Dominican Republic Info
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 Posted: Thu Nov 16, 2006 6:28 am Post subject: DOING BUSINESS IN DOMINICAN REPUBLIC |
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DOING BUSINESS IN DOMINICAN REPUBLIC
STARTING A BUSINESS
STANDARDIZED COMPANY
Legal Form: Sociedad por acciones
Minimum Capital Requirement: 1,000
City: Santo Domingo
Registration Requirements:
Procedure 1. Deposit the 10% paid-in capital in the bank
Time to complete: 1 day
Cost to complete: no charge
Procedure 2. Obtain Certificate of Availability of the proposed company name from the National Industrial Property Office (ONAPI)
Time to complete: 2 days
Cost to complete: DOP 370
Comment: After the name is approved, the company has 30 days to apply for a formal Certificate of Registry with the Secretary of State for Industry and Commerce. If the name is approved a certification of approval of the name is issued by the National Office of Industrial Property once the name was published in the special supplement of ONAPI. Due to a formal administrative resolution from the National Property Office, the formal name application has been reduced from 8 working days to 48 hours.
Procedure 3. Arrange for the publication of the company name in the monthly publication of the National Office of Industrial Property
Time to complete: 10 days
Cost to complete: DOP 925
Comment: The publication would then be published in a national circulation newspaper within approximately 10 days. The National Office of Industrial Property publishes the list business/corporate names requested and their petitioners, twice per month.
Procedure 4. Obtain a Certificate of Name Registry from the State Secretariat for Industry and Commerce (Secretaria de Estado de Industria y Comercio)
Time to complete: 60 days
Cost to complete: DOP 3375
Comment: The registration of company's name is composed of several phases which involves searching archives for availability (procedure 2, 4 days to process), formal registration request (1 days to process), publication of company name in the National Industry Property Office monthly publication (10 days to process), and issuance of Formal Registry Certificate (45 days). If there are no third parties oppositions to the registration of the trade name within 45 days after the publication is published. The Secretariat of State for Industry and Commerce registers the name and issues a Certificate of Registry usually within 15 days within 55 days after the opposition term. The process of obtaining the trade name certificate of registration takes up to 120 90 days. However, one may proceed with the process of incorporation of the company upon the filing of the application for registration of the trade name.
Costs: Formal Registration Request - RD$3,006375.00
National Industrial Property Office publication: RD$925.00 (included in proc. 3)
Procedure 5. Payment of Incorporation tax and registration of incorporation documents in the Santo Domingo Chamber of Commerce "Camara de Comercio y Produccion de Santo Domingo" (Registro Mercantil)
Time to complete: 1 day (simultaneous with procedure 4)
Comment: The relevant taxes shall be paid via certified check addressed to the Collector of the Internal Revenue Department (Colector de Impuestos Internos). Fees are based on the authorized capital of the company at a rate of 0.56% (0.5% plus 12% of the amount of such 0,5%), according to article 21 of law 288-04 on Tax Reform and law 5113-59. Taxes corresponding to Law 80-99 are increased each year according to the inflation rate for the previous year. For year 2005, the said tax is calculated according to the following formula: RD$232.00 for the first RD$20,000 of capital, RD$13.00 per each additional RD$1,000, i.e. 1.3% of the authorized capital)
Procedure 6. Notarize a sworn declaration of incorporation tax payment and shareholders list
Time to complete: 2 day (simultaneous with procedure 4)
Cost to complete: DOP 1000 notary public fees + 16% ITBIS tax
Comment: Notary fee ranges from RD$150 to RD$2,0002. Notary fees are established by article 67, section 27 of Law 301 of 1964. Due to the devaluation of the Dominican currency, notary fees have been increased and adjusted - unofficially.
Procedure 7. Obtain Mercantile Registration Certificate and Corporate Documents certification
Time to complete: 11 days (simultaneous with procedure 4)
Cost to complete: DOP 3340
Comment: Law 3-02 Company establishes compulsory registration of all corporate documents at the Mercantile Registry of the Chamber of Commerce corresponding to the company's domicile, in order to obtain the Mercantile Registration Certificate. The certificate is renewed every two years. Fees are based on the authorized capital of the company, and are calculated according to a fees schedule established by each Chamber of Commerce and Production (for two years). The fees of the Chamber of Commerce in SDanto Domingo are as follows. Fees do not vary significantly in different locations.
-Company of less than RD$ 50,000 of capital value: RD$500.002
-Company capital value from RD$50,001 to RD$250,000: RD$1,200.003
-Company capital value from RD$250,001 to RD$1,000,000: RD$2,500.004
-Company capital value from RD$1,000,001 to RD$5,000.000: RD$4,500.005
-Company capital value from RD$5,000,001 to RD$10,000.000: RD$7,500.006
-Company capital value from RD$10,000,001 to RD$50,000,000: RD$10,500.007
-Company capital value from RD$50,000,001 to $RD250,000,000: RD$15,000.008
-Company capital value exceeding RD$250,000,000:RD$20,000
Document Registration:
Originals (each document) RD$40.00
Copies (each document) RD20.00
Usual cost: (1 set of originals and 6 sets of copies) RD$840.00
Procedure 8. File certified financial reports to the DGII and obtain an identification (RNC) number
Time to complete: 15 days (simultaneous with procedure 7)
Cost to complete: DOP 762.25
Comment: The application for registration at the National Taxpayer Registry shall be addressed to the Company's Department of the Internal Revenue Service. Since April 2006, the databases of ONAPI, the commercial registry and the tax authority have been linked. As a result, the company only has to deposit a completed application form. Copies of the incorporation documents are no longer necessary. The application can also be done electronically. Internal Revenue Department issues a certification of registration at the National Taxpayers Registry within approximately 45 days. The procedures also register Tax on Transfer of Industrialized Goods and Services (ITBIS) and selective consumption tax.
