II. Establishing a Dominican Subsidiary

Start-up and medium-sized businesses in the Dominican Republic are usually incorporated as a limited liability company, or Sociedad de Responsabilidad Limitada (S.R.L.), under Law 479-08, as amended by Law 31-11. The SRL is the most common and efficient corporate form in the country and is often chosen by large foreign companies for their subsidiaries.

SRLs offer the following advantages. Partners receive limited liability and respond for company debts only up to their contributed capital. Partners may be individuals or legal entities. The SRL is manager-managed, with no board of directors required; managers must be individuals and may be Dominican or foreign. The company may raise capital by issuing new quotas, which may be ordinary or preferred.

An SRL may carry out any lawful commercial activity. There are no restrictions on legal currency: the U.S. dollar is exchanged freely with the Dominican peso, as is any other currency.

An SRL may also serve as a holding company and may own assets, whether contributed by the partners or acquired directly, movable or immovable, national or foreign.

An SRL survives its founders. Quotas may be transferred freely among partners, by succession, upon liquidation of marital community property, and among ascendants and descendants, under the rules set out in the bylaws.

The main steps to establish a Dominican SRL are the following:

1. Search availability and file the registration request for a trade name before the National Office of Industrial Property (ONAPI).
2. Draft the bylaws, minutes of the incorporation meeting, and related documents, as private documents or as a notarial act, for signature by partners and managers and notarial legalization.
3. Pay the incorporation tax of one percent (1%) of the company’s registered capital before the Tax Administration (DGII) (Art. 9, Law 173-07).
4. Prepare and file the Mercantile Registry application with the incorporation documents, after paying the registration fee, to obtain the Mercantile Registry certificate.
5. Prepare and file the request for the company’s Tax Identification Number (RNC).
6. Register on the DGII web portal to obtain access and request fiscal invoice numbers (NCF; electronic invoicing, e-CF, is being phased in as mandatory under Law 32-23).
7. Enroll employees before the Social Security Treasury (TSS) and the Ministry of Labor.

The following schedule is a guide to the time required to form a new Dominican company:

• Registration of the trade name: 2 to 4 days.
• Drafting incorporation documents and annexes (incorporation meeting, bylaws, Mercantile Registry application): 2 to 4 additional days.
• Payment of the incorporation tax on capital: less than half a day.
• Incorporation meeting of partners: less than half a day.
• Notarial legalizations: less than half a day.
• Registration in the Mercantile Registry: 2 to 4 days.
• Registration as taxpayer (RNC): 5 to 10 days.

The following founding documents are needed to form the company:

1. Mercantile Registry application form for the Dominican company, signed by the person authorized by the company or by an empowered attorney (a copy of the power of attorney must be provided).
2. Bylaws / articles of incorporation, in private or notarial form, containing the details required by law, including company name, registered domicile, and purpose.
3. Attendance list and minutes of the incorporation meeting.
4. Updated list of partners.
5. Report of the contributions auditor (comisario de aportes), if applicable.
6. Receipt of payment of the incorporation tax.
7. Copies of the Dominican identity card or, for foreigners, the passport photo page or other official photo ID from the country of origin, for partners, managers, and auditor, as applicable.
8. Copy of the trade name certificate issued by ONAPI.
9. Declaration of acceptance of appointment by the managers, if not apparent from the bylaws or incorporation minutes.

The RNC issuance is the critical-path item; banks will not open corporate accounts, and the company cannot invoice, without it.

III. Registering a Dominican Branch

Foreign companies may instead register a branch in the DR. A registered branch may enter into contracts, execute and settle transactions in its own name, and sue and be sued at its place of business.

To complete a branch registration, the foreign company’s documents must prove its valid incorporation and existence, contain all general and specific information and proper authorizations, and be certified, notarized, and legalized by the applicable foreign and local authorities. The Dominican Republic is a party to the 1961 Hague Apostille Convention, which simplifies legalization for documents from other member states.

Registration enables the foreign entity to conduct business with the same rights as a DR business entity.

Branches are generally treated as legal entities for tax purposes and are taxed on their Dominican-source income like local companies. They are not subject to the 1% capitalization tax upon establishment. Remittances of branch profits to the head office are generally treated as dividend distributions subject to the 10% withholding tax (Art. 308, Law 11-92); relief may be available under the double-taxation agreements with Canada and Spain (see Tax Law, section VII).

To register a branch, the foreign company provides certified incorporation documents, shareholder and manager verification, and a power of attorney to qualified attorneys, who draft and file the branch registration with the Mercantile Registry and request the RNC. Registration of a branch for general, unregulated, taxed commercial activities usually involves the following:

• Mercantile Registry: the company registers before the chamber of commerce of its local domicile. The registration fee is calculated on authorized capital. The filing must evidence proper incorporation in the home country and full authority of the representatives.
• RNC: issued by the Tax Administration to identify the business’s taxable activities and control the resulting duties and obligations. The company files a copy of the Mercantile Registry certificate and the corporate documentation required by the DGII, and must present a valid corporate domicile in the DR, which may be verified.

Apostilles, sworn translations into Spanish, and corporate authorizations are where branch registrations stall; preparing the foreign document package correctly the first time typically saves weeks.

This publication is provided for informational purposes only and not as legal advice. Any transaction related to any of the described aspects shall require advice and be specifically consulted with the Firm in advance. © Arthur & Castillo. All Rights Reserved.  Next