WHAT YOU NEED TO KNOW TO ESTABLISH A FREE ZONE COMPANY
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IS THERE A LAW THAT REGULATES THE FREE ZONE REGIME?. Free zones are regulated by
Law 8-90 of January 15, 1990, which seeks to promote the establishment of free zones and the growth of existing ones
- ARE THERE ANY INCENTIVES TO ESTABLISH A COMPANY UNDER THE FREE ZONE REGIME?. Yes, Article 24 of Law 8-90 details these incentives
Free Zone Operators and Enterprises established therein shall be protected by the tax and customs regime set forth in Article 2 of this Law and consequently shall be entitled to 100% exemptions from:
- The payment of corporate income taxes, as set forth in Law No. 5911 of May 22,1962, as amended;
- The payment of construction taxes, taxes on loan agreements, and on the recording and transfer of real property from the date of formation of the Free Zone Operator.
- The payment of the tax on the formation of corporation and on the increase in their capital;
- The payment of any municipal taxes which may affect their activities;
- The payment of import duties and related taxes on raw materials, equipment, construction materials, parts for buildings, office equipments, etc., destined for construction, preparation or operation within the Free Zone.
- All taxes on exports or re-exports, except such as are set forth in sections f) and g) of Article 17 hereof;
- The business tax (patente) on inventory or assets and of the Tax on the Transfer of Industrialized Goods (ITBIS).
- Consular charges on importations consigned to Free Zone Operators or Enterprises;
- Import duties on equipment and utensils for the installation and operation of cafeterias, health services, medical assistance, child care centers, entertainment or amenities or other equipment for the well-being f the working class;
- The payment of duties on the importation of transportation equipment, such as trucks, garbage trucks, microbuses for the transportation of employees to and from work, subject to the prior approval, in each case, of the National Free Zones Council. Such vehicles shall be nontransferable for a period of at least five (5) years.
- WHAT IS THE PROCEDURE TO ESTABLISH A FREE ZONE COMPANY? HOW LONG DOES IT TAKE? WHICH INSTITUTION GRANTS THE PERMITS?
3.1 Installation Permit of Companies in a Free Zone Park.
*Submit the form installation permit (obtained at the Council previously), completed properly.
*Leasing contract and/or intention letter from the park where the company will be installed.
*Documents of formation of the company (definitive or preliminary), including list of shareholders, nationality and contribution.
*Certified check to the order of “Consejo Nacional de Zonas Francas de Exportación”, for processing.
*Sample of the product to be manufactured.
*A solvency letter or any document that identifies the investor.
Note: This type of request must be reviewed previously by the Technical Department of the NFZC.
3.2 Special Free Zones
*Submit letter to NFZC requesting approval.
*Submit twenty (20) copies of technical profile of the project.
*Documents of formation of the company (definitive or preliminary), including list of shareholders, nationality and contribution.
*Submit legal titles of property of the lot (s) where the project will be installed, specifying the superficial extension of the lot(s), the adjacent properties, a copy of the plans of the census of real property of the country (reduced).
*Copy of the plans of the buildings (including infrastructure), properly authorized by the respective State Secretariat of Public Constructions and the Municipal Government.
*Academic and business antecedents of the main executives of the company.
*Letter of the closest Free Zone Park, informing that such activity can not operate in that park.
*Certified check to the order of “Consejo Nacional de Zonas Francas de Exportación”, for processing.
Note: This type of request must be reviewed by the Technical Department prior to being deposited.
3.3 New Free Zone Parks
*Send presentation letter along with the project to NFZC, requesting the approval of the park.
*Submit twenty (20) copies of the Technical-Economic feasibility study of the project.
*Submit legal titles of property of the lot(s), where the project will be installed, specifying the superficial extension of the lot(s) the adjacent properties, a copy of the plans of the census of real property of the country (reduced).
*Copy of the plans of the infrastructure of the park, properly authorized by the state secretarial of public constructions and the Municipal Government, such as area for warehouses, custom office, medical dispensary, cafeteria, etc.
*Copy of the plans of the type of buildings to be made.
*Academic and business antecedents of the main executives that manage or will manage the operations of the company.
Certified check to the order of “Consejo Nacional de Zonas Francas de Exportación”, for processing.
The procedure takes approximately 30 days. The permits are granted by the National Free Zones Council, the entity charged of regulating and supervising the free zone sector in the Dominican Republic.
