Sales of goods and services from Dominican customs territory to free zone enterprises are treated as exports of the local supplier. Conversely, sales from free zones into Dominican territory are treated as imports subject to the applicable duties and taxes; under the framework aligned with DR-CAFTA, free zone enterprises may sell into the local market upon payment of the corresponding duties, subject to the conditions of the regime.

The categories of free zone enterprises are the following:

1. Industrial or Services Free Zones: enterprises authorized by the CNZFE, established within a free zone park, dedicated to manufacturing goods or rendering services destined principally to international markets.
2. Special Free Zones: enterprises authorized by the CNZFE whose activities cannot be conducted inside a park, because their production process depends on immovable assets or proximity to natural sources, or because the industrial process or the geographic, economic or infrastructure conditions so require.
3. Border Free Zones: industrial, agribusiness, agricultural, metal-mechanic, energy and similar enterprises authorized under the special border development regime, operating in the provinces of Pedernales, Independencia, Elías Piña, Dajabón, Montecristi, Santiago Rodríguez and Bahoruco.

Depending on the free zone category and the export business, the incentives include exemption from corporate income tax, asset tax, ITBIS, construction taxes, taxes on loan agreements and on the registration and transfer of real property, incorporation and capital increase taxes, municipal taxes, import duties and tariffs, and charges for the use of ports and airports, among others, for the terms established by the law and its renewals.

Free zone status is granted per enterprise and per activity by CNZFE resolution; expansions, relocations and new lines of business require prior CNZFE approval, and benefits should be confirmed against the current term of each permit. Investors should also monitor the interaction between the free zone regime, the global minimum tax discussions and the incentive-review powers created by Law 30-26 (see Foreign Investment, section VII).

II. Promotion of Dominican Exports

To promote Dominican exports, Law 84-99 on Reactivation and Promotion of Exports provides for the reimbursement of taxes and customs duties paid by exporters on raw materials, components, intermediate goods, labels, containers and packing materials incorporated into export goods or returned abroad in the condition in which they entered.

The law also establishes the Temporary Admission Regime for Inward Processing, which allows certain goods, (a) raw materials, parts and intermediate goods; (b) labels, containers and packing materials; and (c) parts, molds, dies, utensils and other devices that complement equipment or machinery used for the export production, to enter Dominican customs territory from abroad or from export free zones with suspension of duties and import taxes, for re-export within no more than 18 months (see Foreign Investment, section VII, and International Trade, section III).

III. Conclusion

The proper planning and structuring of an export business requires weighing all the alternatives Dominican law offers for incentivizing exports and industrial competitiveness in the general and specialized sectors of the economy.

Specialized advice on the regimes available in each case allows exporters to be cost-efficient and to improve their industrial and logistics processes under the existing customs and tax incentive schemes.

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