherlands.

PReFeRentiAL ACCeSS tO the UniteD StAteS MARKet

the right of preferential access granted to Dominican exports to enter into the United States market has been an

essential part in the development of the Dominican export industry. it has been an excellent tool for the growth

of the Dominican textile industry and, in particular, for industrial free zones, under which most of the local textile

enterprises have been organized. Several legal developments, since 1974, have made this process viable, culmi-

nating with the execution of the Free trade Agreement with Central America and the United States (DR-CAFtA).


AGReeMent With the eUROPeAn UniOn

the Lomé and Cotonou agreements are two very important tools for the collaboration between the european

Union and the Dominican Republic, as part of the ACP countries (Africa, Caribbean, and Pacific). these agree-

ments have promoted and increased economic, social, and cultural development, and have established and

diversified international relationships. Under this system Dominican exports to the european Union, including

tobacco, textiles, bananas, pineapples, coffee, rum, and oranges, have increased.

Recently, the Dominican Republic signed an Agreement for the economic Association between the countries

of the CARiFORUM and the european Union and its member states. the spirit of this agreement is to rein-

force commercial relations and promote regional integration and cooperation within an effective legal frame-

work for commerce and investment.

ReGiOnAL ALLiAnCeS

the Dominican Republic is leading the efforts to promote the commercial integration of countries in Latin

America and the Caribbean. Within this context, the Dominican Republic’s executive Power created in 1997

the national Commission for Commercial negotiations, with the goal of reaching bilateral or multilateral trade

agreements in the most efficient and beneficial way possible for the Dominican Republic. this Commission

appointed a negotiating team that has been handling this process with the other nations in the region.

the Dominican position has been to form a strategic alliance with the countries of Central America and CARi-

COM – the geographical region closest to the Dominican Republic. this would enable the Dominican Republic

to broaden the market and the export capacity of these countries and to create a block of nations to negoti-

ate with other countries in the hemisphere.

the Dominican Republic already has signed an international Commerce treaty with Central America, another

similar agreement with the Caribbean Community or CARiCOM, and a Commercial treaty with Limited Scope

with the Republic of Panama. in addition, it has signed bilateral trade treaties with several other countries in

the world. With the CARiCOM, the Dominican Republic shares in the Forum for ACP Countries in the Carib-

bean. With Central America, CARiCOM, the Dominican Republic, and several other nations form a part of the

Caribbean States Association (AeC).

All of these developments take place within the context of the World trade Organization (WtO), of which the

Dominican Republic has been a member since the 1994 Marrakech Agreement.


FRee tRADe AGReeMent With CARiCOM. the Caribbean Community or CARiCOM provides political coop-

eration and the creation of a common market among the english speaking countries in the region.

the Dominican Republic has been part of CARiCOM since August 22, 1998, when the Free trade Agreement

was signed between the Dominican Republic and CARiCOM. this agreement frees more than 85% of the

commerce among these markets, for an estimated 47 million consumers. Also, the agreement seeks to pro-

mote the active participation of the private sector, broadening and strengthening economic relations be-

tween the parties.

CentRAL AMeRiCA FRee tRADe AGReeMent. On April 16, 1996, the Free trade Agreement Central Amer-

ica-Dominican Republic was signed. the participating countries were the members of the economic integra-

tion System for Central America, consisting of Costa Rica, el Salvador, honduras, nicaragua, and Guatemala.

this agreement was ratified in March 2002.

the treaty relates to goods, services, and investments. it is consistent with the principles of the WtO and with the

process of the creation of the ALCA, and it grants mutual trade opening, with the exception of a limited number

of products. this treaty opens the Dominican Republic to a potential market of more than 40 million consumers.

CARiBBeAn StAteS ASSOCiAtiOn. the Caribbean States Association was created in 1992 to increase and

consolidate economic relations among its members, as well as to develop strategies that increase the members’

comparative advantages. it seeks to establish a free trade area between its members, negotiate jointly with oth-

er economic blocks and international organizations, and develop facilities for transportation and communications.

PARtiAL inteRnAtiOnAL tReAtY With the RePUBLiC OF PAnAMA. On February 6, 2003, Panama and the

Dominican Republic signed a commercial treaty that consists of rules for the application of the treaty; a list

of products that are approved and included in the treaty, with the corresponding specific origin rules for each

particular product; and an agreement for the promotion and mutual protection of investments.

FRee tRADe AGReeMent BetWeen the UniteD StAteS, CentRAL AMeRiCA, AnD the DOMiniCAn Re-

PUBLiC (DR-CAFtA). the Free trade Agreement between the Dominican Republic, Central America and the

United States is a great achievement in international commerce. through it, the Dominican Republic may ex-

port its merchandise, goods, and services to the United States, its main commercial partner.


the DOMiniCAn RePUBLiC AnD the WORLD tRADe ORGAniZAtiOn (WtO). the Dominican Republic is

guided by the parameters established by the WtO to establish economic and commercial integration at the

global level. the Dominican Republic also is a signing party the Declaration of Doha.

Adapting the Dominican Republic to the rules established by the WtO has entailed significant modifications

to all areas of the Dominican economy.

the DOMiniCAn RePUBLiC AnD tAiWAn. the Dominican Republic and taiwan signed a letter of intent for

a Free trade Agreement to promote commerce and investment between both nations.

AGReeMent FOR eCOnOMiC ASSOCiAtiOn BetWeen the COUntRieS OF the CARiFORUM AnD the eU-

ROPeAn UniOn AnD itS MeMBeR StAteS. the spirit of this agreement, recently ratified by the Dominican

national Congress, is to enforce commercial relationships and promote regional integration and cooperation

within an effective framework for commerce and investment between the parties.

FinAnCinG SOURCeS

the Dominican Republic benefits from several international financing programs and insurance against politi-

cal and exchange risks. it is a member of the World Bank group and its different institutions, such as the Mul-

tilateral investment Guarantee Agency (MiGA), an agency that promotes the flow of capital toward member

countries that are in the development stage and that insures against political risk. Likewise, the Overseas Pri-

vate investments Corporation (OPiC) is active in the Dominican Republic with programs for financing and in-

suring investments against risks.

the european investment Bank offers long term loans with low interest for the financing of projects within

ACP countries, mainly in industrial, tourist, mining and energy, transportation, and telecommunications sectors.

BiLAteRAL AGReeMentS FOR the PROMOtiOn AnD PROteCtiOn OF inVeStMentS

the Dominican government has accelerated the process of negotiation of bilateral promotion and protection

agreements for investment with different nations in the matters of direct foreign investment (ieD) based on

reciprocity. these negotiations are designed for the legal promotion and protection of investment and the

Dominican’s economic development.

