DOMINICAN REPUBLIC Law and Practice Contributed by: Fabio Guzmán Ariza, Julio Brea Guzmán, Alfredo Guzmán Saladín and César Calderón, Guzmán Ariza
space in Santo Domingo and other growing economic centres. The rise in REITs can be put down to the Dominican Republic’s strong housing sector and the government policy that supports it. REITs are available to both local and foreign investors. In May 2012, the Central Bank of the Dominican Republic (BCRD) enacted a series of measures to boost the availability of credit to the economy. Most significantly, it reduced the reserve requirements for Dominican banks, a move that increased total lending by USD489 million. The BCRD cited the real estate sector as a particular point of emphasis, announcing that 25% of the increase in lending funds was assigned to buyers of afford - able housing, with another 5% earmarked for buy - ers of newly completed housing. Actions like these have helped the sector remain robust in an uneven economic environment over the past few years, with global interest in the island reaching new highs. The emergence of REITs should have a continued positive impact on the Dominican Republic’s resort and com - mercial housing industries, generating positive eco - nomic impacts that should present new opportunities for the market as a whole. 5.4 Minimum Capital Requirement To form an LLC in the Dominican Republic, the law currently requires, as a minimum, that each sharehold - er holds a share with a value of no less than DOP100 (USD1.68) each. After the introduction of Law 68-19, there are no established minimum capital amounts required, aside from the one previously stated, but in practice, LLCs are usually formed with a mini - mum contribution from shareholders of DOP100,000 (approximately USD1,680), paid in full, and divided into shares with a par value of at least DOP100 each. 5.5 Applicable Governance Requirements LLCs are governed by the provisions of their by-laws. The authority over day-to-day activities falls on the managers or board of directors, and shareholders are the maximum authority regarding issues relating to the dissolution process, the modification of by-laws, sales of the company’s assets, and transformation of the company, among others.
Corporations incorporated with the purpose of acquir - ing or acting as holding companies for real estate properties are not required to obtain licences, authori - sations or government permits. 5.6 Annual Entity Maintenance and Accounting Compliance All foreign and local entities are taxed equally regard - less of structure – a flat 28% on net corporate profits and 10% tax on dividends or profits sent abroad. The Dominican Tax Code has a general anti-tax avoid - ance provision (a “substance over form” principle) and specific rules for the sale of shares of foreign entities that own assets in the Dominican Republic. All companies registered in the Dominican Republic, regardless of whether they are local or foreign entities, including those with no income or operations, must file income tax returns with the Dominican Republic’s Tax Office every year. Aside from the penalties on overdue taxes, which amount to 11.1% for the first month and 5.1% for each additional month, entities that do not comply with the filings and subsequent payments of both income and asset taxes run the risk of having the Tax Office begin a lien registration process against the entity’s properties. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time Leases are the most common arrangement that Dominican law recognises for a person, company or other organisation to occupy and use real estate for a limited period of time without buying it outright. 6.2 Types of Commercial Leases Dominican law only considers leases in general terms. 6.3 Regulation of Rents or Lease Terms Rents or lease terms are freely negotiable for the most part, as general contract law applies to them. Provi - sions are, however, limited by various statutes that protect tenants. For example, if there is no escalating clause for rent in the lease, the landlord cannot raise it unilaterally without undertaking a lengthy administra -
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