About Free Zone Manufacturing in the Dominican Republic
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Manufacturing in the Free Zones 
The Dominican Republic
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Many of our consulting clients have expressed an interest in establishing a service or manufacturing facility in one of the many free zone compounds located within The Dominican Republic.  To answer some common questions about this, we have prepared this summary information. 
 
What Exactly is a "Free Zone" ?

A Free Zone is an area or section that the government has established in order to encourage foreign business to create new facilities or operations.  In most cases, Free Zones are most attractive to those companies involved in assembly or light manufacturing.  However, many service oriented companies are also finding that a call center or order processing operation can enjoy tremendous tax and other advantages as well. 

Some of the most common characteristics of a Free Zone are: 

  • Reduced or Zero Import / Export Tariffs or Duties
  • Reduced or Zero Taxes on profits paid to the government hosting the free zone
  • Relaxed regulations and restrictions
  • Lower labor and other costs than may be found in the manufacturer's present place of business
  • Convenient access to transportation and shipping facilities
There are a few countries offering these type of Duty-Free business zones.  The real question is - Why the Dominican Republic?  

The Dominican Republic is probably one of the most progressive and best locations for any company seeking a location to do business with minimum taxes and very reasonable labor costs.  It's proximity to the United States, special trade agreements with the US, and special trade agreements with the European Union that offer little or zero export duties for goods distributed in the European market ~ make it an ideal location. The fact that the Dominican Republic has been ranked as number four in the world with respect to number of free zone facilities, is testament to the fact it has become a favored domicile for business. 

Some advantages a company would receive if it established operations in one of the Dominican Republic's Free Zones include: EXEMPTION from the following duties or taxes for a renewable 15 year period (starting on the first day of production): 

  • Corporate Income Taxes
  • Incorporation and Capital Increase Taxes
  • Municipal Taxes and Export Duties
  • Taxes on title transfer of real property, construction and mortgages
  • Business taxes, included VAT
In addition, a company may import the following free of any import duties: 
  • Equipment and materials used to establish and operate the company
  • Trucks and other vehicles, vans and buses the company may wish to bring for worker transportation
  • Materials or equipment brought in to provide special health care, cafeterias or child care facilities for workers
Companies may also sell up to 20% of their production within the Dominican Republic if the goods and services are produced within the country or imported by law (see law decree 8-90 for additional details). 

Costs for companies doing business in the Dominican Republic's Free Zones (1997 Figures): 
 

  • Leasing of Space ~ US $3.00 to $ 5.00 per square foot of leased space in private free zone parks, US $ 1.50 to     US $ 2.75 per square foot for government owned free zone compounds
  • Electricity ~ US $ 00.18 per kilowatt/hour (average)
  • Garbage Collection ~ US 25 cents per square foot
  • Labor ~ The fixed minimum wage set by the government for free zone workers is RD $1,932.00 Dominican Pesos monthly or US $ 122.00 per month based on an exchange rate of 15.80 pesos to the dollar
This is just a general highlight of the benefits involved in establishing free zone operations.  The government has additional and more attractive incentives for zones or operations located in certain parts of the country. One example is a 20 year exemption on the taxes or duties mentioned above, plus many more additional benefits. 

This Information has been prepared and compiled by Mr. John Schroder as a service to his clients.  Mr. Schroder maintains an office in Santo Domingo and in Panama.  His firm provides assistance with company incorporations in the Dominican Republic, Offshore incorporations in other tax haven jurisdictions, Residency in the Dominican Republic and Panama, Assistance with Banking and Investments, Real Estate matters and company representation. To contact his firm, please click below: 
 
 

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