Taxation and Residence in the Dominican Republic

Dream beaches, warmth all year round, hospitable people, good food, entertainment… and all of this tax-free?

That’s right! We want to introduce you to a destination dreamed of by many, one of those earthly paradises… of course, today we will talk about the Dominican Republic.

We will explain the different visas that allow you to acquire residency in the Dominican Republic and the tax advantages that you will find in the Dominican Republic, as well as how to acquire citizenship easily and in a short time.

Options to emigrate to the Dominican Republic

Who has never dreamed at some time, while working in a dreary office in the middle of winter, fed up with all the usual problems, of sending everything to hell and packing your bags for a Caribbean country, enjoying the beach, the sun… and the Caribbean Sea!

Although there are other alternatives for obtaining a residence visa, here we will comment only on those that may be more interesting for our regular readers and potential clients (businesspersons, freelancers, investors and annuitants…).

Specifically, we will talk about the “Residency Visa” (RS) in 3 of its variants (Law 171-07). This visa must be applied for at the Dominican consulate in the country of origin before travelling to the Dominican Republic and is valid for 60 days. Once in Dominican territory, the beneficiary of this visa must go to the Directorate General of Migration to formalise the procedures for temporary residence (renewable every year) or permanent residence (renewable every 4 years) as appropriate.

In general, the first thing you get is temporary residency and, after 5 years, you can apply for permanent residency. However, one of the advantages of the 3 variants we are going to talk about -that of the investor, annuitant and pensioner/retiree- is that you obtain permanent residence directly and you do not have to renew your visa every year.

There is a final category, in addition to temporary and permanent, called definitive residence (RD-1), which can be obtained after 10 years of legal residence in the country (renewable every 10 years).

1. A. Residency Visa (RS) for Investment

The main requirement is to invest a minimum of USD 200,000 (or its equivalent in Dominican pesos) either in the capital of an existing Dominican company, in a new one or in real estate located in the Dominican Republic.

There is no minimum age requirement for the principal applicant and the permit may include the spouse and unmarried children under 18 years of age, disabled adults, or adults who can prove that they are pursuing a university degree and are economically dependent on the principal applicant. Likewise, minors over whom the holder or his/her spouse exercises fully recognised guardianship may be included.

This visa by investment offers 2 additional advantages over the others:

1. The residence permit obtained is directly permanent (it only has to be renewed every 4 years).
2. It is possible to obtain nationality through the naturalisation procedure after only 6 months of legal residence in the country. However, the process of obtaining citizenship can take up to 2 years.

1. B. Residency Visa (RS) per annuitant

In this case, you must demonstrate recurrent income of at least USD 2,000 per month (or its equivalent in Dominican pesos). If you wish to include your spouse and minor children, this amount must be increased by USD 250 per month for each additional dependent.

It is important to note that such income cannot be derived from wages or salaries. Income can be derived from movable property (dividends from listed or unlisted companies, investment funds, interest on debt, loans or deposits, royalties, etc.) or from real estate (rental income, etc.). It makes no difference whether the assets are located inside or outside the Dominican Republic, although the documentation to be provided will vary depending on the origin and type of asset.

1. C. Resident Visa (RS) for pension/retirement

You must have a life pension (either public or private) of at least 1,500 USD per month (or its equivalent in Dominican pesos). As in the previous variant, in case you want to include your spouse and minor children, the monthly pension must be USD 250 higher for each dependent.

Requirements common to all visas

It should be noted that, unlike similar visas from other countries (such as Costa Rica, Nicaragua or the Philippines), these visas do allow you to work legally in the country. Although in the case of working for a local company or entity, the income generated by such activity will be considered national and therefore subject to taxation.

Of course, in addition to the particular requirements for each type of visa, there are the typical general requirements, such as:

• Original passport valid for at least 18 months.
• Birth certificate duly translated into Spanish, legalised or apostilled, as appropriate.
• Certificate of No Criminal Record (not required for minors) issued (within 12 months of the application) by the competent authority of the countries in which you have resided in the last 5 years, duly translated into Spanish, legalised or apostilled, as appropriate.
• Medical certification that the applicant does not have any infectious or contagious diseases.
• Marriage certificate (if applying with spouse) duly translated into Spanish, legalized or apostilled, as appropriate.
• Photographs, etc.

Tax advantages of residency in the Dominican Republic

As we have already mentioned, in the Dominican Republic you can live tax-free thanks to its territorial taxation system (foreign income is tax-free) but beware that it is not complete, i.e. it does not apply to all types of foreign income for an indefinite period of time.

