Enabling Regulation for the Dominican Foreign Investment Law (Decree 380-96)

ARTICLE 1 – THE FOLLOWING DEFINITIONS SHALL BE A PART OF THESE REGULATIONS IN ADDITION TO THOSE CONTAINED IN LAW NO. 16-95:

Financial Assets: Instruments to be exchanged in financial markets, such as promissory notes, stocks, bonds, shares, and Bills of Exchange, among others, to which the Monetary Board attributes the category of foreign investment under the regulations to be issued for this purpose.

Repatriable or remittable capital: The fully paid-in capital owned by registered foreign investors, less the net losses suffered by the enterprise, if any.

Certificate of Foreign Investment Registration: Document to be issued by the Central Bank in favor of a foreign investor as evidence that his investment has been duly registered.

Fiscal year: The period of one year in which the results of a company’s business are presented in its financial statements.

Enterprise: An economic unit, whether a single proprietorship, partnership, limited partnership or corporation.

Blocked earnings: Earnings obtained by foreign investors registered under Law No. 861 which, having been reported to the Central Bank within the deadline established by said Law, could not be remitted abroad because they exceeded the percentage limitation.

Law No. 16-95: The Foreign Investment Law passed by the National Congress on 8th November 1995.

Law No. 861: The Foreign Investment Law passed by the National Congress on 22nd July 1978, as amended by Law No. 138 of 24th June 1983, and revoked by Law No. 16-95.

Freely Convertible Currency: Foreign currency that can be exchanged in a banking institution according to existing norms.

Free Zone Enterprise: Any national or foreign company licensed under Law No. 8-90 of 15th January 1990 or any other legislation which it substitutes.

ARTICLE 2.- ATTRIBUTIONS AND OBLIGATIONS OF THE CENTRAL BANK OF THE DOMINICAN REPUBLIC.

The Central Bank of the Dominican Republic shall have the following attributions:

a) To receive and analyze applications for registration related to direct foreign investments, foreign reinvestments, new foreign investments and licensing agreements for the transfer of technology, and to proceed with their registration after having determined that all legal and regulatory preconditions have been satisfied;

b) To receive information from the National Free Zone Council in relation to the registration of foreign enterprises authorized by said Council to operate as free zone enterprises, and to register the respective foreign investments;

c) To request from applicants for foreign investment registration the information and documents necessary to support their applications, as established in Law No. 16-95 and in these Regulations;

d) To issue Certificates of Registration of Foreign Investment or of Transfer of Technology, as the case may be;

e) To verify that the funds remitted abroad as earnings, the payments derived from contracts for technology transfer or repatriation of capital are made pursuant to Law No. 16-95 and these Regulations;

f) To approve the schedules for the gradual remittance of blocked earnings;

g) To provide upon request information concerning the requirements to obtain a Certificate of Registration of Foreign Investment or of Transfer of Technology;

h) To make an annual report to the National Congress, via the Executive Power, on the flow of foreign investment in the country, as part of the annual Central Bank report.

ARTICLE 3.- FORMALITIES FOR THE REGISTRATION OF FOREIGN INVESTMENTS.

Within the 90-day period established in Law No. 16-95, from the date on which each foreign investment is made, any foreign investor or corporation must file at the Central Bank its application for registration with all the information required for the issuance of the Certificate of Registration.

Upon completion of the documentation required for registration, the Central Bank will have a period of ten (10) working days in which to process same and issue the Certificate of Registration.

PARAGRAPH I. All applications for foreign investment registration must contain the following information:

a) If a foreign individual: name, address, telephone and fax number, and nationality of the foreign investor and of the person acting on his behalf, if any;

b) If a corporation:corporate name, place of business, telephone and fax number, and names of its Directors;

c) Amount of the investment, expressed in a freely convertible currency;

d) Name and incorporation papers of the local company that will receive the investment;

e) Type of economic activity in which the local company is or will be engaged;

f)  In the case of a branch office of a foreign corporation, evidence of the authorization to establish a domicile in the Dominican Republic;

g) When the foreign investment has an impact on the environment, the foreign investor must submit a certificate from the competent ministry or agency which describes the manner in which any damage to the environment will be remedied, and

h) When foreign technology is capitalized, the foreign investor must also submit the contract executed by the parties which sets forth the amount of foreign exchange to be received in exchange for the technology;

PARAGRAPH II. In the case of a direct foreign investment, made in freely convertible foreign currency, the investor must submit:

a)  Documentary evidence of entry into the country of the foreign currency via copies of check(s) or wire transfer(s) from the foreign banking institution and

b)Exchange receipt issued by a local bank authorized by the Monetary Board to deal in foreign currency.

