Structuring the investment
The most common entity used by foreign real estate investors in the Dominican Republic is a local individually owned enterprise, or LLC (sociedad de responsabilidad limitada or SRL). Some, preoccupied by the complexities of reporting a foreign entity to the tax authorities in their home jurisdiction, prefer to register their domestic entity in the Dominican Republic.
There are no restrictions regarding the structure or legal form of foreign investment in real estate. If it is duly incorporated and recognised in the jurisdiction where it was formed, entities can do business in the Dominican Republic upon registration at the Chamber of Commerce and Internal Revenue.
As for Dominican entities, Dominican company law allows different types of commercial companies (LLCs) and corporations (regular or simplified stock corporations), all of which provide limited liability for its owners or shareholders. There are other investment entities recognised under the law, such as business partnerships, limited partnerships and per share limited partnerships, but they are seldom used because they do not offer full liability shields to their members, and are subject to the same tax treatment as the other entities. In 2011, Law 189-11 introduced local fiduciary vehicles as a holding option.
Dominican law does not recognise the concept of pass-through entities. Any entity, local or foreign, is subject to the same tax (27 per cent), regardless of its legal structure. There are two exceptions: (1) entities that have obtained exemptions under Tourism Incentive Law 158-01 and (2) closed-end real estate investment funds approved by the Dominican Republic Security and Exchange Superintendence.
The Constitution of the Dominican Republic lays out the fundamental framework for the organisation and the operation of the Dominican government and its institutions, and recognises an impressive list of civil rights for all individuals, Dominicans and non-Dominicans, including an equal protection clause for non-Dominican citizens and investors. Article 25 of the Constitution expressly states that foreign nationals are entitled to the same rights and duties in the Dominican Republic as Dominican nationals, except for the right to take part in political activities. Article 221 of the Constitution sets forth that the government will ensure equal treatment under the law for local and foreign investments.
Hence, there are no restrictions on foreign individuals or entities owning or leasing real estate in the Dominican Republic. The process for purchasing or leasing real estate for foreigners is exactly the same as for Dominicans. Foreign individuals and entities, and Dominicans, must register locally with the tax authorities before registering purchases of real estate. Individuals must submit their application directly at the Internal Revenue office, while entities must first register at the Chamber of Commerce and obtain a mercantile registry certificate, before applying for their tax number. These are mere formal requirements that can be easily fulfilled.
Furthermore, there are no exchange controls issues in investing in real estate in the Dominican Republic. Under current foreign investment laws, foreigners can freely repatriate capital and profits from their investment in the Dominican Republic.
Finally, several statutory incentive laws make it attractive for the foreign investor to purchase property in the Dominican Republic. For example, Law 158-01 on Tourism Incentives, as amended by Law 195-13, and its regulations, grants wide-ranging tax exemptions, for 15 years, to qualifying new tourist projects by local or international investors. The projects and businesses that qualify for these incentives are:
- hotels and resorts;
- facilities for conventions, fairs, festivals, shows and concerts;
- amusement parks, ecological parks and theme parks;
- aquariums, restaurants, golf courses and sports facilities;
- port infrastructure for tourism, such as recreational ports and seaports;
- utility infrastructure for the tourist industry such as aqueducts, treatment plants, environmental cleaning, and garbage and solid waste removal;
- businesses engaged in the promotion of cruises with local ports of call; and
- small and medium-sized tourism-related businesses such as shops or facilities for handicrafts, ornamental plants, tropical fish and endemic reptiles.