Among the agreements of this type are those signed with Spain, ecuador, France, China, Argentina, CARiCOM,

and Central America. Others are in the process of negotiation.


PRiMARY INVESTMENT

INDUSTRIES in the DOMiniCAn

RePUBLiC


TELECOMMUNICATIONS

During the last few years, telecommunications has been one of the most dynamic sectors of the Dominican

economy. the General telecommunications Law has modernized the telecommunications industry, adapting

it to the parameters established by international organizations such as the World trade Organization (WtO)

and the international Union for telecommunications (Uit). Dominican law regulates the installation, mainte-

nance, and operation of Web sites, the rendering of services, and the supply of telecommunication equipment

to guarantee that telecommunication services are accessible to the whole population, to promote free com-

petition, and to promote the development of this industry.

the Dominican institute of telecommunications (inDOteL), which began operations in 1999, seeks to ensure

the application of the law and the organization and promotion of the telecommunications market.

Dominican law also establishes the legal and technical framework for the regulation of both AM and FM broadcasting.

BANKING

the current banking regulation provides for the operation of different types of entities within the financial sys-

tem such as: Multiple Banks, Credit entities, Savings and Loan Associations, and Savings and Credit Banks.

the law opens up the financial industry by granting equal treatment to foreign financial intermediaries with

local institutions, establishing the parameters for their ability to operate in the Dominican Republic. Likewise,

it authorizes foreign banks that are not domiciled in the country to establish representative offices in Domin-

ican territory, in accordance with existing statutes.

the establishment of financial intermediaries is subject to the approval of the Monetary Board, subject to the

favorable opinion of the Banking Superintendent.

With respect to banking regulation, the law has taken into account modern international trends. to promote

the stability and security of the system, our legislation follows the Basel’s principles i and ii and has a strict

compliance and close supervision system operated by the financial and monetary authorities.

the law reaffirms the obligation to deposit, at the Central Bank, liquidity reserves under the system called “le-

gal reserve” (encaje legal). it establishes mandatory norms with the objective of facilitating the supervision

of financial entities; creates strict requirements for adequate corporate governance; and establishes a pre-

ventive supervision model based on a process of follow-up on the minimum conditions of liquidity and solven-

cy to avoid regulatory insolvency. in this regard, the law states that compliance with these requirements is

mandatory for all financial institutions.


the law’s preventive approach is especially manifested in the regulation system created to confront financial

difficulties that may affect these entities. the extraordinary Program of Risk Prevention for Financial interme-

diary institutions is a fund that can channel public and private resources to protect deposits and avoid a sys-

temic risk that may affect the financial system as a whole.

in addition, Dominican law creates a system of administrative sanctions that are applicable in cases of vi-

olations of the law. it contains rules for weighting violations and imposing sanctions, explains the types of

violations and applicable penalties, and sets forth the special provisions for the sanctioning process. An in-

stitution, its directors, and related companies may be held liable and subject to administrative sanctions un-

der the law. Also, the law defines criminal infractions and provides their corresponding sanctions.

INSURANCE

Dominican law regulates all insurance operations, reinsurance, and bails made within the Dominican Repub-

lic. the insurance Superintendent is in charge of the supervision of insurance companies, reinsurance compa-

nies, intermediaries, and adjustors.

As a matter of public order, insurance that covers assets located in the Dominican Republic must be issued in

the country, except when it is related to insurance surplus lines. the insurance branches in which insurance and

reinsurance companies may operate are personal insurance, general insurance, and bonds.

the law establishes the necessary requirements to operate as an insurance and reinsurance company in the coun-

try, as an intermediary, or as an adjuster, as well as the process for requests to initiate operations and to act as

a local or international insurance or reinsurance company. Also, the law governs matters relating to insurance

and bond agreements, such as their execution, contents, payment of premiums and claims, among other things,

and establishes the creation of a guarantee fund to guarantee the obligations derived from these contracts.

FREE ZONES

Free zones are geographical areas within the Dominican Republic that are subject to special fiscal and customs

regime, within which companies dedicated to the production of goods or provision of services for the internation-

al market are located. the Free Zone system in the Dominican Republic is one of the most advanced in the world.

the main activities of the Free Zones are the manufacture of textiles, services, and the commercialization and

production of tobacco and other products.


the Dominican Free Zone system has always been especially attractive for investors for the advantages that

it offers, such as:

• incentives that exempt companies from the payment of taxes;

• Preferential access to export to the United States and european markets without the need of pay-

ment of customs tariffs;

• the possibility of obtaining financing from local and foreign institutions; and,

• Availability of capable workforce

Dominican law seeks to promote the establishment of free zones and the growth of those in existence. the

law creates the national Free Zones Council (CnZF), an organization that is in charge of regulating and super-

vising free zones; defines and classifies free zones; indicates the requirements for their installation and the

applicable incentives; and regulates their sales at the local market, if they chose to do so.

A special development zone near the haitian border has been created by Dominican law, establishing a pref-

erential system that, subject to specific limitations, grants extensive fiscal incentives and exemptions for com-

panies that establish their operations within the area and comply with the requirements provided by this law.

TOURISM

Because of the country’s natural resources, its climate, its cultural diversity and historical interest along with

its accessibility and political stability, the Dominican Republic is at present the island with the greatest tour-

ist interest in the Caribbean.

the tourism industry began to grow in the 1970s, mainly because of government initiatives. Since the 1980s,

the tourism industry began to include larger private investment. today, tourism is one of the pillars of the Do-

minican economy.

the tourism industry is supervised by the tourism Ministry, which has offices in different parts of the world

as well as in the Dominican Republic.

the government continues to promote both the development of several tourist areas in the country and private

investment in the tourism industry in all of it varieties such as ecotourism, health and leisure.

AGRICULTURE

traditionally, the Dominican Republic has been an agricultural country. it is the largest exporter of agricultural


and cattle products in the region. the main agricultural products in the country are rice and beans, and the

most exported goods are sugar, coffee, cocoa, and tobacco. the country exports substantial amounts of oth-

er products, including fruits, roots, and other vegetables. the products that have enjoyed the biggest growth

are rice, cocoa, beans, potatoes, tobacco, and coffee. Significant growth also has occurred in the export of

unprocessed tobacco, coffee beans, grain cocoa, and sugarcane.

the Dominican Republic has been successfully experimenting with organic agriculture, which is a growing mar-

ket. the country’s main organic products are dry coconuts, bananas, biodynamic bananas, pineapples, man-

gos, lemons, green coffee, spices, crude coconut oil, and cocoa.

An area that recently has experienced exceptional growth is livestock, fish, and wildlife, especially the pro-

duction of chickens and eggs.

the Ministry of Agriculture, with the support of other institutions, is the agency in charge of this industry with-

in the Dominican economy.

