DOMINICAN REPUBLIC Law and Practice Contributed by: Fabio Guzmán Ariza, Julio Brea Guzmán, Alfredo Guzmán Saladín and César Calderón, Guzmán Ariza
ties, the Ministry of Public Works issues the building permit. Large-scale infrastructure developments may also enter into agreements with the government under the Public-Private Partnerships Law No 47-20. Agree - ments can also be arranged with city councils, where - by taxes collected from the developer are directed towards social improvement projects, and optional environmental management plans may be signed with the Ministry of Environment and Natural Resources, which are compulsory for projects in protected areas. If an application for permission or authorisation is denied, the applicant may appeal to the same institu - tion. If the reconsideration is again denied, an admin - istrative appeal may be submitted to the immediately superior government authority. The applicant may also submit a claim directly to an administrative court, bypassing the hierarchical appeal process. Restrictions on development and designated use are enforced through sanctions, including: • fines and penalties; • closure of operations; and • revocation of licences and permissions. New environmental regulations include provisions for prison sentences for violations. The government also employs tax regulations as an enforcement mecha - nism. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Foreign Investors The most common entity used by foreign investors is a local limited liability company (LLC). Some inves - tors, concerned by the complexities of reporting a foreign entity to the tax authorities in their home juris - diction, prefer to register their domestic entity in the Dominican Republic. Finally, high-income individuals with complex estate planning in place use the struc - tures existing in their estate plan to acquire Dominican assets.
There are no restrictions regarding the structure or legal form of a foreign entity. If it is duly incorporated and recognised in the jurisdiction where it was formed, an entity can do business in the Dominican Republic upon registration at the Chamber of Commerce and Internal Revenue. However, trusts as they are known in most common law jurisdictions are not recognised as legal entities and cannot, therefore, directly hold property in the Dominican Republic. Dominican Entities As for Dominican entities, Dominican company law allows different types of commercial companies (individually owned enterprises and LLCs) and cor - porations (regular or simplified stock corporations), all of which provide limited liability for their owners or shareholders. There are other investment entities recognised under the law, such as business partner - ships, limited partnerships and per-share limited part - nerships, but they are seldom used because they do not offer full liability shields to their members and are subject to the same tax treatment as the other enti - ties. In addition, in 2011, Law 189-11 introduced local fiduciary vehicles as a holding option. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Local law does not recognise the concept of pass- through entities. Any entity, local or foreign, is taxed as an entity, regardless of its legal structure, except real estate assets held through a closed-end invest - ment fund approved by the Dominican Republic Secu - rity and Exchange Superintendence. These funds are considered fiscally neutral investment vehicles and, as such, are not subject to income tax, although their shareholders or beneficiaries will pay income tax on income received from the funds. 5.3 REITs Real estate investment trusts (REITs) are securities similar to mutual funds that allow investors of different sizes to take an ownership share in real estate ven - tures. International investors drawn to the Dominican Republic by its strong growth and investor-friendly political climate are taking advantage of these new securities to transform the real estate market, expand - ing the stock of rentable commercial and industrial
216 CHAMBERS.COM
Powered by FlippingBook