PARAGRAPH III. In the case of a direct foreign investment in kind, the following documents must be submitted, whenever pertinent:

a) In cases involving investments in kind of imported goods and/or services:

– Commercial invoice

– Proof of payment

– Bill of lading, and

– Customs clearance documentation

b)  In cases involving investments in kind made in installments over a given period of time, the investor must submit an affidavit describing the goods to be imported, the estimated value of customs duties, and the period of time during which the imports will take place. In such a case, a provisional certificate of registration will be issued for the estimated value of the imports, based on the proof of payment, letter of credit or purchase order for the goods or services to be received from abroad.

Upon completion of the foreign investment, the foreign investor shall submit to the Central Bank the documents mentioned in section a) of this paragraph and the provisional registration certificates, in order to replace them with definite certificates of registration;

c)  In cases of foreign loans or financing, the investment will be registered only if the loan or financing is given to the foreign investor, not when it is granted to the local company in which the investment is being made, and

d) In the case of intangible technological contributions, the foreign investor must submit a copy of the agreement with the local company receiving the investment, as well as the evidence of ownership of the technology.

PARAGRAPH IV. In cases of new investment or of reinvestment of earnings,  after being registered, will receive the same treatment as direct foreign investments. For this purpose, the foreign investor must, within ninety (90) calendar days from the date on which the local company declares the dividends, submit the following:

a) Copy of the audited financial statement of the company declaring the dividend;

b) Minutes of the shareholders’s meeting at which the dividend was declared, if required;

c) Documentary proof of payment of the taxes owed by the foreign investor in the Dominican Republic.

d) In case of reinvestments of profits, the documentation mentioned in Paragraph I, Section c) of this article will also have to be submitted and

e) In case of new investment, the documentation mentioned in Paragraph I, sections c), d), e), f), and g) of this Article will also have to be submitted.

PARAGRAPH V. Foreign persons and corporations may engage in the Dominican Republic, in the same manner as nationals, in the promotion or procurement of imports, sale, distribution, rental or any other use of foreign goods or products, whether manufactured abroad or in the country, whether acting as agents, representatives, exclusive distributors, concessionaires or under any other name, provided, however, that if such person or corporation has maintained commercial relations with a local concessionaire, it must enter into a written agreement and pay a fair and complete indemnity arising therefrom based on the elements mentioned in Article 3 of Law No. 16-95.

ARTICLE 4. REMITTANCE OF EARNINGS.

A foreign investor shall have the right to remit without the prior authorization of the Central Bank, all earnings accrued during the fiscal year ending after the entry into force of Law No. 16-95, as well as the pending portion of the earnings which were authorized in part after the entry into force of Law No. 16-95, as well as dividends paid in anticipation within the current fiscal period, provided that the corresponding tax obligations have been fulfilled.

The same treatment will be accorded to earnings accrued during fiscal years ending within the period of two (2) years mentioned in Law No. 861, in case the same have not been submitted to the Central Bank for approval. However, earnings not declared to the Central Bank, within the two (2) year period mentioned in Law No. 861 shall not qualify for remittance abroad.

After the remittance abroad of dividends declared during any given fiscal year, the investor will be required to submit the documentation mentioned in Article 3, Paragraph IV, sections a), b), and c), as well as a copy of the form evidencing the sale of foreign currency duly stamped by the bank which sold the same, which must be a bank licensed to deal in foreign currency.

