Free Zones in the Dominican Republic: A complete guide to benefits, requirements, and opportunities

Free zones have been a key driver of economic development in the Dominican Republic, attracting foreign investment, generating employment, and strengthening exports. This sector has boosted industries such as textiles, medical device manufacturing, pharmaceuticals, BPO services, and technology, contributing over USD 8 billion in exports in 2024. Additionally, it has facilitated the diversification of the productive fabric, modernizing industrial infrastructure and promoting the country’s competitiveness in the global market.

Regulated by Law No. 8-90 on the Promotion of Free Zones, these areas offer tax and logistical incentives for companies operating under a special foreign trade regime. This article explores the key aspects of this system, including its benefits, requirements, and opportunities for investors.

 

What Are Free Zones?

According to Law 8-90, a free zone is a designated geographic area within the country subject to special customs and tax controls. These areas allow companies to establish operations for producing goods or providing services primarily for export. Their main objective is to encourage investment and job creation.

By the end of 2024, the country had more than 90 free zone parks and over 850 companies operating under this regime, generating approximately 198,450 direct jobs and contributing around 67% of national exports.

Types of Free Zones Under Law No. 8-90

Law No. 8-90 on Export Free Zones establishes three main types of free zones in the Dominican Republic:

• Industrial or Services Free Zones Enterprises: These must be established within a free zone park for manufacturing goods for exportation or rendering services either to other free zone companies or abroad.
• Services Free Zones: These can be established outside of a free zone park subject to limiting its operations to rendering of services (not manufacturing).
• Border Free Zones: These must be located between three (3) and twenty-five (25) kilometers from the border between the Dominican Republic and Haiti. These zones receive special incentives to promote economic development in border areas.

Rights of Free Zone Companies

Companies authorized to operate within export free zones enjoy several rights under Law No. 8-90, allowing them to conduct operations flexibly and efficiently. These rights include:

• Industrial operations and processes: Companies can introduce, store, package, recycle, display, manufacture, assemble, refine, and handle products, merchandise, and equipment within the free zone.
• Provision of specialized services: They can offer services such as design, layout, telemarketing, telecommunications, printing, digitization, translation, and computing.
• Access to machinery and supplies: They are allowed to import machinery, equipment, spare parts, and utensils necessary for their operations without tariff restrictions.
• Transfers between free zone companies: They can transfer raw materials, equipment, and services between companies within the same free zone or between different free zones, provided they comply with customs regulations.
• Export to the local market: They can export up to 20% of their production to the local market under the regulations of the General Directorate of Customs (DGA), paying the applicable taxes. Certain sectors, such as textiles and footwear, may export up to 100% to the local market with tariff exemptions, provided they meet specific conditions.
• Access to domestic raw materials: They can acquire domestic inputs exempt from export taxes, except for certain regulated products such as sugar, coffee, and cocoa.
• Production flexibility: They can modify their production lines and processes as often as necessary, provided they notify the National Free Zones Council (CNZFE) in advance.

These rights ensure a competitive and attractive business environment for investment in Dominican free zones.

Benefits of Free Zones

Free zones in the Dominican Republic offer a range of incentives and advantages that make the country an attractive destination for foreign investment. These benefits can be grouped into two main categories:

1. Tax benefits and exemptions

• 100% exemption from the following taxes:
  • Income tax
  • Taxes on construction, loan contracts, registration, and transfer of real estate
  • Taxes on company incorporation or capital increases
  • Municipal taxes and import duties, tariffs, customs fees, and related levies on machinery, raw materials, and equipment necessary for operations
  • Export and re-export taxes
  • Patent taxes, asset or equity taxes, and the Value-Added Tax (ITBIS)
• Additional benefits for border free zones
• Access to free trade agreements with over forty (40) countries, allowing companies in free zones to reach more than 1 billion consumers in strategic markets such as the United States, the European Union, Central America, and the Caribbean under preferential export conditions.

Other investment incentives

In addition to these tax incentives, the Dominican Republic offers several advantages that position it as an ideal investment destination:

• Strategic location and connectivity: The country’s geographic position makes free zones a key commercial link between North America and Europe. The Dominican Republic has one of the best logistics infrastructures in Latin America, with nine (9) international airports and thirteen (13) seaports, facilitating access to major global markets. The proximity of these zones to ports and airports enables efficient transportation and a streamlined supply chain.
• State-of-the-art infrastructure: Over ninety (90) free zone parks offer modern and secure facilities for companies across various sectors.
• Economic and political stability: The country is recognized for its political and social stability, which has enabled sustained economic development and a favorable investment climate.
• Skilled workforce: The Dominican Republic has a young and well-trained labor force, with continuous education programs designed to meet the demands of the global market.

These incentives aim to enhance the competitiveness of companies established in free zones and attract foreign investment to the country.

How to set up a business in a Free Zone?

To establish a company in a free zone, businesses must comply with the requirements outlined in Law 8-90 and obtain approval from the National Free Zones Council (CNZFE). The main requirements include:

1. Approval application: The company must submit a formal application detailing shareholders, authorized capital, and the source of funds. The application must specify the type of product or service, the number and type of jobs it will generate, and the projected national value-added, among other required information and documents.
2. Processing fee payment: As determined by CNZFE.
3. Installation permit acquisition: The CNZFE evaluates the project’s feasibility, considering its economic and social impact. If approved, a resolution authorizing its operation is issued.
4. Registration with tax and labor authorities: Companies must comply with the requirements set by the General Directorate of Internal Taxes (DGII), the Social Security Treasury (TSS), and the Ministry of Labor.
5. Start of operations: Once the procedures are completed, the company can begin operations within the free zone.

Obligations and regulations

Despite the benefits granted, companies established in free zones must comply with certain obligations to ensure the proper functioning of the regime and its positive impact on the Dominican economy. These obligations include:

• Compliance with labor laws: Companies must adhere to Dominican labor regulations, ensuring adequate working conditions for employees.
• Financial and operational reporting: Companies must submit periodic reports to the Central Bank and CNZFE on their operations, revenues, and expenses.
• Environmental regulations compliance: Businesses must operate under environmental regulations to minimize their ecological impact.
• Notification of business closure: If a company ceases operations, it must inform CNZFE at least three (3) months in advance.
• Tax obligations compliance: Companies must declare their local sales using Form RZF-01 before the fifteenth (15th) of each month and retain 100% of the ITBIS and Selective Consumption Tax (ISC) on goods and services sold in airport free zones.

By adhering to these regulations, free zone businesses contribute to the sustainability and growth of the Dominican economy while benefiting from the country’s favorable investment climate.

While exports are exempt, sales to the local market must pay the ITBIS (Value Added Tax), require the issuance of an invoice with a Tax Receipt Number (NCF), and must be reported within the first twenty (20) days of the following month, among other tax obligations. Due to amendments introduced by Law No. 253-12 as of November 9, 2012, any sales of goods  or services to the local market by a free zones company, are subject to payment of Income Tax on the gross sales at a rate of 3.5%.

A great opportunity for investors

Free trade zones in the Dominican Republic represent a great opportunity for investors and entrepreneurs looking to benefit from a favorable tax environment and a strategic location for exports. Thanks to Law 8-90, the country continues to strengthen its position as an attractive destination for foreign investment and industrial growth.