DOMINICAN REPUBLIC Law and Practice Contributed by: Alfredo Guzmán Saladín, Fabio Guzmán Ariza and Julio Brea Guzmán, Guzmán Ariza
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 for - eign, is taxed as an entity, regardless of its legal structure, except real estate assets held through a closed-end investment fund approved by the Dominican Republic Security 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 securi - ties similar to mutual funds that allow investors of different sizes to take an ownership share in real estate ventures. 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, expanding the stock of rentable commercial and industrial space in Santo Domingo and other growing eco - nomic centres. The rise in REITs can be put down to the Domini - can 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 econ - omy. 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 buy - ers of affordable housing, with another 5% ear - marked for buyers 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 economic 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 shareholder holds a share with a value of no less than DOP100 (USD1.83) each. After the intro - duction 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 minimum contribution from shareholders of DOP100,000 (approxi - mately USD1,835), 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 regard - ing 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 acquiring or acting as holding companies for real estate properties are not required to obtain licences, authorisations or government permits.
237 CHAMBERS.COM
Powered by FlippingBook