Nearshoring in the Dominican Republic: How Free Zone Law 8-90 Shields Manufacturers From Tariff Volatility

When tariffs on Asian imports can double between one quarter and the next, the cost of distance stops being theoretical. Manufacturers supplying the U.S. market are discovering that a factory two days by sea from Miami — inside a jurisdiction that charges them no income tax on exports — changes the arithmetic of their entire supply chain.

That jurisdiction exists. Since Free Zones Law 8-90 came into force in 1990, the Dominican Republic has built one of the hemisphere’s most developed free zone and logistics ecosystems. Approved companies receive renewable 15-year exemptions covering income tax, export taxes and most operational levies — a package designed precisely for the manufacturer weighing nearshoring options against rising trade friction.

The trade architecture reinforces the tax advantage. The Dominican Republic is party to DR-CAFTA with the United States and Central America, holds trade agreements with the European Union and the United Kingdom, and maintains partial agreements with Panama and Caricom. For a nearshoring investor, this means preferential access to the world’s largest consumer market from a location within its shipping orbit.

Less known, and commercially significant: the free zone system operates as a special tax-free jurisdiction internally. Approved manufacturing, logistics and services companies may contract and transact with one another — and with their international suppliers — on a zero-tax basis. Machinery, equipment, raw materials, parts and components enter duty-free, both at startup and during expansions. A common oversight among newcomers is the ITBIS Exemption Card, which allows free zone companies to purchase goods and services from local Dominican suppliers without paying VAT; companies that skip this step quietly absorb an 18% cost they were never required to bear.

Currency risk is also contained. The Dominican peso is freely convertible, the U.S. dollar circulates alongside it, and the Monetary and Financial Law of 2002 expressly permits business transactions in foreign currency.

Two developments deserve an investor’s attention in 2026. First, labor costs are rising on a fixed schedule: the free zone minimum wage increased to RD$20,875 per month (roughly US$345) on June 1, 2026, the second phase of a 25% adjustment. Second, the June 2026 fiscal reform (Law 30-26) introduced a general rule barring taxpayers from stacking more than one special incentive regime on the same activity or investment — a provision whose interpretation by the tax authority will matter to any group structuring operations across regimes.

For manufacturers evaluating a Dominican Republic free zone as their nearshoring base, the incentives are substantial but the regime is formal: qualification, permits and structure determine whether the benefits actually attach. Our free zones team guides investors from feasibility through installation permits and beyond — contact us to map your project against the current regime.

Do you need assistance with Nearshoring Opportunities in Dominican Free Zones? Contact Us.

ABOUT US: Arthur & Castillo assists free zone enterprises in the industrial manufacturing, logistics and technology services sectors to establish and expand their business in the Dominican Republic, obtain free zone & logistic center authorizations, execute contracts and manage relations with government agencies and institutions.

Our free zones consultants assist in the preparation of free zone operation permit applications, review and negotiation of leases, commercial terms and conditions, purchase and supply agreements, purchasing & developing real estate, tax free equipment & machinery and advising on applicable free zones and logistics centers matters, including, corporate, customs, labor, tax, social security laws, among others.

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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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