Investing in operating businesses in the Dominican Republic

<p>A practical research guide for evaluating Dominican projects and established operations. Separate official national context from the evidence required for a particular transaction. The discussion below identifies market considerations, legal frameworks and questions for professional due diligence; it does not recommend an investment.</p><h2>At a glance</h2><table><thead><tr><th>Indicator</th><th>Figure and year</th><th>Source</th></tr></thead><tbody><tr><td>Corporate ISR</td><td>27% general; 30% for income ≥ RD$1 billion in 2026–2028, per DGII page</td><td><a href="https://dgii.gov.do/cicloContribuyente/obligacionesTributarias/principalesImpuestos/Paginas/impuestoSobreRenta.aspx">DGII, Impuesto sobre la Renta, tabla y reglas publicadas para 2026</a></td></tr><tr><td>Standard ITBIS</td><td>18%, from 2016</td><td><a href="https://dgii.gov.do/cicloContribuyente/obligacionesTributarias/principalesImpuestos/Paginas/Itbis.aspx">DGII, ITBIS, tasa vigente desde 2016, página sin fecha</a></td></tr><tr><td>Cash-dividend withholding</td><td>10%, DGII confirmation 2025</td><td><a href="https://ayuda.dgii.gov.do/conversations/discusiones/dividendos/684c50c0bc37656bbb1db89a">DGII, respuesta sobre dividendos, 2025</a></td></tr></tbody></table><h2>Market and investment thesis</h2><p>An established business offers operating history, customers and staff, but its reported profits are only the starting point. Separate demand for the product from dependence on the founder’s personal relationships. Determine whether the investment finances expansion, provides liquidity to owners or repairs an underfunded balance sheet. Each purpose changes the underwriting. Examine whether management can run the company without the seller and whether the buyer has the expertise to supervise it. There is no universally appropriate valuation multiple or ownership structure.</p><h2>Company forms: SRL, SA and SAS</h2><p>DGII identifies the SRL, SA and SAS within the framework of Law 479-08 of 2008, amended by Law 31-11 of 2011. <a href="https://dgii.gov.do/contribuyentesRegistrados/personasJuridicas/Paginas/default.aspx">DGII, Personas jurídicas, sin fecha, marco de 2008 y modificación de 2011</a> The SRL uses membership interests, or cuotas sociales, and is commonly considered for closely held ownership. The SA is a share company with a more formal corporate framework. The SAS is a simplified share-company form introduced through the amended framework. Check the current law, bylaws, corporate books and transfer restrictions rather than relying on the company initials. The original 2008 text alone is insufficient to verify all SAS rules.</p><h2>Buying shares versus buying assets</h2><p>A share or quota purchase changes ownership of the entity while its contracts and historical liabilities generally remain within it, subject to contractual consent provisions. An asset acquisition identifies the equipment, inventory, intellectual property, contracts and other rights being transferred. It may require assignments, registrations and new permits. Neither structure should be described as automatically free of tax or labour exposure. Ask counsel to examine successor obligations and creditors’ rights. Compare total after-tax cost, transaction execution and continuity of business, not only the advertised purchase price.</p><h2>Verified DGII tax basics</h2><p>The DGII income-tax page states a general corporate ISR rate of 27%; it also states 30% for fiscal years 2026, 2027 and 2028 for taxpayers with income of at least RD$1,000,000,000. <a href="https://dgii.gov.do/cicloContribuyente/obligacionesTributarias/principalesImpuestos/Paginas/impuestoSobreRenta.aspx">DGII, Impuesto sobre la Renta, tabla y reglas publicadas para 2026</a> Confirm the applicable statutory basis and company-specific treatment before closing. DGII describes standard ITBIS as 18% from 2016, with exemptions and other treatments requiring item-by-item analysis. <a href="https://dgii.gov.do/cicloContribuyente/obligacionesTributarias/principalesImpuestos/Paginas/Itbis.aspx">DGII, ITBIS, tasa vigente desde 2016, página sin fecha</a> Its June 2025 dividend response confirms 10% withholding on cash dividends to individuals and legal entities, domestic or abroad, and distinguishes capitalised share dividends. <a href="https://ayuda.dgii.gov.do/conversations/discusiones/dividendos/684c50c0bc37656bbb1db89a">DGII, respuesta sobre dividendos, 2025</a></p><h2>Labour obligations and continuity</h2><p>The Labour Code, Law 16-92 of 1992, addresses employment relationships, working time, rest, holidays and termination. <a href="https://mt.gob.do/wp-content/uploads/2024/07/codigo_de_trabajo.pdf">Ministerio de Trabajo, Código de Trabajo, Ley 16-92 de 1992, edición 2012</a> Review payroll, social-security compliance, accrued benefits, leave records, employee claims and actual working arrangements. Do not assume a contractor label determines legal status or that an acquisition resets employee service. Employment transfer and dismissal consequences require local advice, particularly in an asset transaction. Obtain a quantified benefits and claims schedule. Workforce retention, supervisor continuity and clear communication may be as important to business continuity as the purchase agreement.</p><h2>Due diligence and acquisition risks</h2><p>Check the Registro Mercantil, RNC, beneficial ownership, authority to sell, debt, collateral and related-party dealings. Reconcile sales with tax reporting, cash receipts and customer confirmations. Test whether customer or supplier agreements terminate on a control change. Inspect licences, trademarks, software rights, property leases and environmental exposure. A tax clearance is useful evidence but should not replace historical review and contractual protection. Free-zone treatment under the 1990 regime must be confirmed rather than assumed to transfer without conditions. <a href="https://cnzfe.gob.do/wp-content/uploads/2023/06/Ley-No.