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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):
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Corporate Income Taxes
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Incorporation and Capital Increase Taxes
-
Municipal Taxes and Export Duties
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Taxes on title transfer of real property,
construction and mortgages
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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
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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):
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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.
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