MINING

traditionally, the extraction of minerals has been an important activity in the Dominican Republic, which ex-

ports gold, silver, nickel, marble, granite, and limestone. the importance of the mineral resources of the coun-

try has made this one of the most important industries for investment.

the supervising agency of this industry is the General Department of Mining, an agency of the Ministry of in-

dustry and Commerce.

ELECTRICITY

the power generating and distribution units of the Dominican Power Company have been converted into three

distribution companies owned and operated by the government and two power generating companies priva-

tized in transactions involving companies with foreign and private partners.

the Dominican General electricity Law regulates all stages of production, transmission, distribution, and

commercialization of electricity, as well as the functions of governmental entities supervising the whole

system. Dominican law establishes the legal framework that regulates everything concerning the develop-

ment of the Dominican energy industry, covering aspects such as the requirements to participate in this in-

dustry, interconnection regulations, price determination, and sanctions for the possible violations by any of

the participating agents.


the institutions that supervise the energy industry are the national energy Commission, the electricity Super-

intendence, the eteD, eGhiD and the CDeee. All of them work in coordination to regulate the national elec-

tricity interconnection System (neiS).

AVIATION

the Dominican Republic’s civil aviation law applies to all civil aircrafts, domestic or foreign, owners, operators,

crew, passengers, and all the goods transported therein, as well as any person involved in aviation related ac-

tivities, in Dominican territory. Civil aircrafts are any aircraft not owned by the state.

the law regulates the registration of aircrafts, flying, entry or exit permits, and permits to carry out landings

for non-commercial purposes and to move from one point to another within Dominican territory. it also gov-

erns all matters relating to aircrafts registered in the country, such as ownership certificates, and airworthi-

ness permits, the granting of security, and the signing of leases with respect to them.

the agencies responsible for regulating civil aviation in the Dominican Republic are the Dominican Civil Avia-

tion institute (iDAC) and the Civil Aviation Board (JAC). the Special Body of Airport Security (CeSA) impacts

aeronautical matters in the Dominican Republic by ensuring the safety of passengers, crew, ground staff, and

the general public in all matters related to civil aviation.

CONSTRUCTION

Dominican legislation on construction sets forth regulations on engineering, building, architecture, and relat-

ed activities. the law provides the requirements and regulations for safety in building neighborhoods, public

structures, and buildings. it establishes the rules relating to building safety, creates the General Director-

ate of Standards, Regulations and Systems, and assigns to that body the functions of preparing the technical

regulations that support the preparation and implementation of projects and works of engineering, architec-

ture, and related activities.

Generally speaking, the governmental agencies in charge of regulating construction in the country are the

General Department of Constructions (under the Ministry of Public Works and Communications) and the Gen-

eral Department of Regulations and Systems.

With respect to state projects, Dominican law provides that foreign participation cannot exceed 50%, although

it may rise to 70%, when national participation is unable to exceed 30%. therefore, entering into a consor-

tium with a local partner is mandatory.


BUSineSS ORGANIZATIONS


Dominican law recognizes different types of corporate structures and business forms, and sets forth a gen-

eral framework that may be used by the parties to regulate everything from an entity’s name, capital, and

transfer provisions to the administration and supervision of these entities, decision making, and dissolution.

While there are business forms that are based in the identity of the owners (intuito personae) these are rarely

used, and investors usually prefer corporate vehicles that limit their liability to the amount of their investment,

except in case of fraud were distinction would not apply and the piercing of the corporate veil is likely to occur.

the most common business forms are:

CORPORATION

Corporations (sociedades anónimas) are entities with a legal existence formed by two or more partners who

only assume risk of losses up to their capital contributions. For this reason, it is one of the most popular forms

of business organizations.

Corporations may or may not seek funding from the securities markets as a form of financing and expansion

of their operations. if they do so, they will be required to obtain an authorization from the Dominican Repub-

lic’s Securities Superintendent.

Capital and transfer Provisions: Corporate capital is represented by shares, which are essentially negotiable.

the minimum authorized corporate capital is RD$30,000,000.00 and 10% of such amount must be paid and

outstanding. the law does not establish any restriction on the assignment of shares. nevertheless, it pro-

vides that shareholders may agree to restrictions, so long as they do not contain any permanent prohibition

on the transfer of shares.

Administration, Supervision, and Decision Making by Shareholders: A board of directors composed of a min-

imum of three members is normally in charge of managing these companies. Legal entities may not serve as

president of a corporation. in terms of supervision, the law establishes that corporations must be supervised

by one or several vigilance officers that are named for two fiscal periods and are primarily appointed to veri-

fy the annual accounts presented by the board of directors and the documents addressed to the shareholders

indicating the annual accounts and financial situation of the entity.

in addition, corporations that seek funding from the securities markets are subject to the supervision of the

Securities Superintendent during the formation and organization process, as well as in all corporate actions

relating to amendments to bylaws, the issue of negotiable titles, transformation, and liquidation.


the supreme decision making entity is the general meeting of shareholders, who annually receives a report

of all the company’s operations, decides on the distribution of dividends and also approves the report print-

ed by the management.

SIMPLIFIED CORPORATION

the Simplified Corporation or SAS is a limited liability company formed by two or more partners whose loss-

es with respect to the company’s activities are limited to their contributions.

Capital and transfer Provisions: the capital of a simplified corporation is divided into shares, which

only can be issued in registered form. the minimum authorized capital requirement is RD$3,000,000.00 and

at least 10% of such amount needs to be subscribed and paid in.

Administration and Supervision: the partners may, by means of the bylaws, freely determine the organization-

al structure of the company, which can be managed and directed by a board of directors or by one or more di-

rectors. Also, a simplified corporation does not require the supervision of a vigilance officer, unless it issues

private debt.

LIMITED LIABILITY COMPANIES (SRL)

A limited liability company is the entity formed by a minimum of two and a maximum of 50 partners, none of

whom may have personal responsibility for company debts. this form of commercial organization is used for

medium-sized businesses and closed capital entities.

Capital and transfer Provisions: the social capital of an SRL is divided into equal parts denominated corporate

quotas or units, which cannot be represented by negotiable shares or have a nominal value below RD$100.00.

the minimum corporate capital of an SRL is RD$100,000.00.

Quotas or units are freely transferable by succession or in case of liquidation of the assets of a marriage and

are freely transferable between family members. the assignment of corporate units to third parties requires

the consent of three fourths of the partners, apart from other conditions and formalities.

Administration, Supervision, and Decision Making: the administration is in charge of one or several manag-

ers, who must be individuals and who are individually equipped with the broadest powers to act in the name

of the company under any circumstances. the designation of a vigilance officer is not necessary, but the fi-

nancial statements of the company must be audited.


each partner has the right to vote on SRL decisions and has the same number of votes as the corporate quo-

tas that the partner possesses. the general meetings of unit owners may be held for the approval of SRL de-

cisions but are not necessary.