Fees: RNC Form No.3267 RD$500.00RP-01
payment receipt RD$232.00
Stamps RD$ 30.00
Procedure 9. Register local employees with the Department of Labour
Time to complete: 2 days (simultaneous with procedure 7)
Cost to complete: DOP 450, for a maximum of 25 employees and DOP 100 for each additional 25 employees.
Comment: Forms DGT-3, DGT-4 and "RNL" (Registro Nacional Laboral) (Employer's registration) must be filled-out within the first week of employment, and can be found at local Department of Labour.
Documents to be filed include: a list of permanent personnel, work schedules, and vacation periods of all personnel.
Procedure 10. Register employees at the main social security office (Consejo Nacional de Seguridad Social / CNSS)
Time to complete: 1 day (simultaneous with procedure 7)
Cost to complete: no charge
Comment: To control the contributions made by the company (as employer) and the employee, every company shall be registered and file the list of its employees at the Social Security National Treasury (Tesorería Nacional de la Seguridad Social - TNSS) which is a dependency of the CNSS. The TNSS distributes all the contributions to the corresponding administrator of each plan.
- Administradora de Fondos de Pensiones (AFP), 5.02% of employee's salary (Retirement Plan) at a Public or Private organization
- Administradora de Riesgos de Salud (ARS), 7% of employee's salary (Health Plan)
- Administradora de Riesgos Laborales (ARL) (Labor Risks Plan)Under the Law 87-01 employers must register employees at CNSS within three days of hiring or upon the start of business.
TAXATION
There are many legal provisions that regulate or touch the performance of business activities in the Dominican Republic. In this chapter we will examine the most relevant ones, namely: the tax regime applicable to business activities, the labour and environmental laws that companies must comply with, the mechanisms established to protect intellectual property rights, the relevant rules for undertaking business transactions such as purchase of real property and granting of securities, as well as the legal framework for electronic commerce.
Taxable Income
Dominican citizens and residents must pay taxes on the income they generate in the country and on income originating abroad. Foreigners must only pay taxes on income of Dominican origin, and after the third year of residence, also on income of foreign source.
Any person or entity that pays taxable income has the duty to withhold the respective tax amount and pay it to the administration. These withholding agents are liable to the tax office for the payment of the corresponding taxes.
Corporate Tax Rate
The income tax rate for legal persons is currently 25% on the taxable income of each fiscal year. This tax must be withheld at a corporate level from the dividends paid by the company. The remaining balance is not subject to any other tax, whether it is paid to persons or companies.
Payments Abroad
A 25% rate applies to all payments made abroad. This rate does not apply to interests owed to foreign financial institutions, which under Law 92-04 on Bank Risk Prevention are taxed with a lower rate of 15%. In all cases, the Dominican party is obliged to withhold the tax and pay it to the administration.
Income from Business Activities
A 10% tax rate applies to income obtained in the course of business activities, such as fees, commissions, etc., which has to be withheld by the person or company making the payment. A higher rate of 20% applies to income obtained from the lease of property, 15% to income obtained from lottery games, 1.5% to payments made by State agencies for independent services, and 10% to any other income.
National Registry of Taxpayers
Law 53 of 1970 created the National Registry of Taxpayers ("RNC") with the aim to establish a common registration number for determining and paying tax obligations, charges and fees. The RNC number serves as code of identification of taxpayers in their tax activities and as mechanism of control for the Administration to follow up the compliance with tax obligations. All persons and companies are obliged to obtain a RNC registration, which must appear in all of the documents used for their operations.
Taxation of NGO's
On March 2002, DGII (the tax office) issued Norm 1-2002, which by defining the extent of the exemption granted on behalf of non-for-profit organisations in Article 299.b of the Tax Code, provided that these entities will be liable to pay taxes for any business activities that they may perform. The tax exemption will thus only apply to their non-commercial activities. This measure is aimed at preventing that these entities are used to evade taxes.
Tax on Incorporation of Companies
Incorporation taxes amount to 0.5% of authorized capital, which shall not be less than RD$1,000. This tax will also apply to increase of capital, thus conforming a significant raise in relation to the previous rates.
Tax on the Transfer of Industrialised Goods and Services (ITBIS)
ITBIS applies to the following:
1. The transfer of industrialised goods, calculated on the net transfer price plus accessory services.
2. The import of industrialised goods, calculated on the CIF value of the goods plus custom duties, and
3. The provision and lease of services, calculated on the value of service excluding mandatory tips.
As indicated above, the 2004 Tax Reform increased the ITBIS rate to 16%. Advertising services will be taxed with a lower rate of 10% until 31 December 2005. Afterwards, the rate will be 16%.
A wide range of agricultural and livestock products have been exempted from the payment of ITBIS, such as living animals, meat, fishes for reproduction, milk products, plants to cultivate, vegetables and fruits for public consumption, coffee, corns, milled products, sugar, cacao, etc. Also, fuel and energy, books and magazines, as well as personal computers and accessories.
Services excluded are education, culture, health, financial (excluding insurance), pension plans, ground transportation, electricity, water and garbage collection, rent of houses, and personal care.
Selective Consumption Tax
This tax applies to the transfer of certain goods manufactured in the country, to the import of certain products and to the provision of certain services. Examples of these goods and services are alcohol and tobacco derivatives, vehicles, jewellery, certain home appliances, hotel rooms, etc |
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