Company formation in the Dominican Republic can take the form of onshore or offshore incorporation. Foreign investors prefer, in general, the latter form of incorporation, as, through an offshore business, they will enjoy many tax exemptions, regulated by the commercial law of the country.
Offshore company setup implies the fact that a legal entity is incorporated in a given jurisdiction (in this case, the Dominican Republic) but does not engage in commercial activities in the respective country. Rather, the operations of the offshore business are conducted with partners and clients outside the country of incorporation.
Investors who will start a business in the Dominican Republic can incorporate a limited liability company (LLC). Our consultants can offer full legal support during its incorporation.
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Open a company in the Dominican Republic as an LLC
The process of offshore company formation for an LLC registered in the Dominican Republic is completed in accordance with the local legal requirements. The main difference between the onshore LLC and the offshore LLC is that the latter is registered as a tax-exempt entity, as it benefits, through its offshore status, from tax exemptions which do not apply to an onshore LLC.
Some of the characteristics of the LLC are presented below:
- the business form can have 100% foreign ownership;
- it must be incorporated by at least 2 shareholders, who can be natural persons or other legal entities;
- the maximum number of shareholders that can associate in the LLC is 50;
- the shareholders must appoint 1 director (one of the shareholders can act as the director of the company);
- in order to set up a company in the Dominican Republic as an LLC, the investors must subscribe a minimum share capital of $2,300.
What are the tax exemptions applicable to an offshore LLC?
The tax-exempt LLC registered in the Dominican Republic benefits from numerous tax exemptions. The local legislation stipulates that the taxation of businesses applies only as long as the income of said businesses is generated within the country’s borders. Income obtained overseas is not taxed in the Dominican Republic.
Therefore, the LLC operating as an offshore business will not be charged with taxes such as:
- the corporate income tax (imposed at a standard rate of 27%);
- the withholding tax on dividends (10%), which is not applicable for payments made to foreign shareholders;
- the valued added tax (18%).
Management requirements
As said above, for company incorporation in the Dominican Republic, investors have to appoint 1 director. It must be noted that the local law doesn’t impose any residency requirements for the directors of the LLC, therefore the appointed person can be a resident/citizen of any country.
It is also worth knowing that the shareholders do not have to appoint a company secretary. However, the company must be represented by a local registered agent, whose address can be used as the company’s official business address.
Accounting obligations
Although investors who start a business in the Dominican Republic as an offshore are exempt of tax obligations, they do need to comply with the local accounting rules. In this sense, it must be noted that it is legally required to submit annual financial statements with the Dominican tax authorities, this being the sole accounting obligation the offshore LLC will have (audits do not apply to an offshore business).
Investors planning to reside in the Dominican Republic and make a significant investment in the local economy ($200,000) are required to apply for an appropriate residence permit (for foreign investments), by following the procedures of the General Directorate of Migration of the Dominican Republic.
Provided that you want to invest here or to start an offshore business, you can contact our consultants, who have the necessary expertise. We can assist in immigration formalities, business consulting, onshore and offshore account setup and many others.