INDIVIDUAL ENTERPRISE OF LIMITED LIABILITY (E.I.R.L.)

An e.i.R.L. is a company of limited liability that belongs to one person, that has the legal ability to exercise

rights and obligations, and that forms an independent and separate entity from the rest of the assets of the

person who owns the e.i.R.L. Legal entities may not incorporate or purchase companies of this type.

Capital and transfer: the amount of contributions to be made by the owner of an e.i.R.L. may be freely estab-

lished and increased, in accordance with the procedures established by law. An e.i.R.L. may be transferred

in accordance with the rules established by law.

FOREIGN ENTITIES

Dominican law recognizes the legal existence of companies incorporated abroad, upon confirmation of their le-

gal existence by the appropriate authority. Dominican law stipulates that foreign companies’ legal exis-

tence, capacity, and dissolution are governed by the law in effect in the place of their incorporation, and their

operations and activities in the Dominican Republic are subject to Dominican law.

Foreign companies that wish to establish a branch or permanent establishment in the Dominican Republic or

that are conducting commercial transactions on a regular basis in the country must be registered in the Mer-

cantile Registry and also must obtain a national taxpayers Registration from the General Department of in-

ternal Revenue.

the law recognizes the equality of foreign entities with local companies and, therefore, declares that for-

eign entities have no obligation to provide any kind of litigation bond in case they need to appear before lo-

cal courts in a litigation process.

OTHER PROVISIONS OF LAW RELATING TO BUSINESS ORGANIZATIONS

Dominican law establishes corporate processes for mergers and divisions, the increase and reduction of cor-

porate capital, and the dissolution and liquidation of legal entities.

the law also establishes in detail the obligations and responsibilities of directors and includes criminal penal-

ties to punish the violation of the law by companies and their directors.


LeGAL FRAMEWORK

FOR COMMERCIAL ACtiVitieS


there are several legal provisions that regulate or affect business transactions in the Dominican Republic. the

most important are those related to taxation, labor, the protection of the environment, intellectual property,

and most recently electronic commerce.

TAX SYSTEM

the Dominican tax system levies Dominican source income and financial income generated abroad from in-

vestments and financial gaits. the primary taxes in the Dominican Republic are the following:

inCOMe tAX (iSR)

Any legal entity or individual residing in the Dominican Republic as well as the group of heirs that are part of an

undivided succession, residing in the country, are subject to the payment of taxes over their income from Domin-

ican sources and from sources outside the Dominican Republic deriving from investments and financial gains.

individuals residing or domiciled in the country pay an income tax from any employment, as well as from in-

come earned from the exercise of a profession, commercial activities, return on investments, or financial earn-

ings from abroad. the tax rate varies depending on their income and there is an exempt amount of income

that is yearly adjusted by inflation.

Companies, public entities carrying out business activities, and any other form of organization are considered

legal persons for purposes of this tax. in accordance with Dominican tax law, these entities are subject to the

payment of taxes on their net income. the applicable income tax rate for legal entities with domicile in the

country is 29% over net income.

Although income tax is payable on a yearly basis, the law establishes mandatory monthly advanced payments

of that tax, which ultimately are reconciled with the annual payment required to be made at the end of the

year. individuals or legal entities carrying out commercial and industrial activities do not have to pay the ad-

vanced payment as long as the annual income from those activities is equal to or less than RD$5,000,000.00.

CAPitAL GAinS

Capital gains are also subject to tax. in order to determine the taxable capital gain amount, a taxpayer de-

ducts, from the price or value of an asset being transferred, the cost of acquisition or production of such

asset, adjusted by inflation. the capital gain that is received by a taxpayer is subject to the payment of a

tax of 29%.


WithhOLDinG

Legal entities and single owner businesses act as withholding agents for the tax authorities whenever they

make a payment or credit to the account of other physical persons or undivided successions, as well as oth-

er entities not exempt from the payment of taxes, except to legal entities. the following are the applicable

withholding rates, according to the Dominican tax Code:

a) 10% over the amounts paid or credited as payment for leases or rental of any type of movable prop-

erty or real estate, as an advance payment on the yearly income tax;

b) 10% over the fees, commissions, and other remunerations and payments for the rendering of servic-

es by individuals, as an advance payment on the yearly income tax of such individual;

c) 15% over the amount of prizes or earnings derived from lotteries and any other prize offered through

promotions or public campaigns, as a tax payment separate from income tax;

d) 3% over the payments made by the state or its agencies to individuals and legal entities for the ac-

quisition of goods and services in general, as an advance payment on the yearly income tax; and,

e) 10% for any other kind of payment not established above, as an advance payment.

Payments or credits from Dominican sources to nonresident persons or persons not domiciled in the country

that are not interests paid to the accounts of financial institutions abroad, and dividends, are subject to with-

holding of 29% to Dominican tax authorities. Payments or credits of interests of Dominican sources from loans

contracted with foreign credit institutions must withhold and pay the Dominican tax authorities 10% of those

interests, gross up provisions are usually incorporated to cover the tax impact over the financing transaction.

tAX On the tRAnSFeR OF inDUStRiALiZeD GOODS AnD SeRViCeS (itBiS)

itBiS is the tax applicable over the transfer and import of industrialized goods, as well as the rendering of ser-

vices. individuals and legal entities (foreign and domestic) transferring and importing industrialized goods or

rendering services in the country (with limited exceptions) must pay this tax. the rate of this tax is 16% and

is calculated over the price of the transfer of the good or the service provided.

ReAL eStAte PROPeRtY tAX

the real estate property tax is levied on real estate properties that are destined for housing, commercial, and

industrial activities belonging to individuals whose value – including the land – surpasses RD$5,000,000.00.

the value is adjusted annually for inflation.


tAX On ASSetS

A tax on assets is applied to all assets that are registered in the general balance of the taxpayer, not ad-

justed by inflation, after applying the deductions for depreciation, amortization, provision for unrecoverable

accounts receivable, investments in stock in other companies, lots located in rural areas, agricultural real

estate, and taxes that have been paid in advance.

Financial intermediary entities, intermediaries in the securities exchange market, investment funds admin-

istrators, and title companies, as well as electric generation, transmission and distribution enterprises, pay

this tax on the basis of the total of their fixed assets, free from depreciation, such as they appear in their

general balance.

tAX On the inCORPORAtiOn OF COMPAnieS

the incorporation of limited partnerships, corporations, and limited liability companies is subject to the pay-

ment of a tax of 1% of the authorized corporate capital, with a minimum tax of RD$1,000.00.