-8-90-del-15-de-enero-1990.pdf">Ley 8-90 sobre zonas francas, 1990</a> The core risks are hidden liabilities, weak records, concentrated revenue and dependence on departing owners.</p><h2>Deal structures and investment governance</h2><p>Distinguish ownership of a company from ownership of its underlying assets. A minority subscription, a controlling acquisition, a secured loan and a development partnership create different rights. Describe who appoints management, approves budgets, commits additional capital and authorises related-party transactions. Agree information rights and a realistic exit process before negotiating headline valuation. A holding company does not remove liabilities at the operating level. Obtain independent legal and tax opinions on the actual structure rather than assuming another transaction provides a template.</p><h2>Permits, title and incentives</h2><p>Prepare an approvals matrix identifying the competent authority, applicant, outstanding conditions and evidence required before operations begin. Ask local counsel to confirm land title, encumbrances, zoning, environmental authorisation and sector licences where applicable. Separate an application from an approval, and an approval from permission to commence operations. Incentives should enter the financial model only after the adviser confirms eligibility, the relevant resolution, remaining duration and any restrictions on a change of ownership. A nearby successful project does not establish that the proposed site has the same rights.</p><h2>Financial and commercial due diligence</h2><p>Reconcile management accounts with bank statements, tax returns, customer invoices and material contracts. Examine receivable ageing, inventory condition, supplier dependence and maintenance spending that may have been deferred. Separate recurring trading performance from related-party income, exceptional gains and owner expenses. Obtain independent evidence of customer demand rather than relying exclusively on a sponsor forecast. Test how delayed collections, higher operating costs and a slower launch affect liquidity. Treat forecasts as scenarios, not verified facts or promises about future performance.</p><h2>Currency, climate and execution risks</h2><p>Match the currency of revenues with operating costs, debt service and distributions. A business can report growing sales while struggling to obtain enough cash to pay foreign-currency obligations. Examine insurance exclusions, deductibles, storm exposure, drainage and business-interruption arrangements. Have engineers review asset condition and replacement requirements. A construction budget should specify contingencies and responsibility for overruns. For existing operations, inspect backup power, water security, cybersecurity and the ability to continue serving customers after disruption. These are diligence questions, not assertions that every site has the same weaknesses.</p><h2>Negotiating protections and closing conditions</h2><p>Use a controlled data room and verify the identity and authority of the people supplying documents. Specify conditions precedent, representations, disclosure schedules, indemnities and any retention or escrow with counsel. Identify how unresolved tax assessments, employee claims and permit defects will be treated in the price. Review enforceability and dispute resolution rather than assuming an overseas contract automatically provides effective local remedies. Do not release acquisition funds solely against a presentation. Closing evidence should demonstrate that the agreed ownership, consents and security arrangements can actually be delivered.</p><h2>Practical next steps</h2><p>Define the target sector, geographic scope, desired control and capacity to fund follow-on requirements. Build a preliminary investment memorandum that separates confirmed evidence, assumptions and unresolved questions. Commission local legal, tax and technical reviews before making a binding commitment. Obtain a written plan for operations after closing, including management transition, reporting and capital expenditure. Sponsors can <a href="https://dominicaninvesting.com/for-projects">list a project</a>; prospective investors can <a href="https://dominicaninvesting.com/for-investors">register as an investor</a>. Introductions are not a substitute for independent verification. This guide is general information, not investment, legal or tax advice, and does not promise returns.</p><h2>Sources</h2><ul><li><a href="https://dgii.gov.do/contribuyentesRegistrados/personasJuridicas/Paginas/default.aspx">DGII, Personas jurídicas, sin fecha, marco de 2008 y modificación de 2011</a></li><li><a href="https://dgii.gov.do/legislacion/leyesTributarias/Documents/Otras%20Leyes%20de%20Inter%C3%A9s/479-08.pdf">Ley 479-08 de sociedades comerciales, 2008</a></li><li><a href="https://dgii.gov.do/cicloContribuyente/obligacionesTributarias/principalesImpuestos/Paginas/impuestoSobreRenta.aspx">DGII, Impuesto sobre la Renta, tabla y reglas publicadas para 2026</a></li><li><a href="https://dgii.gov.do/cicloContribuyente/obligacionesTributarias/principalesImpuestos/Paginas/Itbis.aspx">DGII, ITBIS, tasa vigente desde 2016, página sin fecha</a></li><li><a href="https://ayuda.dgii.gov.do/conversations/discusiones/dividendos/684c50c0bc37656bbb1db89a">DGII, respuesta sobre dividendos, 2025</a></li><li><a href="https://mt.gob.do/wp-content/uploads/2024/07/codigo_de_trabajo.pdf">Ministerio de Trabajo, Código de Trabajo, Ley 16-92 de 1992, edición 2012</a></li><li><a href="https://cnzfe.gob.do/wp-content/uploads/2023/06/Ley-No.-8-90-del-15-de-enero-1990.pdf">Ley 8-90 sobre zonas francas, 1990</a></li></ul>