If you wish to set up a business in the Dominican Republic, here is some information regarding procedures to follow.
Starting a business requires rigor and appropriate planning. Although the Dominican Republic has become a leading destination for entrepreneurs over the years, it is best that you inquire on its economy, as well as on regulations and procedures regarding the setting up of a business in the country. These should not be very complicated, but you will require particular documents and have to meet specific conditions.
According to the World Trade Organization (WTO) indicators, the Dominican Republic enjoys a healthy economy. Export of goods of amounted to some US$ 9,630 million in 2013, against US$ 8,612 million in 2011 and US$ 9,079 million in 2012. Export of services, for their part, amounted to US$ 5,918 million in 2013. The United States, Haiti, China, Guatemala, the Netherlands, Honduras, North Korea, Germany, Peru and finally Canada are the country's main clients.
According to Comtrade, which is the International Exchange database, travel, transport (freight, sea and air), communication services (Post and Telecommunications), business services, financial services, insurance services, and finally information and technology services accounted for the country's exports.
Good to know:
According to the International Monetary Fund (IMF), unemployment rate has been decreasing since the past few years, from 13% in 2012 to 12% in 2013 and 2014. Hence, the active population consists of 4,912,000 people. The services sectors remains the main job creator, with 67.8% of the total employees while 17.8% worked in industry and 14.5% worked in agriculture.
Foreign businessmen have chosen to invest in the Dominican Republic for various reasons. First of all, the country offers a stable political and economic environment. The latter remains open and integrated in trade thanks to the government's continuous efforts so as to attract and promote investments. It also enjoys:
- a relatively stable exchange rate
- a favorable environment for Foreign Direct Investment (FDI)
- a favorable legal framework for foreign investment
- a market which trades with the EC as well as the USA
- a trained and qualified workforce
- modern transport infrastructure
- a high-end telecommunications infrastructure which is supported by the United States
- industries and services at competitive costs
- flexible rules on the origin of imported products.
It is also found near the sea, providing an indisputable quality of life for foreigners.
The following fields are very open towards foreign investment in the Dominican Republic: telecommunications, infrastructure, renewable energy, agribusiness, call/contact centers, software development, manufacturing and tourism. Moreover, the Santo Domingo Cyberpark, which is found in the free zone, hosts some 600 international companies, namely industries, companies specializing in software development in the design and manufacture of computer and technology products. This free zone operates under a special tax free customs regime.
Types of companies
Before proceeding with the setting up of your business, you should know that the capital deposit is no longer required since 2012. Hence, you just have to determine which type of company you would like to create, bearing in mind associated conditions.
The Limited Company
The Sociedad Anónima, which is a Limited Company, can be founded by two or more partners. Both are responsible for the company's debts according to their capital contributions. In fact, it is one of the most popular types of companies with foreigners. The company's capital will be represented by negotiable shares. The minimum authorized capital amounts to 30 million pesos. 10% of this amount must be paid at the time of the company's creation.
The board of directors can consist of a minimum of three members who must be appointed to take over the company's management. According to current laws, the Sociedad Anónima must be supervised by one or more "vigilance officers" appointed for two mandates. They will have to perform an audit of the annual accounts submitted by the Board of Directors, of documents sent to shareholders regarding annual accounts and on the company's financial status.
Any final decision must be approved by the shareholders' general meeting. The distribution of dividends based on the ratio of all the company's operations and the approval of the management's printed report will then be determined.
Sociedad Anonima simplificada
The Sociedad Anonima simplificada, which is a Simplified Limited Company, can be founded by two or more partners. Each one's responsibilities are limited to their capital contributions. The Sociedad Anonima simplificada's capital is divided into shares which can be issued in registered form. A minimum capital of 30 million pesos is required. 10% of this amount must be paid at the time of the company's creation.
Partners may determine the company's organizational structure through internal regulations. The company can then be managed and directed by a Board of Directors or by one or more directors.