SeLeCtiVe tAX On COnSUMPtiOn

the Selective tax on Consumption applies to the transfer of some goods of national production at the manu-

facturing level, as well as their importation, and the rendering of telecommunications, insurance services, and

the payment by check or wire transfers.

Persons, companies, or enterprises, both national and foreign, that produce or manufacture these goods in

the last stage of the production process are obliged to pay this tax, in addition to importers of goods, on their

own account or for third parties, and services providers.

Certain insurance companies based on the scope of services they provide are subject to this tax, as well as,

electrical appliances, luxury goods and vehicles.

tAX On the tRAnSFeR OF ReAL eStAte

Real estate transfers are subject to a 3% tax over the higher value, if any, that results between the amount

stated in the purchase agreement and the value assigned by the DGii to the property subject to the transfer.

this tax also applies to the transfer of real estate property purchased through loans granted by financial inter-

mediaries so long as the purchased house or lot destined with said loan has a value of over RD$1,000,000.00,

amount adjusted by inflation.


tAX On the tRAnSFeR OF MOtOR VehiCLeS

the transfer of motor vehicles is subject to a onetime tax of 2% over the value that is greater from the one

stated in the purchase contract and the value assigned by the DGii.

SPeCiAL inCentiVeS FOR FOReiGn RetiReeS AnD thOSe LiVinG On A PenSiOn

Dominican law provides those who are retirees as well as certain of those who live off a pension or a fixed

income with broader benefits and exemptions from those granted to foreign investors and citizens resid-

ing abroad. the law allows such individuals to obtain a residence in 45 days; exempts them from the pay-

ment of taxes on furniture and personal goods; and partially exempts them from the payment of taxes on

motor vehicles. in order to benefit from this law, a foreign individual must receive a monthly income of

US$1,500.00 in the case of retirees, and US$2,000.00 in the case of passive investors receiving steady in-

come for a minimum of 5 years.

there are additional benefits accorded to those individuals, from an exemption on taxes of certain real estate

transfers to an exemption of 50% of capital gains taxes.

LABOR LAWS

the relationship of companies with their employees is regulated by the Dominican Labor Code.

QUOtAS FOR DOMiniCAn eMPLOYeeS

At least 80% of the workers in a company must be Dominican citizens unless qualified individuals from the lo-

cal market cannot fulfill this quota. Managers and other employees with supervisory functions preferably must

be Dominicans, although there are no legal restrictions at the management level.

WORK PeRiODS

the normal working week is 44 hours; a normal working day is 8 hours. the common practice is to work from

Monday to Friday and, in some companies, until midday Saturday. Part time workers cannot work more than

29 hours per week.


PAiD LeAVe

the law grants five days of paid leave in case of marriage, three days in case of a close family member’s death

and two for a father whose wife has had a child.

VACAtiOnS

All employees who have worked uninterruptedly for more than one year have the right to enjoy a vacation pe-

riod of 14 working days.

SeXUAL hARASSMent

the law prohibits employers or their representatives from committing actions that may be considered to be

sexual harassment of an employee.

MAteRnitY PROteCtiOn

employers may not dismiss an employee during pregnancy or within three months after the birth of a child,

without just cause. to discharge an employee with just cause, an employer must obtain the prior authoriza-

tion of the Labor Department, among other requirements. Women have the right to pre and post natal leave

totaling up to 12 weeks. they are entitled to ask for their vacation right after their postnatal leave and to re-

quest, during the first year of their child’s life, half a day off work a month to take the child to the doctor.

MiniMUM WAGe

Dominican labor legislation establishes a minimum salary for certain private industry employees that is estab-

lished periodically by the national Salary Committee. the minimum wage applicable to employees depends

on the industry in which they work.

OVeRtiMe, niGht WORK, AnD hOLiDAYS

in these cases, the amounts that have to be paid by an employer over the base salary of an employee are 35%

for overtime that does not exceed 60 weekly working hours, and, in excess of that, it shall be 100%, as well

as for work on Sundays and holidays. night work requires payment of a 15% supplement over the basic salary.


eMPLOYee BeneFitS

employee benefits contemplated by law are Christmas salary, profit sharing of the company’s benefits (if any),

and payment of annual vacations.

teRMinAtiOn OF LABOR COntRACtS

A labor contract may be terminated, among other reasons, by layoff or termination may be sought by any of

the parties, in which case it is not necessary to indicate any cause; with cause when one of the parties has

committed a major fault; or by mutual consent. During the first three months of work, employees may be ter-

minated without the need to pay any sort of compensation. After this period they shall have indemnification

rights in accordance to their time as employees.

in the case of a dismissal with cause in accordance with the causes and procedures the Labor Code establish-

es an employer will not have to pay any indemnification to the employee. if, however, a dismissal is declared

by an appointed labor court as unfair, the employee is entitled to receive full indemnification; otherwise, only

certain acquired rights apply.

the employer must give advance notice when laying off an employee. if advance notice is not given, the em-

ployer must pay the laid-off employee compensation for lack of notice. Payments made to employees who are

terminated are not subject to the payment of income tax.

Reduced termination benefits are paid in the event of termination of employment for special causes, such as

an employer’s death or disability, illness, lack of raw materials, or company bankruptcy , among others.

SOCiAL SeCURitY OBLiGAtiOnS

the Dominican Social Security System (SDSS) is comprised of a complex web of State, mixed, and private

agencies, such as the national Social Security Council (an organization that establishes policies regarding this

matter), Social Security treasury (to charge contributions, distribute, and pay financial resources), Pensions

Superintendance, health and Labor Risk Superintendance, national health insurance, Pension Fund Adminis-

trators, health Risks Administrators, Providers of health Services, among others.

the law regulates the functioning of all these entities, establishing the rights and obligations of all partici-

pants, including the State, employers, employees, and beneficiaries.


ENVIRONMENTAL LAW

the Dominican Republic’s environmental law recognizes the importance of the protection, conservation, and

sustainable use of natural resources for the good of humanity. it creates the effective protection of the envi-

ronment, as an essential duty of the State, adopting for these purposes a policy to be executed with the par-

ticipation of all institutions related to the environment and the general population and with each person in

particular. it also recognizes the principle of caution.

the law regulates the pollution of soil, water, and air; dangerous products, elements, and substances; munici-

pal and housing wastes; and human settlements and sound pollution. it regulates the concession of the rights

for the use of natural resources. the administration for environment and natural resources is under the juris-

diction of the Ministry of environment and natural Resources.

Any project, infrastructure, industry, or any other activity that may affect the environment and natural resourc-

es must obtain from the Ministry of the environment and natural Resources in advance an environmental Per-

mit, for which the interested party must present an environmental impact Declaration (DiA), at its own cost,

or an environmental License, for which an environmental impact Study is necessary. Additionally, there are

rules regulating environmental permits and licenses, environmental audits, and performance bonds.

the country’s environmental law establishes administrative and penal sanctions for those that violate its rules.