Tax residents (those who spend more than 182 days a year in the country continuously or discontinuously during the tax period) are subject to taxation on all types of domestic income (wages and salaries, rental income, capital gains…) and on foreign income derived from investments and financial gains. Likewise, individuals who become tax residents of the Dominican Republic, generally, must pay tax on such foreign income from the third year onwards, i.e. they only enjoy full territorial taxation during the first 2 years of legal residence in the country.

However, if you have obtained a residence visa through the investor, annuitant or pensioner route, you will always enjoy full territorial taxation, i.e. all foreign income will be tax-free until the situation changes.

In addition, holders of any of these 3 visas (investor, annuitant and pensioner) will enjoy the following additional tax benefits:

1. a) Exemption from real estate transfer taxes (for the first property acquired).
2. b) 50% exemption from taxes on mortgages (when the creditors are financial institutions duly regulated by the Monetary and Financial Law).
3. c) 50% exemption from Real Estate Property Tax.
4. d) Exemption from taxes levied on the payment of dividends and interest (generated in the country or abroad).
5. e) Exemption of 50% of the Capital Gains Tax, provided that the annuitant is the majority shareholder of the company that is subject to the payment of this tax and that such company is not engaged in commercial or industrial activities.
   The Dominican Republic does not have CFC rules (Controlled Foreign Company) or GAAR rules (General Anti-Avoidance Rule). In other words, we can perfectly well maintain companies abroad without the need to justify them and benefiting from a double non-taxation (at a personal and corporate level) if you locate it in a country where the company does not pay taxes.

It is interesting to note that partnerships are considered to be fiscally independent persons. In other words, LLCs or LPs are not considered fiscally transparent there.

Another advantage is that there is no exit tax (an important factor if the day comes when you want to abandon your tax residence there).

Finally, those who have businesses or have been taxpayers in Spain will be interested to know that the Dominican Republic has signed 2 useful agreements with Spain.

On the one hand, Spain is one of only 2 countries in the world (the other is Canada) with which the Dominican Republic has a double taxation agreement in force that allows you to benefit from reduced withholding taxes on certain income. That means that, for example, if you have a company in Spain, only 10% will be withheld when you receive dividends from that company (or 0% if you receive them through a Dominican company that owns at least 75% of the shares) instead of the usual 19%.

On the other hand, Spain is the only country with which the Dominican Republic has a social security aggregation agreement in force, so that contributions and periods of contribution are recognised and added up for pensions and benefits for maternity, disability, retirement, etc.

How to obtain Dominican citizenship

The Dominican Republic allows dual citizenship without restrictions (Art. 20 of the Constitution). This implies that Dominicans can acquire second and multiple citizenships without losing their Dominican citizenship and, in turn, foreigners can acquire Dominican citizenship without having to renounce theirs. Needless to say, you will also have to make sure that your country of previous nationality does not have limitations to acquire a second or multiple citizenship.

There they follow the system of Ius soli (or right of soil), by virtue of which, a person obtains nationality by the mere fact of being born in the country. However, if this is not your case, citizenship can be obtained in different ways: the classic ways of marriage, direct descendants, etc.) or through the naturalisation process.

Within the naturalisation process, there are two alternatives:

1. The longer one, although it does not require investment. Nationality can be applied for after 2 years in the country with legal residence (not as a tourist). This period is the one established by law, but the reality is that the process often takes more than 3 years.
2. If you have applied for a residence visa as an investor (200,000 USD investment), you can apply for citizenship after only 6 months from the time you obtain the residence permit. Once again, it should be noted that this is just on paper, in practice the process usually takes about 2 years in total.

The cost of obtaining a Dominican passport varies widely, but is usually around US$15,000. The passport is not the strongest (it allows travel to only 66 countries without a visa), but it is a second passport after all and can serve a multitude of purposes.

So, can I open a bank account in the Dominican Republic?

No problem!

Probably thanks to the fact that the Dominican Republic does not participate in the CRS (Common Reporting Standard), they open bank accounts without further requirements, even for tourists. In this way, you can easily open a bank account there and avoid the automatic exchange of tax information with your country of residence.

This is the current situation (June 2022) and could of course change in the not too distant future.

Concluding

We hope the article has been useful for you and, of course, in case you want more information or would like us to help you decide whether the Dominican Republic or any other of the many destinations we talk about is the best option for your particular case, you can book a Staatenlos consultation here.

If you prefer to continue studying the options on your own, you may be interested in our ebook Emigration Encyclopedia, in which we explain the most interesting countries to emigrate to and avoid paying taxes.

Finally, although we always advise you to start with a consultation to make sure you do everything correctly (leaving your country, etc.), if you already have it clear and simply want to live in the Dominican Republic, you can contact us. This way, we can put you in contact with our associates there who will help you with immigration, obtaining citizenship, opening bank accounts, etc.

Because your life is yours!