Regarding dividends paid in anticipation within the current fiscal period, the documentation to which Article 3, paragraph IV, section c) refers to shall be presented, in addition to a copy of the Resolution of the Board of Directors where the dividends paid in advance during the current fiscal year were declared. Once the Assembly has ratified the dividends for said period, the minutes or the pertinent document must be remitted to the Central Bank, as well as the audited financial statements.

PARAGRAPH I. In case the remittance made by a foreign investor exceeds the benefits produced by his investment, as evidenced by the minutes of the shareholdersÕÕ meeting mentioned in Article 3, Paragraph IV, section b), the Central Bank shall act as if a repatriation of capital had taken place and shall reduce the amount of the registered investment and amend the corresponding certificate. This step will be notified to the foreign investor.

PARAGRAPH II. Blocked earnings may be remitted abroad subject to prior authorization of the Central Bank. To this end, the foreign investor must apply for approval of a gradual schedule of repatriation and attach the documentation mentioned in this Article for the case of dividends.

ARTICLE 5. REMITTANCE OR REPATRIATION OF CAPITAL.

The foreign investor whose capital is registered at the Central Bank shall have the right to remit or repatriate same upon the sale of his shares or interests to national or foreign investors or when the company in which he has made his investment is liquidated, provided he is up to date in his tax obligations to the Dominican Republic.

He will also be allowed to remit abroad, without prior authorization of the Central Bank, the capital gains realized and registered in the books of the company, as set forth in Article 12 of Law No. 16-95.

The sale session or transfer of shares or interests by one foreign investor to another foreign investor or to a national investor must be reported to the Central Bank within sixty (60) calendar days from the date on which the sale or transfer takes place or on which the company is liquidated.

PARAGRAPH I. The foreign investor must deliver to the Central Bank his original certificate of registration for purposes of cancellation before repatriating his foreign capital.

PARAGRAPH II. For the purpose of a joint registration of transactions involving the sale and purchase of foreign capital, the buyer shall be granted a period of sixty (60) calendar days to obtain the new certificate of registration and shall thereafter enjoy the same rights and obligations as his transferor.

Within the sixty (60) day period mentioned above, the following documents must be filed with the Central Bank:

a) The original certificate of foreign investment registration involved in the transaction;

b) Documentary evidence of the payment of Dominican Republic taxes by the foreign investor who is transferring his investment;

c) Documentation satisfactory to the Central Bank evidencing the transfer of ownership of the foreign capital;

d) A request by the new foreign investor of a Certificate of Foreign Investment Registration, and

e) The information mentioned in Article 3, Paragraph I, sections a), b), c), and f) of these Regulations.

PARAGRAPH III. It is a condition for the new registrations that the repatriation of has not taken place. If the repatriation of capital has been effected, the purchasing foreign investor will be subject to the provisions contained in Article 3, Paragraph II, of these Regulations.

ARTICLE 6. TRANSFERS OF TECHNOLOGY.

Applications for registration of contracts for the transfer of technology must be accompanied by a copy of such contracts and documentary evidence that the transferor is the owner of such technology. Further, the requirements established in Article 3, Paragraph I, section g) of these Regulation must be met.

SOLE PARAGRAPH. Within sixty (60) days of having remitted a royalty payment abroad, the transferee must submit to the Central Bank:

a) A copy of the form for sale of foreign currency duly stamped by the banking institution selling the currency. This institution must be authorized to make foreign currency transactions;

b) Documentary evidence of compliance with the tax obligations of the transferor in the Dominican Republic;

c) A communication from the conceding corporation containing the calculations made for the determination of the amount of royalty paid;

d) Evidence that the foreign grantor of the technology received the royalty payment being documented.

ARTICLE 7.- REQUISITES FOR THE SALE OF FOREIGN CURRENCY.

Only financial institutions authorized to deal in foreign currency will be permitted to sell foreign currency for the remittance abroad of earnings, repatriations of capital and capital gains, and for the payment of royalties derived from contracts for the transfer of technology. For such sales, the prior authorization of the Central Bank will not be required, except in the cases provided in these Regulations.