Limited Liability Company
The Sociedad de Responsabilidad Limitada, which is a Limited Liability Company, can be founded by a minimum of two and a maximum of 50 partners. However, none of them can be personally liable for business debts. This type of company is more preferred by small and medium enterprises and other similar entities. Its capital, a minimum of 100,000 pesos, is divided into equal shares which cannot be traded. In general, these shares are rated at less than 100 pesos. The shares are then transferred by succession or upon the liquidation of assets. Moreover, can be transferred freely among family members, but the transfer to third parties required the consent of ¾ of the partners. Other conditions and formalities also apply.
Finally, the company is managed by one or more physical partners who will be responsible of the company under all circumstances. Hiring a vigilance agent is not mandatory. However, the company's financial statements have to be verified.
Individual limited liability company
The Sociedad de Responsabilidad Limitada Individual, which is an Individual Limited Liability Company, can be created by a single person. The latter will have be the only one to have rights and obligations. But the company should be separate and independent from the rest of his property. Moral persons cannot set up this type of company in the Dominican Republic. Moreover, contributions have to be set by the owner. This amount may be freely established and increased in accordance with the legal procedures. Finally, the company can be transferred provided it complies with existing regulations.
Foreign companies are legally recognized in the country when its existence is confirmed by competent authorities. Hence, according to Dominican laws, the legal existence, capacity and dissolution of a foreign company is governed by the laws in force in the country where it has been set up. However, its constitution, as well as activities performed in the Dominican Republic, are governed by local laws.
Note that a foreign company wishing to set up a subsidiary in the Dominican Republic or who wished to carry out regular commercial transactions with the country has to register with the Trade Register, as well as with the Internal Revenue General Directorate.
Good to know:
Foreign and local companies are equally recognized by local laws.
First of all, you are required to verify on the Oficina Nacional de la Propiedad Industrial (ONAPI) website if the name you have chosen for your company is available. If it is the case, you can purchase and register it online for 4,755 pesos. To make sure that the company name has been registered, check the bimonthly ONAPI newsletter, at least 10 days following the purchase. In case of failure, you can contact the ONAPI once again within 45 days.
Thereafter, you have to report to the Dirección General de Impuestos Internos where you will pay incorporation fees (1% of the company's capital of the company), either by a certified check adressed to the Colector de Impuestos Internos, online through banks such as Leon and BHD), or in person at Banco del Progreso. Alternatively, you can go directly to the Dirección General de Impuestos Internos or to the Banco de Reservas. Moreover, you can pay in cash in case the amount does not exceed 10,000 pesos.
You also have to register the company and the company's office address at the Chamber of Commerce so as to obtain an identification number. In the Dominican Republic, the company's head office is the actual administration and business management office. Documents to be produced to the Commercial Register which is found at the Chamber of Commerce office are the following:
- duly signed company regulations
- the constituent General Assembly with the list of members present
- a list of the amount invested by each partner, as well as social quota shares;
- in the case of a Limited Liability Company, a duly filled and signed application form
- the Association's partnership agreement
- a receipt of payment of incorporation fees
- photocopies of partners' identity cards
- a copy of the company's name, issued at registration with the ONAPI.
You then have to declare the company to the National Taxpayers Registrar which is located at the Dirección General de Impuestos Internos office and register for tax revenues in order to obtain a tax number. Fees of some 10,800 pesos apply.
If you intend to hire Dominicans, you must also register with the Ministry of Labor's local office within the company's first week of activity. You also have to produce a permanent staff list the employees work schedules and vacation periods, etc. Note that you have to obtain the tax identification number before proceeding with this step.
Finally, you are required to register your employees with the Tesorería de la Seguridad Social, that is the Social Security Treasury within three days following their hiring or during the company's setting up. This can also be performed online.
In the Dominican Republic, an employee is hired on a three months probation period, whether it is a part time, full time or seasonal contract. A legal working week consists of 44 hours per week, that is 8 working hours per day over five or five and a half days, including four hours on Saturday.
Once an employee has completed a year of service, he is entitled to a 28 days paid annual leave. Note that these conditions should be stipulated in the employment contract.
Expat.com – Work in Dominican Republic Forum
Ministry of Industry and Trade www.mic.gob.do
Ministry of Labour www.ministeriodetrabajo.gob.do
Tesorería de la Seguridad Social www.tss.gov.do
Doing Business – Dominican Republic www.doingbusiness.org