Border Zone Tax Incentives Under Law 12-21: A 30-Year Exemption Most Investors Overlook.

While most foreign capital crowds into Punta Cana and Santo Domingo, seven provinces along the Haitian border offer something no beachfront project can match: a 30-year, 100% income tax exemption. The trade-off is location; the opportunity is a tax horizon longer than almost any other regime in the region.

Law 12-21, enacted on February 22, 2021, created the special zone for comprehensive border development covering Pedernales, Independencia, Elías Piña, Dajabón, Montecristi, Santiago Rodríguez and Bahoruco. It replaced the 20-year regime of Law 28-01, which had phased out that same month, and extended the incentive period to 30 years with the declared aim of accelerating economic, social and tourism development in the border region — including Pedernales, now the site of the government-backed Cabo Rojo tourism development.

Qualified businesses receive 100% exemption from, among others: income tax; the selective consumption tax on telecommunications and insurance services for project facilities; customs duties and ITBIS (the Dominican VAT) on imported or locally purchased machinery and equipment needed for set-up; customs duties and ITBIS on inputs and raw materials used to produce ITBIS-exempt goods; customs duties on imported inputs not produced locally; real estate transfer tax on project land and infrastructure; withholding taxes on payments abroad for technology and innovation services during construction and set-up; and taxes and registration fees on capital increases of entities domiciled in the zone. Inputs used to produce ITBIS-taxable goods receive a partial exemption of up to 50%.

The benefits are not automatic. A company must apply for and obtain a license from the regime’s governing council, demonstrate genuine establishment and operation within the border provinces, and maintain compliance — substance requirements that the authorities take seriously precisely because the benefits are so generous. And under the 2026 fiscal reform (Law 30-26), no project may stack this regime with another incentive law for the same activity, while the Ministry of Finance now reviews cost-benefit feasibility before new classifications are approved. The screening of applicants is tightening; well-prepared files are approved, improvised ones stall.

For manufacturers eyeing nearshoring, agribusiness ventures, energy projects or tourism developers priced out of the east coast, the border regime deserves a serious feasibility look. Our firm assists new and existing enterprises in evaluating eligibility, preparing the license application and maintaining compliance under Law 12-21 — the earlier we review your project structure, the stronger your application file.

Do you want more information about our services for obtaining Dominican Republic Border Zone Tax Exemptions? Contact Us.

ABOUT THE AUTHOR: Felipe Castillo is a Partner leading the Foreign Investment, Real Estate & Tourism areas at Arthur & Castillo Advisers and Consultants in the Dominican Republic. He specializes in foreign investment, real estate and international business (Master in International Business, Entrepreneurship and Finance Studies from Georgetown University in Washington, D.C. & Masters in International E- Business in Universitat Pompeu Fabra in Barcelona) with more than 20 years of experience in Foreign Investment, Free Trade Zones, International Business and Cross Border Real Estate practice. He is a Certified Business Bankruptcy Expert and English and Spanish Interpreter.

Email: fcastillo@aclaw.com

Disclaimer: This publication is not intended to provide advice or suggest a guaranteed outcome as individual situations will differ and the situation may have changed since publication. For specific advice on the information provided and related topics, please contact the author.

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