Top challenges of doing business in the Dominican Republic

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Sat amidst some of the most lucrative markets in the world, the Dominican Republic is an island economy packed with a wealth of potential. But many businesses find it to be a difficult investment environment to navigate, which is why having local help on board is crucial.

Location is certainly an asset for the Dominican Republic. Sat in the heart of the Caribbean, it offers excellent connectivity to markets in North, Central and South America, with 70 daily flights to the US and Europe. Its proximity to vast consumer markets is a big selling point in attracting foreign direct investment (FDI); the country hosts a highly developed free trade zone system, efficient shipping networks, and the strongest telecommunications sector in Latin America, which support regional expansion.

The Dominican Republic also boasts an expansive working population which is renowned for its superior productivity. Combined with increasing national investments in education and diverse skills development, these characteristics offer expanding businesses a wealth of human resource capabilities, which become the engine of growth for corporates in the DR.

But despite the many advantages of investing in the Dominican Republic, the business environment is quite tricky to navigate for nascent firms. The World Bank and International Finance Corporation (IFC) rank it in 116th place out of 185 economies for ease of doing business, highlighting the importance of having local help on board when expanding into the lucrative market.

Starting a Business
Setting up a corporate entity is a costly endeavour. Payments are required for the purchase of a company name and publication of said name, incorporation tax, registration with the Chamber of Commerce and registration with the Department of Labour. The process takes 19 days to complete on average.

Dealing with Construction Permits
Construction is an arduous process across the board. Obtaining the permits to start construction takes well over 200 days on average and incurs a significant cost. After navigating through several official departments for registration and inspection, the Ministry of Public Works and Communications must be notified of building completion and allowed to inspect the building.

Getting Electricity
EDESUR carries out electrical connections in the Dominican Republic, from approving electrical plans to conducting an external inspection and carrying out the works. Taxes must be paid to CODIA before meter installation can be carried out.

Registering Property
Property registration takes around 60 days to complete, with various tax payments and legal requirements to be navigated. Once the process is complete, the buyer files the property transfer request before the Title Registrar´s Office.

Getting Credit and Protecting Investors
Getting credit can be a difficult task in the Dominican Republic, with a low legal rights index hampering the availability of credit. Investor protection is also an area in which the DR ranks rather poorly.

Paying Taxes
Tax payments are a very time consuming aspect of running a business in the Dominican Republic, absorbing 324 hours of corporate time per year. Corporate income tax - a flat fee of 29% - alone takes over 80 hours to file, as does employer paid pension contributions and filing for VAT takes double that time.

Trading Across Borders
As an island economy, the Dominican Republic relies on effective cross border trade. It takes just over a week to export and import goods and is relatively cheap, although there are several documents to prepare during the process.

Enforcing Contracts
There are 34 procedures to navigate when enforcing contracts, taking an average of 460 days to complete. Most of the time is spent held up in the judicial process.

Resolving Insolvency
The World Bank and IFC rank the Dominican Republic in 156th place in the world for resolving insolvency. Not only does it take three and a half years to pass through the judicial system, the recovery rate is also extremely low on average.

Dominicans are family-orientated people who pride themselves on their hospitality. Appearance is very important in society and people believe clothes indicate social standing and success. Networking is important and maintaining formal relations in business situations is also key.

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We have the local knowledge to help you navigate these minefields. Whether you want to set up in the Dominican Republic or just want to streamline your Dominican operations, talk to us.