- HOW MANY TYPES OF FREE ZONE PARKS EXIST?. There are public, private and mixed free zone parks. The public free zone parks are managed by the government, the private parks are managed by a private company or group and the mixed free zone parks are managed by a non profit organization.
- WHAT ARE THE MAIN ACTIVITIES IN THE FREE ZONE PARKS OF THE DOMINICAN REPUBLIC?. 50% of the companies established in the dominican free zones manufacture textile products. Other products manufactured in the free zones are shoes, leather goods, cigars, jewelry, pharmaceutical products, electronic parts; also call centers and data processing companies.
- WHAT IS THE MINIMUM WAGE IN THE FREE ZONE SECTOR?. As of February 2009 the minimum wage is RD$5,400.00 (US$150.00).
- RENT IN THE FREE ZONE PARKS. Rates go from US$1.8 to US$5.50 per square foot annually.
- BASIC PRICES OF ELECTRICITY, WATER, ETC. The cost of industrial electricity is US$0.15/Kwh to US$0.18/Kwh for non regulated parks and US$0.23-US$0.25 for regulated parks; the cost of water is US$0.33/M3.
- PREFERENTIAL SCHEMES AND FREE TRADE AGREEMENTS. The Dominican Republic is beneficiary of the following Preferential Schemes: Caribbean Basin Initiative (CBI), the Generalized System of Preferences (GSP) and COTONU. The country is part of the following Free Trade Agreement: the Caribbean Common Market (CARICOM), Central America, Panama, DR-CAFTA and the European Partnership Act (EPA).
- WHO HAS INVESTMENT IN THE FREE ZONES OF THE DOMINICAN REPUBLIC?. 61.3 % of the investment is from United States origin, followed by 26% of Dominican investment; 5.28 from South Korea. The rest of the investment in the dominican free zones are Dutch, Puerto Rican, Swiss, Venezuelan, Italian, French, among others.
- DO I NEED TO REGISTER A COMPANY IN THE DOMINICAN REPUBLIC IN ORDER TO ESTABLISH A COMPANY IN A FREE ZONE PARK? WHAT CORPORATE ORGANIZATION FORMS ARE POSSIBLE?. No, you don’t need to register a company in the Dominican Republic in order to establish your company in a dominican free zone.
The most common form of business association in the country is the limited liability company, but the Commercial Code also provides for the creation of the following types of associations:
*Civil partnership, which is used for pursuing noncommercial activities.
*Commercial partnership, whose members do not enjoy limited liability, even after transferring their interest for the debts arising before their departure from the association.
*Limited commercial partnership, in whish partners who do not participate in the daily management of the association enjoy limited liability.
*Limited stock partnership, which is a limited commercial partnership whose capital is divided into shares.
*Company of participation, which allows its members to act as a single body but has no legal existence as regards to third parties.
- CAN I OWN LAND/REAL STATE PROPERTY?. Until a few years ago the purchase of real state by foreigners was subject to obtaining an authorization of the President of the Republic.
These restrictions were eliminated by way of presidential decree, and thus now the acquisition of real property rights by foreigners is not subject to any special condition, falling under the same legal regime applicable to Dominican nationals.
- CAN FOREIGN INVESTORS ACCESS LOCAL CREDIT AND FINANCE?. Prior to the enactment of Law 8-90, local financing was unavailable. Now, dominican individuals and institutions may lend to free zone enterprises, subject to monetary board regulations.
- FOREIGN EXCHANGE AND REMITTANCE OF CAPITAL ABROAD FOR FREE ZONE COMPANIES. Industries established in the free zones are not subject to currency exchange restrictions. Except for the monthly local operating costs, free zone companies have no obligation to remit abroad or to account for the resulting profits to the Dominican Government or the Central Bank.
Free zone companies must pay the monthly local operating costs in Dominican pesos. These pesos must be obtained from the Central Bank.
- WHICH INTERNATIONAL BANKS DO YOU HAVE?. The Scotiabank and the Citibank are established in the Dominican Republic.
- FOREIGN EXCHANGE RATE. 1US$ = RD$36.10 (Jan 2010), 1EUR = RD$51.21 (Jan 2010)
- AVAILABLE WORKFORCE? UNEMPLOYMENT RATE?. The available workforce is 3 million people and the unemployment rate is 15.6%.
- HOW MANY FREE ZONE PARKS DOES THE DOMINICAN REPUBLIC HAVE? HOW MANY FREE ZONE COMPANIES?. There are 56 parks throughout the country and 555 companies.
