Setting up a business in the Dominican Republic

Setting up a business in the Dominican Republic
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Updated 2022-04-25 13:42

The Dominican Republic has been attracting foreign investment for many years, dramatically increasing since 2000. The primary assets are tourism, manufacturing and services in the Free Trade Zones, and mining. Due to recent trends, one of the fasted growing areas in real estate. Many foreigners have come to realize that the Dominican Republic is quite the gem to invest their money in. So if you're not looking for employment with a company but rather start your own business, this guide should shed some light on the necessary steps to take in order to make this happen!

Why set up a business in the Dominican Republic?

The Dominican Republic is an ideal market for foreign investment for the following reasons:

  • Social, political, and economic stability
  • Attractive incentives and special regimes
  • Government support
  • Strategic location
  • Ranked second in Latin America and the Caribbean in terms of connectivity (transport, logistics, and telecommunications infrastructure)
  • Continuously the highest growth rate in Latin America
  • Preferential access to a market with more than 900 million consumers throughout the world via Free Trade Agreements signed with 48 countries.
  • The largest receiver of Foreign Investment in the Caribbean
  • The lowest rate of inflation in Latin America and the Caribbean
  • Competitive and qualified workforce

How do I set up a business?

The first stage is to decide what type of business you want to register, and the Dominican Republic gives you five options for entities.

There is a large government body known as CEI-RD (Center for Exports and Investment in the Dominican Republic), which can help the new investor through the various stages of setting up a business.

Sole proprietor

This would be appropriate for small businesses such as consultancy, beauty parlor, technical advisors, etc., and is also the easiest way to set up a business. The cost for registration is RD$500, which is around US$10.

Individual Limited Liability Company (EIRL)

This is again a sole individual, but the assets are in the company name, not the individual's so that the individual is protected in the event of any liabilities or legal actions. This is recommended for companies that have more significant amounts of fixed assets or stock.

Limited Liability Company (Sociedad de Responsabilidad Limitada, SRL)

This type of company has between two and 50 partners and has to have a minimum investment of RD$100,000, which is around US$10,000. The cost for establishment starts at around RD$9,000 or US$200.

Once you have decided on the type of company you want to establish, you simply go to the company registration site and follow the instructions.

Joint Stock Company (Sociedad Anónima, SA)

You need at least two shareholders to form this type of company. Their liability will always be limited to the contribution to the capital they've made, just like in the LLC. Transferable shares with a minimum nominal value of 1 Dominican Peso represent the minimum capital of 30 million Dominican Pesos.

Simplified Joint Stock Company (Sociedad Anónima Simplificada, SAS)

This entity also requires two shareholders, and the liability is again limited to the amount they have paid into the capital. The difference with the SA is that the value of shares will be established through the bylaws and the amount of minimum capital is lower (3 million pesos). In order to incorporate, you will have to pay at least 10% into the capital.

We have been focusing on the two most common business types amongst foreigners - opening up a real estate company and a restaurant.

Hopefully, our little guide will give you a better understanding of the things you have to be aware of and, most notably, how to begin and proceed when starting your own business in those two fields.

Opening up a bank account for your business

Once you have decided on what type of business you want to form, followed all the necessary steps, and finally started the operation of your company, one crucial thing you have to do is to set up a bank account in order to be able to operate thoroughly. Your bank account plays a central part in your whole business and helps you to manage all of your expenses and payments correctly.

Banks in the Dominican Republic

You can choose from a variety of banks operating in the Dominican Republic:

  • Banco Leon
  • Banco Reservas
  • Central Bank
  • Banco Popular
  • Scotiabank

Good to know:

There is only one international bank operating in the DR, Scotiabank.

Are Dominican banks considered to be safe?

Absolutely! Some might even say they are much safer than banks in Europe or the United States of America.

What makes these banks a safe bet for your money?

In order to be able to guarantee the payment of assets and liabilities, Dominican banks have to put aside some money as a reserve. They are also checked up on from time to time to see if they have really ensured the payments (makes up usually up to 6% of outstanding debts from credit cards, debit cards, and also loans that are not secured).

Oh, and it does not matter which bank you choose because all of them have to do it!

One more reason to put your trust and money into Dominican banks is that unlike banks in the United States and also in Europe, the ones in the Dominican Republic do not engage in banking activities other than traditional ones. This means they are not involved in things such as derivatives, which could be a potential risk to your money as the banks are basically gambling with it.

Whenever you ask experts on the topic of banking, they would probably tell you that they think of Dominican Banks being very old school and somewhat conservative. Also, banking is widespread throughout the country and, therefore, available almost everywhere.

The only downside when it comes to banks in the Dominican Republic is borrowing money from them. You can invest your money or deposit it, but when it comes to loans, they will charge you up to 18% for mortgages or car loans.

