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Dominican Rep

7 April 2021

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Dominican Republic Extends Special Border Development Free Zone Including Tax Incentives

According to recent reports, the Dominican Republic enacted Law 12-21 on 22 February 2021, which establishes a new regulatory framework that updates and replaces Law 28-01 on tax incentives for the Special Border Development Free Zone with immediate effect. The zone covers provinces near the border with Haiti, including Pedernales, Bahoruco, Independencia, Elías Piña, Dajabón, Montecristi, and Santiago Rodríguez.

Under Law 12-21, the tax incentives for qualifying companies operating in the zone includes 100% exemptions from the following for up to 30 years:

  • Corporate Income Tax;
  • Selective Consumption Tax (ISC) on telecommunications and insurance services for project facilities located in the zone;
  • Tax on the Transfer of Industrialized Goods and Services (ITBIS) on machinery and equipment required for the installation and start-up of operations, whether imported or acquired locally;
  • ITIBS on the acquisition and import of inputs and raw materials used in the production of goods exempt from ITBIS;
  • Import duties on inputs and raw materials used for the production of goods, provided these are not produced in the Dominican Republic; and
  • Real estate transfer tax.

In addition to the above exemptions, a 50% exemption from ITBIS is provided on the acquisition and import of inputs and raw materials used in the production of goods that are not exempt from ITBIS. Further, payments abroad for technological innovation services required for qualifying projects are exempt from tax during construction and commissioning and an exemption from taxes, fees, and registration rights is provided in relation to capital increases and the transfer of shares in companies covered by the law.

Law 12-21 generally applies to industrial, agro-industrial, agricultural, metalworking, and metallurgical companies, as well as all types of companies incorporated under Dominican laws that are established and carry out operations in the zone. Companies benefiting from the incentives have a period of 2 years from the granting of the license to start their operations. Within a period of 10 years from the date the license is granted, companies will be reviewed, and the validity of the license will be conditioned on a social cost-benefit analysis. Where it is found that a company has acted fraudulently to take advantage of the incentives, the law provides for a specific system of sanctions.

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