Administrative sanctions may be applied by the environmental and natural Resources State Department and

include fines, as well as the suspension or closing of operations. there also are environmental crimes, which

may be penalized with fines and prison, apart from the obligation of repairing any damages that are caused

and other measures such as the closing of the establishment and the withdrawal of the permits.

INTELLECTUAL PROPERTY PROTECTION

the complete reform for the protection of intellectual property rights in the Dominican Republic, enacted in

the year 2000, was a great achievement in the modernization of the legal framework governing the country’s

economic activities and a significant step forward in the process of complying with the WtO’s obligations. in

addition, as a result of the application of the DR-CAFtA, the Copyrights Law and industrial Property Rights

Law have been amended in order to fortify the regulations on the matter.

Dominican law regulates the transfer and diffusion of technology and protects industrial property rights. this

law is in accord with the provisions of the Agreement on trade Related Aspects of intellectual Property Rights


(tRiPS) and other international agreements. it establishes that the classifications for registration must be in

accordance with the internationally recognized classifications system: for patents and industrial models, the

Strasburg Convention from March 24, 1971 applies; for industrial designs, the Locarno Agreement from Octo-

ber 8, 1968 applies; and for trademarks, the niza Accord from June 15, 1957 applies.

the government agency in charge of granting patents and registering industrial property is the national in-

dustrial Property Office (OnAPi).

Civil and criminal sanctions may be applied in case of an infraction of industrial property rights, which include

damages as well as fines and/or prison.

PAtentS

Patents may be obtained to protect inventions, utility models, and industrial designs. An invention is defined

as any idea or creation of the human intellect related to products or procedures, capable of being applied in

industry. it must be novel, i.e., it must be unknown in the relevant industry. Likewise, it must have an inven-

tive character, i.e., it must not be able to be deduced by a person with technical knowledge in the matter or

from existing technology. Matters that are not patentable range from exclusively aesthetic creations and in-

formation presentations to computer programs and therapeutic and surgical methods.

Requests for patents are directed to the OnAPi and must contain requirements stated by law.

the law grants the OnAPi the ability to study and make decisions regarding requests that are deposited. Pat-

ents are granted for a period of 20 years.

the period for invention patents may be extended once, for a maximum period of three years, in cases where

the OnAPi has incurred an unreasonable delay in granting registration of a patent, in accordance with the pe-

riods established in the DR-CAFtA.

tRADeMARKS

Dominican law protects all kinds of trademarks, including collective trademarks and certification trademarks,

defining them in a broad manner. the registration of a trademark grants exclusive rights over the same. the

period of use of those trademarks that have been registered before (more than six months) determines the

priority for the registration. Dominican law also recognizes certain rights of priority for trademarks registered

abroad. new trademarks are registered in favor of the person who first requests it.


Among the distinctive signs that may not be registered are some prohibitions relative to the sign itself, those

which are:

• Signs that may be used commercially to describe the product;

• Generic or scientific denominations of products, colors, etc.;

• Signs that are contrary to the public order or morals;

• Signs that ridicule persons, religions, countries, or others;

• Signs that may deceive the public in terms of the nature or the qualities of the product, etc.

Other prohibitions are related to the rights of third parties.

the OnAPi receives and studies requests presented in accordance with its established procedures. Reg-

istration grants the exclusive right for the use of the trademark and authorizes its bearer to oppose third

parties’ use of the same, unless in case of usual commercial indications. it grants a registration period of

20 years, renewable for consecutive periods of 10 years. the requests for renewal must present the proof

of use of the trademark.

the bearer of a mark may not oppose the use of the trademark by third parties, in relation to products that

are in the market, within the country or abroad, for the same person or with that person’s consent, or by

persons economically related to that person, as long as the product, its packaging, and labels have not suf-

fered alterations or deterioration.

tRADenAMeS

Distinctive signs such as names, brands, signs, slogans, and origin denominations are protectable as trade-

names. the right for the exclusive use of a commercial name comes from its first commercial use. the pro-

tection is granted even before registration and derives from the use of the name. Only in cases of commercial

slogans, the right of exclusive use is granted by registerring.

tradenames may not be composed of indications or signs that are contrary to public order or moral standards,

or that may create confusion in the public in terms of the nature, activities, or any other aspect related to the

company or business associated with the same or its products and services.

Registration is not mandatory, but it helps to ensure that the owner of the tradename has in fact adopted and

legally uses said name. the procedure for registration is similar to that of trademarks. Registration is grant-

ed for renewable periods of 10 years, except for the original denominations, which are registered indefinitely.


the costs of the procedures related to the recognition and exercise of industrial property rights have been es-

tablished by OnAPi.

COPYRiGhtS

the main objective of the Dominican copyright law is to provide a legal and institutional framework in accor-

dance with the provisions of the Aspects of intellectual Property Rights Agreement related to Commerce (tRiPS),

which allows for the protection of copyrights in the Dominican Republic, taking into account the national interest.

the national Copyright Office (OnDA) is the national authority in charge of ensuring the protection of copyrights

and the application of the law. For these purposes, the law has granted ample administrative, supervision, and

arbitration powers. its supervision activities are enforced by the obligation of any importer or distributor of com-

mercial goods, services, and equipment with author or related rights to register the same.

Likewise, the country has ratified the following international conventions regarding this matter:

• Berne Convention for the Protection of Literary and Artistic Works from 1886;

• Universal Copyright Convention from 1952;

• Rome Convention for the Protection of interpreters, Audio Producers, and Radio transmission Orga-

nizations from 1961; and,

• treaties of the intellectual Property World Organization (OMPi) for the Rights of Authors and inter-

preters and Phonograms of 1996.

Dominican copyright law protects all kind of original intellectual creations that may be fixed, transmitted, or re-

produced by any existing means or are existing in print, reproduction, or dissemination. it also protects the in-

dependent creations derived from original works, such as those resulting from the adaptation, translation, or in

another manner transformed from its original version.

it also protects and regulates the rights related to copyrights, in order to efficiently combat the illegal retrans-

missions of television broadcasts and the unauthorized reproduction of musical productions, those which were

two of the major gaps under the past legislation. Related rights are granted to artists for their interpretation, to

the producers of phonograms for their recordings, and other radio transmitters (including the original transmis-

sion by cable, fiber optics, or other method) for their radio and television programs.