To this end, said institutions shall request to be shown the original Certificate of Foreign Investment Registration and shall request the filing of one copy of said copy together with the following documentation:

a) An affidavit by the foreign investor or his authorized representative expressing the right under Law No. 16-95 to purchase the foreign currency being sought in the amount and for the reason stated and, further, that he has complied with his tax obligations in the Dominican Republic. Regarding the remittance of dividends paid in advance during the current fiscal year, a copy of the corresponding Resolution of the Board of Directors must be included;3

b) When a repatriation of capital is involved, the foreign investor shall be required to submit a proof from the Central Bank attesting that it has received the original certificate of registration. This proof shall substitute the requirements of exhibiting the original certificate and submitting a copy thereof, and

c) In cases involving the purchase of foreign currency to make payments derived from contracts for the transfer of technology, a copy of the Certificate of Registration issued by the Central Bank and the affidavit of the transferee mentioned in section a) of this Article will be required.

PARAGRAPH I. All cases of sales of foreign currency by banking institutions under these Regulations shall be handled according to the procedures established for cash sales over the counter. Such sales shall, however, not be subject to the quantitative limits established for such operations. Payment of the Delegation Fee shall be required in each case, pursuant to the rules in effect.

PARAGRAPH II. Banking institutions shall remit to the Central Bank the documents received from the purchasers of foreign currency, as described in the present article, together with the original form for the sale of foreign currency, pursuant to the banking norms in effect at the relevant times.

ARTICLE 8.- MISCELLANEOUS.

The following procedures shall be applicable to the cases set forth below:

PARAGRAPH I. In case of loss of a Certificate of Foreign Investment Registration, the foreign investor shall request the Central Bank to issue a duplicate upon submission of an affidavit of loss.

PARAGRAPH II. If found to have been obtained by fraudulent means the Certificate of Foreign Investment Registration or of Transfer of Technology shall be revoked. Upon making this determination, the Central Bank shall notify the owner of the registration.

Further, if through indirect information received by the Central Bank, it is determined that the foreign investor does not appear in the list of stockholders of the company registered as the recipient of his investment or if his share in the capital does not coincide with the information submitted for registration, the Central Bank, prior notification to the foreign investor, shall proceed to cancel or adjust the amount of the registration, as may be required.

PARAGRAPH III. When there is a change of address and/or business name and/or of the authorized representative, the foreign investor shall so inform the Central Bank, since the Central Bank when sending notices to the foreign investor, shall rely on the latest information on file.

PARAGRAPH IV. In the case of a foreign investment made in several currencies, the registrations at the Central Bank of new foreign investment, reinvestment or earning or changes in the amount of direct foreign investment shall be adjusted proportionately to the currencies of the original registration, using the exchange rate in effect at the time of each application.

ARTICLE 9.- TRANSITORY PROVISIONS.

At the request of the foreign investor, blocked earnings may be treated as reinvested earnings or as new foreign investment, as the case may be. To this end, the provisions established in Article 3, Paragraph IV of these Regulations must be complied with.

Applications for registrations of foreign investment, reinvestment of earnings, contracts for the transfer of technology, and renewals of such registrations, which were submitted to the Central Bank prior to the entry into force of Law No. 16-95 and which have not been registered for lack of session of the Board of Foreign Investment, shall be dealt with under Law No. 16-95 and these Regulations, and the owners thereof shall be entitled to:

a) Remit abroad the earnings derived from such foreign investments during the fiscal years ending after the date of filing of their applications for registration at the Central Bank, and

b) Remit abroad the payments under contracts for the transfer of technology, which became due after the date of filing at the Central Bank of the application for registration.

A new ninety (90) calendar days period, as of this date, is hereby granted for the acceptance of applications for foreign investment registrations and registration of contracts for transfer of technology which to this date, had not been submitted to the Central Bank for registration.4

To this end, the interested parties shall submit the information called for in Article 3 of these Regulations, as the case may be. After compliance with this requirement, such investors shall be permitted to remit abroad the earnings obtained during the fiscal years ending after the registration of their investments and the payment of royalties due after the date of registration of the contract for the transfer of technology.

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