INVESTMENT CLIMATE IN THE DOMINICAN REPUBLIC  

One of the disadvantages of investing abroad, in addition to the language, is the uncertainty that some nations bring along the way, especially in the Third World. Within this context, the Dominican Republic in the past was one of them. It was a country with a great question mark regarding investments.   

Since 1994 the Dominican Republic has been promoting foreign direct investment, and it has been opening its own way in  the international markets. As part of this effort, we have several laws as incentives, such as the new law of real estate registry, the law of foreign investment, of intellectual property, etc.

In other words, the Dominican Republic doesn’t seem to be an uncertain place for investing now. At this moment, foreign direct investment has grown enormously, thanks to the interest of different companies and personalities to invest in the country, among them the actors Brad Pitt and Vin Diesel.

A lot has been said of the excellent location of the country for investors of different latitudes and regions in the Caribbean and from the United States.

Located in the center of the Antilles, the Dominican Republic is between two hours and a half to three hours and a half to most of the Hispanic countries, among them Panama, Colombia and Venezuela.   

Currently, the country has modern legislations that guarantee the foreign investment, and that are on a par with the most advanced legal codes of Central America and the Caribbean. We have previously mentioned the laws of industrial protection that include trade names, design, and industrial property. In 2005, a new Criminal Proceedings Code has been implemented, which is considered by many as a model Criminal Justice Code.  

Regarding the fiscal and financial aspects, the country has strengthened its banking laws and the Tributary Code to assure the stability of the financial system, and to provide the investors with the most modern tools so that -once an investment is registered in the country- they can determine the possible fiscal or tax loads of their investment with agility and certainty.   

Like in the past, the main partner and client of the Dominican Republic is the United States.  The Dominican Republic receives the greatest amount of economic resources from the Dominican immigrants in the United States. At the present time, the opening of the markets with the imminent entrance in effect of the Free Trade Agreement (DR-CAFTA) is expected, which will constitute a sure source of business for the Dominican Republic with incentives of transparency in favor of the direct foreign investors.

The European countries with greater incidence in the Dominican Republic are France and Spain. There is a great Spanish investment in the hotel and tourism areas in the country.   Italy can also be mentioned as one of the markets of greater growth in the Dominican Republic regarding the European investments. The countries of the Asian continent have a great presence in the country, among them Japan, Taiwan, and South Korea.       

REGULATIONS

The investment in real estate is regulated by the new law 108-05, from March 23, 2005. This law -although it has not still entered into effect- is the one that officially will determine the procedure for acquiring properties in the Dominican Republic. Its advanced structure will allow fulfilling real estate operations in a shorter time and with greater security for the investors. It is legislation that like all of the laws it has its shortcomings, but that in general shines like a gigantic leap in advance in the Dominican real estate sector. For those of you who want to know this legislation in depth, we offer our comments on it free of charge as a download.   

However, other regulations like the Tax Code and even the Law on Industrial Property take part in a project of investment or purchase when the real estate operations are made through corporative vehicles or corporations constituted in the Dominican Republic. In spite of this apparent complexity in the regulation of the real estate investment, we must say that as rule of thumb it is not so complex to buy property in the Dominican Republic. The basic thing is the subscription of a transaction contract, the payment of the corresponding taxes and the registry of the certificate of title in the Registry of the area where the building is located.   

On the other hand, as for the purchase of properties to be built, which is known like the preconstruction market, the situation can become still more complex, since generally previous agreements are required, or transaction options, and in addition the fulfillment of deep investigations of the promoters are required, as well of the certificates of the titles and the construction permits. This subject will be object of an additional study, which will be able to be bought online in this website on a minimum price.   

The legislation of greater benefit or incentive for the real estate investment is the Law for the  Promotion of Tourism Development (Law 158-01), that promotes the real estate investment in almost all the national territory. An explanation must be given to many foreigners who think that this legislation was created in order to eliminate the resulting tax burdens of the transaction related to a building. This is an error, because the law only includes the projects, and it has not been conceived for the foreign direct investors. The projects that meet the requirements, even the foreign companies that wish to invest in real estate projects in the Dominican Republic, will be forced to have a permanent address in the country.  

As a last term, no longer in the scope of this section on the regulations, but within the tools that can help to handle yourselves within this complex world of real estate legislation, we find a society of world-wide prestige that has been operating in the Dominican Republic for many years: Stewart Dominican Title.

This company has taken part with great success in the main real estate projects in the Dominican Republic. Its contributions to real estate investments include the guarantee of titles, the examination and audit of titles (due diligence), and the complementary services of escrows.    

TYPICAL STRUCTURE OF INVESTMENT     

There are multiple ways of doing business in the Dominican Republic, as well as in the real estate area as in commerce and in the industry. Typically we can indicate the following types of structures of businesses:

	Commercial Partnership.
	Limited Partnership.
	Joint Ventures.
	Stock companies or anonymous societies (“compañías por acciones”, or “sociedades anónimas”).
	Limited liabiltiy companies or corporations (companies or corporations of limited financial obligation). .

Without doubt, the safest and most widely used structure of companya is the formation of a stock company or anonymous society (“compañía por acciones”, or “sociedad anónima”).   In the case of foreigners. that type of structure, although it can be quite useful, usually it is expensive, and it does not adjust adequately to all the types of investment. Link to www.fgasoc.com.do, companies transactions.   

The question might be why we cannot prescribe this wonderful medicine to all the investors. It is one of the most frequently asked questions, and it gets answered by another question in order to get a whole picture of this scenario:   Should I establish a company to be able to invest in the Dominican Republic?  Our answer is not magical, and we don’t think that a magical formula or unique answer exists to answer this question.  The legal and financial consultant must work with the investor to determine this necessity.  

As a general rule, it is advised that the buyer who only has an intention to acquire a property for recreation purposes or as a second home, should not get involved in the complexities of establishing a formal company. Whereas the investor interested in obtaining an economic benefit, appreciation, or rent should indeed invest through that type of corporative vehicle.   

We have endorsed this opinion or general advice, but not in their totality. It is necessary for the investor to contract the services of a professional in the legal area, regardless of their investment budget. There are different levels of legal consultancy. In our case, we have a diverse spectrum of legal fees, and on a regular basis we can offer a complete service that includes fiscal and financial consulting.  

Continuing with the subject of the evaluation, it is necessary to state –once the investor profile has been analyzed- that the lawyer will determine if what the investor is looking for is rent or appreciation of the real estate investment. Then -and only then- it will be determined if they should go on establishing a specific legal structure according to the kind of investment. On the contrary, that is to say, if an intention of sale in the medium or short term does not exist, it is advised to acquire the property on a personal basis without establishing any kind of legal society. Our firm rarely advises to make an investment on a personal basis.  Link a do it yourself www.fgasoc.com.do