​If you are not interested in any loans etc., you should not have a problem with banking in the DR.

What is required to open a company or real estate agency in the Dominican Republic?

To finalize the opening of a company or real estate agency in the Dominican Republic, you have to carry out all the procedures contained in the registration of incorporation, like any company in any country.

But these, due to their commercial activity, have other types of regulations and obligations.

Real estate companies must apply for a license to operate as the national executive, as stated in the Law for the Creation of the Dominican Association of Real Estate Brokers (ADCI) and Regulation of Real Estate Brokerage in the Dominican Republic.

Those are the requirements that the law establishes.

Whoever requests it must make sure to comply with the points mentioned above in order to obtain a bond created by some insurance company in the country.

Said deposit must be equal to RD $300,000.

Real estate agents must also obtain a license, must be members of the ADCI, and not have any outstanding debt in order to practice as such.

Starting a real estate company is a great way to do business in the Dominican Republic.

This is a nation full of beautiful landscapes and exotic coasts, so more and more foreign visitors are interested in obtaining property within the Dominican territory.

However, it is also true that this type of company requires greater responsibility and attributes more outstanding commitment to the company members.

Opening a restaurant in the Dominican Republic: insights about costs, and tips to keep in mind

The opening will always depend on the savings you have when you want to realize this project. Remember that for the Registration of your Business Name, you need a minimum of RD $ 5,000.

For ONAPI (Oficina Nacional de la Propiedad Industrial), the “National Intellectual Property Office”, you will need RD $9,000.00 in total. This is only important in the case you want to register your commercial name or, for example, a trademark, of course.

But of course, this is merely an estimate of what the lawyer and the notary public request.

Tips for opening a restaurant in the Dominican Republic:

When you consider opening a restaurant, you should focus on making a different and balanced meal or an outstanding service for your audience.

Recall that this is a country where several gastronomic proposals have been established in the sectors where tourism visits. This means considerable competition.

We advise you to make a goal and plant it in your business strategy.

Be aware of your investment and check the priorities you have before committing to any rental or buyers agreement.

Inquire in the area where you want to settle down and look for a place according to your needs.

The location of your business can be a key factor for success. In the first instance, you can consult with companies conducting market research or accessing statistics in the tourism sector.

Reports on the growth of cities, routes, and other factors could be of great help to you.

Look for a team of employees that you know, and that effectively follow the instructions that you will give within it.

It is vital to be able to trust your team once you start operating in your business.

Have the registrations to avoid overpaying. If you do not register, they close the business, and you will have to pay the extra money, most of the time unforeseen.

Always maintain a good attitude. Positivism makes everything you develop you can execute, remember that we are almost always the ones who limit ourselves.

Employees

Dominican Employment Law is strict and in favor of the employee, which is a good thing and contrary to many other nations in Latin America. Holidays, working hours, and minimum wages are strict, and employees have to receive an additional month's wages at Christmas. If dismissed, they are entitled to a compensatory payment based on the amount of time worked.

You are also required to register your employees with the Tesorería de la Seguridad Social, which is the Social Security Treasury, within three days following the hiring of employees or during the company's setting up. This can be done online and definitely is advised to do so, as they will come and check up on you!

Taxation

All businesses have to register with the Taxation Office, known as the DGII or Impuestos Internos. They will then be given a taxation number, known as an RNC. They will be liable to pay sales tax, ITBIS, to the government minus any taxation incurred in company-related purchases. In order to deduct the tax paid, the business will need to provide receipts, known as the comprabantes fiscales. The current level of sales tax is 18%.

In the Dominican Republic, every organization that works profit-oriented, any corporation, LLC, partnership, etc., has to pay a 27% income tax rate.

You also have to send an annual tax report, so if you don't want to deal with it yourself, it might be better to get a professional accountant to do it. You have to include financial statements approved by a state accountant additionally. This is due every year before April 30th and has to be made to the Dirección General de Impuestos Internos (DGII).

Income tax, on the other hand, has to be paid in advance every month. You can find more about the exact amount and a much more detailed report about all the essential things regarding taxes in our article about the taxation system in the Dominican Republic.

Tax-Free Zones

Tax-Free Zones are one of the most popular places to start a business as they allow much flexibility in terms of taxation and also allow lower wages to be paid to staff members. There is a Tax-Free Zone (Zonas Francas) in most cities, and often more than one. Surrounded by high walls, fences, and security, all goods and services manufactured there are for export only. Most of the companies are call centers and manufacturers of tools, clothing, shoes, and jewelry.

Investment in tourism

There can be significant tax advantages for those involved in the tourism business once the project has qualified as a project for the tourism industry.

Useful links:

PWC - Doing business in the Dominican Republic

Labor Ministry

CEI-RD

Ministry of Tourism

Taxation Office

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.