Finally, it protects the works of Dominican authors who reside in the country or who are nationals or reside in coun-

tries that belong to international treaties ratified by the Dominican Republic, as well as works that are published

for the first time in the country (or in a country signatory to an international treaty) or that have been published


in the country (or in a country signatory to an international treaty) within 30 days following its first publication.

in the absence of international treaties, the protection of foreign works will be subject to reciprocity.

the author is the authentic titleholder of the copyright of his work or creation. All the rights conferred to other

persons, by virtue of law or contract, have a derivative character. Authors have the moral and economic rights

over their creations. Moral rights permit the following:

1. Receive credits for the creation;

2. Oppose changes that may affect the merit of the creation;

3. Abstain from publishing the creation or to maintain it in anonymity; and

4. take the work out of circulation, as long as the author compensates for damages that this decision

can entail.

Moral rights are inherent to the author. Upon the author’s death, they are transferred to the author’s legal heirs

or, in their absence, to the State. the heirs can use the work or creation for a period of 50 years.

economic rights allow the author to exploit the author’s creation by means of any method of use, publication, re-

production, or distribution that exists or may exist and grants rights to third parties for its use. the methods of use

are independent among themselves, and therefore the author may transfer the author’s rights separately for each

method of use. the law regulates the different kind of contracts and licenses for the transfer of economic rights.

the distribution, reproduction, publication, or other use of creative works without the consent of the author or ti-

tleholder, totally or partially, is illegal and therefore may be subject to civil and criminal sanctions. to ensure the

protection of rights, the author or title bearer for the distribution of the author’s work may apply or require the

application of methods, systems, or machines that prevent the transmission, reproduction, or modification of the

work without the author’s authorization.

COMMERCIAL AGREEMENTS

Business agreements and covenants in the Dominican Republic are primarily based on the principle of free-

dom of contract, as provided in the country’s Civil Code. Accordingly, parties to an agreement are free to es-

tablish the provisions that will regulate their relationship and to make those provisions legally binding on them,

as long as they do not contravene laws regarding public order.

All commercial agreements are executed on the basis of this principle, and on any other law that specifical-

ly regulates certain types of business.


FinAnCiAL tRAnSACtiOnS

Presently, lending operations and other financial transactions are executed between the contracting parties.

Only when a financial institution is the lender and the nature of the transaction is retail banking the forms

of these agreements are approved in advance by the authorities to comply with consumer protection regu-

lations. Financial institutions are otherwise free to determine with the consumer the terms of these agree-

ments such as the applicable interest rates, currency of payments, and other terms relating to any loan and

its repayment. these loans can be regular loans, a line of credit, revolving or not, factoring or financial leas-

ing operation, project financing, etc. the following are the most common types of securities used to guaran-

tee repayment of loans in the country.

MORtGAGeS

in general, any type of real estate right can be mortgaged, be it land or even a registered right of use or

exploitation of real estate. the construction or improvements of existent buildings on land are also con-

sidered real estate and may be mortgaged. Mortgages over real estate properties that will be acquired or

built in the future are not permitted, although, in practical terms, the security interests of a creditor with

respect to a mortgaged property will extend to any buildings or improvements made on the property while

a mortgage is in place.

Because a mortgage security depends on the debt it guarantees, the validity of such debt is necessary for

the mortgage to be valid. the secured obligation may, however, be conditioned or eventual, in which case

the mortgage will also be conditioned or eventual. Likewise, a mortgage may be granted to ensure future

obligations, which allow guaranteeing financial instruments such as lines of credit and credit cards. the

mortgage debtor must have a duly registered title for the mortgage to be valid with respect to third par-

ties. the persons with conditional property rights may grant mortgages under the same conditions affect-

ing those rights.

A mortgage must be executed in Spanish within Dominican territory and registered in the title Registry Of-

fice of the place that the property is located by means of the deposit of the security agreement and the title

Deed as well as other documentation relating to the payment of taxes and the identification of the parties in-

volved. the date of the registry is the date of the deposit, although the physical issue of the Certificate of the

Mortgage Creditor will be issued several weeks later.


PLeDGeS OF ASSetS

encumbrances over movable assets may be structured with or without relinquishing possession of such assets.

A pledge may cover tangible assets, such as machinery and inventory, and intangible goods, such as credits,

bank accounts, contracts, etc., in which case the debtor of the obligation granted as a pledge must be notified.

the original common pledge entails the delivery of the assets being pledged, either to the creditor or to a third

party that must protect and keep the asset, until the debt is paid in full. nonetheless, since this type of pledge

became impractical because it made debtors unable to keep using their assets while they were pledged, the

pledge without dispossession was created. in this case, there are several ways to protect the rights of cred-

itors against a potential assignment or further encumbrance of the asset without its consent.

A creditor wishing to foreclose on a pledged asset has the option to initiate a foreclosure process to force a

public sale of the pledged assets, to collect the debt or to request the court to assign the asset to the creditor.

PURChASe OF ReAL eStAte PROPeRtY

the purchase of real estate properties or real estate rights by foreigners is not subject to any special require-

ment. the same rules that apply to Dominicans also apply to foreign purchasers.

Before purchasing real estate, it is appropriate to verify the legal status of a property at the title Registry

Office to confirm the identity of the registered owner of the property and whether there are any transfer re-

strictions that govern.

After executing a transfer agreement, a prompt filing of the corresponding transfer documentation is very im-

portant. in this regard, a buyer must deposit at the title Registry a notarized original of the purchase agree-

ment along with the title Deed in the name of the seller, which shall be cancelled and substituted for a new

one in the name of the buyer. the payment of transfer taxes also is required, among other things.


ELECTRONIC COMMERCE

the law on electronic Commerce, Digital Documents and Signatures has adapted the Dominican legal system

to new technologies and has allowed the economy and its agents to benefit from the opportunities that new

digital technologies offer for the promotion of economic activities and the execution of commercial transac-

tions in the global market. Specifically, the law seeks to:

• Facilitate electronic commerce within and among the nations;

• Validate transactions that have been made by means of new information technologies;

• Promote and support the development of technological initiatives related to electronic commerce and

to promote the use of these services and diffuse its use among the population.

the law is based on model laws prepared by the Commission of the United nations for international Mercan-

tile Rights (CnUDMi) regulating concepts of origin, conservation, data messages, and digital documents to

grant legal validity to the same. the rules also specify the conditions for the use of a digital signature, differ-

entiating it from an electronic signature; establish the requisites for the establishment of certification enti-

ties; and regulate the certificates of digital signatures and non-credited entities.

the law provides the requirements for digital certificates issued by certification entities.


LeGAL FRAMEWORK APPLiCABLe tO FOREIGNERS


ENTRY AND DEPARTURE

Foreign investors whose businesses or activity requires to visit the Dominican Republic or to transfer their

residence to the country will find in this chapter information about the principal laws and regulations that

will apply to the entry and stay, as well as to the civil and family life.

entRY ReQUiReMentS

in general terms, foreign individuals must have a Dominican visa to enter the country, except for citizens of

certain countries with which the Dominican Republic has entered into agreements to exempt their citizens

from this requirement. the different types of visas are classified as Diplomatic, Official, Courtesy, Business,

Dependent, tourism, Residency, and Study and are issued by the exterior Service of the Dominican Republic.

