Free Zone Information | Dominican Republic Free Zones | Export | Import

What is a Free Zone and why does such a place exist? The answer to this is quite simple. Any intelligent and forward thinking government is one that wants to attract new business and hopefully create jobs for its citizens. One way that some governments have done this, is to pass special legislation that permits the existence of what are known as Duty Free Zones or we could also say “Duty Free Business Parks”. These are special zones, campuses, industrial parks or compounds that offer a number of special benefits to the occupants. Such places are certainly located within the borders of a particular country, but in a way, operate somewhat as sort of an autonomous facility. In other words, such places are sort of business tax havens, allowing business owners to operate with limited regulation, restriction and taxation. The most obvious and direct benefit is of course that the business may operate and enjoy either 100% tax-free income or a greatly reduced tax rate of 5%, 10% or something similar - for a period of time, often 20 years or longer. But aside from this, such zones may also permit certain types of businesses or operations, which may not be permitted otherwise inside the country, or which otherwise may require some sort of special licensing if operated inside the country (such as on-line casino operations or other kinds of operations). In short, the entire premise behind a free zone is that the business will be manufacturing and or marketing a product or service abroad. In other words, the conditions of having a business inside one of these special tax-free zones is that you will be selling the finished product outside of the country - or in the case of manufacturing, that you will be exporting what you make.
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However, an interesting turn of events over the past 5 years especially has been an increase in service businesses who wish to take advantage of the tax benefits. Travel agencies, call centers, order fulfillment, and other kinds of service businesses have now discovered they can still service customers just as easily from a free zone in the Caribbean, then they could if they were located in Florida, or someone else, as just an example. While many US companies have already outsourced these kind of functions or services to far away places such as India, a country like the Dominican Republic is closer in terms of distance, plus closer in terms of time zone issues.

Business owners that are located inside a free zone may import raw materials, equipment and products for their business 100% free of any type of import duty or taxation (or at a greatly reduced rate). They may operate freely and enjoy 100% tax-free business income (or a greatly reduced rate), and may also be free to expatriate business profits. In other words, even if currency exchange controls exist within the country where the free zone was located, being located inside a “free zone” means that your business is exempt from many local regulations or requirements. The Dominican Republic has no currency controls in place, and the local currency may be converted into other currencies at will (or vice-versa) without restrictions.

Many countries such as the Cayman Islands, Jamaica, Panama, the Dominican Republic, and many others, all offer such free zone or tax free “business park” type of locations. The costs to set up will of course vary from country to country, so it is important to shop around for the “best deal”. As an example, some business owners have investigated the Cayman Islands and the Dominican Republic. As a result, they have found the Dominican Republic to offer a cost structure, which was half of what it is in the Caymans. But a number of factors, location being just one, will factor into your decision as to where you wish to locate.

In terms of the Dominican Republic, we have already said that a business can enjoy 100% tax free business income or a very much reduced rate of taxation when operating inside a free zone, so this is something that is common no matter which free zone you use. However, one important point is the length of time that is stated on your license. For example, if you choose a free zone location close to Santo Domingo or Santiago, you obtain a twenty-year exemption with regards to income tax. If however, you choose a location in a more rural area, or one where the government wants to encourage a company to use, then you may get a 25-year period or longer. Also, where you locate and how much space you want to rent will be a factor as well. Generally speaking about the Dominican Republic, you can expect to pay anywhere from US $7.00 and up per square foot per year. If you require a larger space of say 10,000 square feet, you naturally can obtain a better per square foot price. For the smaller spaces, of course the price is slightly higher.

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According to the Statistics provided by the Dominican Republic National Free Zones Council, during the period of January through December 2004, 116 new businesses were approved for new operations in the various free zones located inside the country. Total new jobs in the Dominican Republic created as a result were 18,492. Total local investment of these new businesses amounted to RD$8.9 Billion Pesos (about US$300 Million) , of which resulted in US$113 Million of business turnover. Breakdown of the new businesses by sector type locating to a local free zone in the Dominican Republic is as follows: 33% Textiles, 15% Services (such as Travel Agencies, Advertising Agencies, etc.), 7% Telecommunications and Marketing (call centers, etc.)

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