How to establish a Free Zone company in the Dominican Republic: Steps and legal Considerations
Free Zones in the Dominican Republic represent one of the most dynamic pillars of the national economy. According to figures from the National Free Zones Council (CNZFE), this regime contributes approximately 67% of the country’s total exports, generates over 190,000 direct and indirect jobs, and, as of the end of 2023, accounted for 3.1% of the Gross Domestic Product (GDP). These results reflect not only its attractiveness to investors but also its strategic role in creating value chains and diversifying production.
For companies interested in operating under this scheme, the installation process is designed to be agile and transparent. Below are the essential aspects that every investor should know.
The Free Zone Regime: Concept and modalities
Under the framework of Law 8-90, a Free Zone is defined as a delimited territory where national or foreign companies can engage in industrial, commercial, or service activities, benefiting from tax exemptions and customs facilities. Its primary objective is to promote exports and job creation, although its design allows for variations according to regional or sectoral needs.
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.
Step-by-Step procedure: From application to operation
The installation process consists of six key stages:
- Submitting the application: The first step is to submit a formal application to the CNZFE, accompanied by comprehensive documentation. This application must be made on company letterhead, addressed to the Executive Directorate of the CNZFE, and signed by the president or an authorized representative. Along with basic company information (shareholders, capital, and source of funds), the application must include the corresponding Installation Permit Request Form, a detailed business plan outlining the operational model, target markets, export and employment projections, and expected economic impact. Proof of available physical space, such as a lease agreement or commitment for use within the selected Free Zone, must also be provided. A processing fee ranging from RD$150,000 to RD$300,000 (approximately USD 2,400 to USD 4,700) is required upon submission.
- Evaluation by authorities: After submission, the CNZFE publishes a summary of the application in the press for two consecutive days, allowing third parties to file objections if any. The CNZFE then conducts a technical analysis of the project, which takes approximately 30 days and may include site inspections or additional information requests.
- Obtaining final authorization: Upon approval, the CNZFE issues a formal resolution granting the corresponding installation permit.
- Obtaining additional authorizations and registrations: With the resolution in hand, the company must complete its registration with the customs (DGA), tax (DGII), and labor (Ministry of Labor and TSS) authorities. This step includes obtaining a customs registration number, a VAT exemption card, and approval of labor schemes adapted to the operation’s nature. Additionally, relevant environmental permits must be obtained depending on the project’s specific activities.
- Starting operations: Once all procedures are completed, the company is legally authorized to begin operations. However, continuous monitoring of regulatory obligations is recommended to ensure ongoing compliance.
Key aspects for successful implementation: A comprehensive legal approach
Establishing a Free Zone company requires more than just fulfilling administrative procedures. To ensure the sustainable success of the operation, investors should carefully consider the following strategic legal aspects:
- Choosing the right corporate vehicle
- Determine whether it is more beneficial to establish a Limited Liability Company (SRL), a Corporation (SA), a Simplified Stock Corporation (SAS), or a branch of a foreign company. The choice should align with the business goals and tax strategy.
- Analyze specific requirements regarding capital, shareholding structure, and shareholder liability.
- Compliance with Free Zone Law (Law 8-90)
- Strictly adhere to the requirements established under Law 8-90 and its amendments to ensure eligibility for tax exemptions and customs benefits.
- Maintain exports above 80% of production to retain fiscal and customs benefits.
- Free Zone park lease agreement
- Carefully review the terms of the lease agreement within the selected park, including clauses on duration, renewal, early termination, and associated penalties.
- Evaluate required guarantees and clauses related to structural or operational modifications to the leased property.
- Tax and customs regime
- Ensure compliance with requirements to maintain tax exemptions (corporate income tax, VAT, asset tax, and customs duties).
- Keep separate accounting records if local operations subject to ordinary taxes exist.
- Establish a clear and documented transfer pricing policy for transactions with related parties.
- Labor aspects
- Comply with the special labor regulations applicable to the Free Zone regime, including flexible work schedules authorized by the Ministry of Labor.
- Properly manage the hiring of foreign personnel (limited to 20%), which requires demonstrating the unavailability of local talent.
- Prepare specific employment contracts for the special regime and ensure timely registration with the Social Security Treasury (TSS).
- Environmental requirements
- Verify whether the proposed operation requires special permits or authorization from the Ministry of the Environment.
- Implement waste management policies and environmental compliance, particularly in sensitive industrial sectors.
- International regulatory compliance
- Ensure compliance with international anti-corruption and anti-money laundering laws, such as the U.S. FCPA or similar European regulations.
- Conduct due diligence processes to document financial transparency and the lawful origin of invested funds.
- Exit strategy and business continuity
- Plan for possible future scenarios such as business closure, transfer to third parties, or transition to the general tax regime.
- Consider tax and labor implications of these scenarios to minimize future contingencies.
- Corporate governance
- Implement a clear corporate governance structure, especially in joint ventures with local partners or multiple international investors.
- Design effective mechanisms for dispute resolution and share transfer.
- Intellectual Property Protection
- Promptly register trademarks, patents, or intellectual property rights to protect the company’s intangible assets in the Dominican Republic.
Experience shows that successful projects integrate specialized legal advice from the initial phase. Considering these recommendations holistically from the start ensures not only the project’s legal stability but also maximizes the strategic and fiscal benefits offered by the Dominican Free Zone regime.
Opportunities in an expanding ecosystem
The Dominican Free Zone regime offers a stable legal framework and significant competitive advantages in the region. To maximize these benefits, it is essential to approach the process with a comprehensive vision, combining administrative agility with specialized advisory services.
With over three decades of development, this model has proven to be a reliable catalyst for sustainable growth.