Citizens of countries with which the Dominican Republic has signed agreements for the exemption of the req-

uisites for visa may enter the country for a period of 60 days with the only requirement of purchasing a tour-

ist card, which may be acquired at the airport upon arrival.

DOMiniCAn ReSiDenCe

Foreigners may acquire the right to reside in the Dominican Republic. in order to apply for a residence visa,

either provisional or permanent, a list of required documents must be compiled. Dominican residence is

granted for one or two years, depending the type of residence, and can be renewed permanently.

the Center for export and investment (Cei-RD) has introduced a special program for foreign investors to speed

up the process to obtain the Dominican residence. it also applies to employees of companies that are reg-

istered in the Cei-RD, the national Council of Free Zones, or those that have a concession from the Do-

minican State.

DOMiniCAn CitiZenShiP

Dominican nationality can be obtained, at the discretion of the Dominican President. the naturalization pro-

cess lasts between eight months to one year.


IMPORTANT ASPECTS OF FAMILY LAW

MARRiAGe

Foreigners who wish to marry in the Dominican Republic must present an original and copy of their passport,

a legalized certificate stating that they are single issued in the country of origin, and their tourist card, resi-

dence card, or identity card, whichever is applicable.

the Dominican Civil Code regulates the pecuniary relationship between spouses marrying in the Dominican

Republic. the default financial system applicable to Dominican marriages is the system of communal property.

Spouses who wish to adopt a different system may choose among the marriage systems established by law,

such as the separation of assets, single heir system (sistema dotal), and universal community. they also can

create a completely different one or elect a system under foreign law. When electing a system other than the

default communal system, the spouses, before the celebration of their marriage, must draft an agreement to

this effect before a notary public, which must be registered. After the marriage, the spouses may not change

the system, even when they are divorced and later decide to remarry.

the dissolution of marriage by divorce or death of one of the spouses leads to the determination of divisible

assets, the recouping of each spouse’s personal goods (or his or her heirs) and the division of the remaining

common assets. this liquidation and partition process may be made amicably by means of a notary act, or, in

the absence of an agreement, in court.

DiVORCe

Divorce in the Dominican Republic may be executed by mutual consent or for cause, such as incompatibility,

absence or abandonment, adultery, criminal action, physical, alcoholism, and drug addiction.

A “special divorce” or quick divorce applies only to foreign persons or Dominican citizens who reside abroad

and that wish to divorce by mutual consent. the complete process for this type of divorce usually takes from

one to four weeks.

ADOPtiOn

the national Council for Children and Adolescents (COnAni) is in charge of coordinating Dominican adoptions. A

request for adoption must comply with the dispositions of the international Convention for the Protection of Minors

and other international measures in the interest of minors, and must comply with Dominican legal requirements.


SUCCeSSiOnS

the Dominican Civil Code establishes different succession orders so as to regulate transfer of assets follow-

ing death. there is a tax on successions and a gift tax. Succession is distributed in equal parts among the

deceased’s closest relatives, that is, first the descendants. if the deceased never had descendants, then the

succession goes to parents or other ascendants, and in their absence to siblings and collaterals. Spouses will

inherit in the absence of all of the above and then the State.

the successions of foreign persons who have assets in the country are subject to the payment of these tax-

es in respect to said assets.

FOREIGNERS AND THE DOMINICAN PENAL LAW

the Dominican Penal Code establishes three types of infractions: misdemeanors, felonies, and crimes.

Dominican courts have the jurisdiction to judge foreigners who commit infractions within Dominican territory,

even when the victim is also a foreigner.

DePORtAtiOn

Foreigners that engage in certain illegal activities in the Dominican Republic may be arrested and deport-

ed to their country of origin.

When foreigners become a public nuisance within five years following their entry to the country, the im-

migration inspectors are in charge of investigating these cases and obtaining the corresponding arrest

warrant. Foreigners may not be deported without having the possibility of defending themselves from the

charges of which they are being accused.

eXtRADitiOn

the Dominican Republic has signed extradition treaties with the United States of America and Spain. the

country also is a signatory to the international extradition Convention of 1981.

FOReiGn PARtieS BeFORe DOMiniCAn COURtS

Access to justice and the right to ask a Dominican court to defend an individual is granted both to Dominican

citizens as well as to foreigners, without regard to country of origin.


By virtue of the principle of contractual liberty, a foreign law may be chosen as the applicable legislation to

any contract, so long as it does not contradict public order laws, as they cannot be waived by private contracts.

A foreigner who raises a complaint before Dominican courts may be ordered by a judge, as per the request of

a local counterpart, to supply a “judicatum solvi” bond as guarantee for the payment of the costs or indemni-

fications that may result in the legal process. this bond can be ordered when the foreigner does not have a

legal domicile in the country. As there is no specific legal disposition to limit the amount of the bond, the Do-

minican counterpart sometimes asks for exaggerated amounts as a way of delaying the course of a lawsuit.

the Dominican party may waive the right to request bond in case of litigation in any private document before

such litigation arises. notwithstanding the foregoing, it is important to note the legality of litigation bonds

imposed on foreign individuals may always be questioned, because it limits the right of every individual, for-

eign or national, to access the courts and obtain legal protection.

Private documents issued or executed abroad, to be admissible in a local court or governmental agency must

be notarized and authenticated by the corresponding agencies in their country of origin and in the Dominican

Republic. in addition, documents that are not in Spanish must be translated by an official translator or a sim-

ilar officer in the country of origin.

Documents executed in certain countries that are party to the hague Convention of October 5, 1961 are suf-

ficient if they are annotated according to the terms of the Apostille Convention.

ARBitRAtiOn

Persons or enterprises may opt to resolve their commercial conflicts outside the judicial courts, submitting

their claims to conciliation, or local or international arbitration. this is possible when the litigation does not

refer to public order laws, in which case the court is the mandatory venue.

in October 2001, the Dominican Republic became a member of the Convention on the Recognition and en-

forcement of Foreign Arbitral Decrees (the new York Convention). it also is party to the inter-American Con-

vention on international Commercial Arbitration (the Panama Convention). hence, the execution of foreign

arbitral decrees must be ordered by a local court, based on the provisions of international conventions and

local laws on the matter.


ALL RIGHTS RESERVED. ©

Av. John F. Kennedy no. 10, Santo Domingo, Dominican Republic tel: (809) 541-5200 Fax: (809) 567-0773

www.phlaw.com [email protected]

Mailing Address: P. O. Box 25522ePS A-303 , Miami, FL 33102 USA

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