Forming an Incorporated Company in the Dominican Republic:

When many people think about Offshore Incorporations or Trusts, the Dominican Republic is one of the last places that come to mind. To be sure, the Dominican Republic is not a traditional tax haven as the Isle of Man, the Bahamas, Panama or some other jurisdictions. 

Even so, that may be even more of a reason for investors to consider forming a Dominican Company to protect their real estate or vacation property.  In addition, the Dominican Republic does offer investors some interesting Banking Options, including US dollar and Euro savings accounts.
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Why Form a Dominican Company ?

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Like any other strategy to protect your assets and gain tax advantages, the main goal of asset protection is the separation of personal property from the benefical owner.  In other words, if your assets are not in your name, they cannot be taken away from you if a lawsuit arises or if someone wishes to attach your property for some reason. 

In essence you do not own the property, a completely separate entity does.  But this is not the only real benefit of a Dominican Company.  Owning your Dominican Republic Vacation property, real estate or investments via an incorporated company can also provides tremendous tax advanteages.
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Here is Why We Make This Suggestion:  

While it is true that other tax haven jurisdictions may be a better choice for general asset protection or tax strategies, any investor considering the Dominican Republic should form a separate Dominican Company for the following reasons:

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1. Title of Real Estate and Bank Accounts

The Dominican Republic is an emerging market.  With less than 25% of the tourists coming from the US, it has also remained sort of an undicovered market for many investors.  Because of this, The Dominican Republic offers some of the best real estate bargains  and returns from time deposit investments in the entire Caribbean, but obsurity has its price. 

The meaning is that The Dominican Republic is not as sophisicated as say the Bahamas or Panama with regards to foreign ownership of real estate or investments.   While the new legislation has greatly liberalized and improved foreign ownership of land, most government offices and banks are not familiar with the idea of property that is being purchased or titled in the name of an offshore trust or IBC. 

You will have a difficult time getting property or bank accounts titled in the name of a US Delaware corporation, Bahamas IBC or other offshore entity.  Not because it is against the law or because of some other issue, simply because Dominicans are not used to dealing with these type of structures and do not have the experience. 

So, to have a asset protection program in place for your Dominican holdings and to prevent a slew of tap dancing at the title transfer office (or down at the bank), the formation of local company speeds things up and prevents questions. 

Also, generally speaking, it is always a good idea to compartmentalize your holdings anyway.  The meaning is, keep you investments or properties separated.  Your Dominican holdings with one entity, your offshore mutual funds from Europe with a Panamanian Foundation and so on.

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2. The New Capital Gains Tax
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The real benefit to owning your Vacation Property or other real estate through a local Dominican Corporation, is tax savings.

  Most foreign investors are unaware of the recent capital gains tax imposed into the tax code.  The fact of the matter is, I would wager to guess that most Dominicans are probably not aware of it either.  If you ask most Dominican Real Estate agents, they will most likely give you the boiler plate reply regarding title transfer tax, but may indicate that there is no capital gains tax in the Dominican Republic.  While this used to be true in the past, it is not the case today.  Fear not, we have a solution.
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Most governments assess capital gains and property title transfer taxes when a property title changes hands. This is true for real estate in the United States, Europe or tim-bok-tu. 

The solution then is to never change the title of ownership.  If the property title name does not change, there is no title transfer tax, nor is there an official sales document indicating the new purchase price (and thus a way to determine the capital gain due). 

Instead, sell or transfer the entity that owns the real estate through a private transaction.  Not only is this perfectly legal, it is also a common practice that wealthy Dominicans have been doing for years.
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In reality, the new buyer is not taking direct posession of the property, they are taking control, via stock ownership and/or the directorship, of a company that happens to own the property.  Thus eliminating a taxable real estate transaction.

By John Schroder
Ascot Advisory Services