The Dominican Republic has enjoyed an unmatched economic growth in the region for a decade,

In addition, the Dominican Republic enacted, over twenty (20) years ago, its Foreign Investment Statute establishing, among other topics, the equality of treatment between nationals and foreigners, something relatively common today in emerging economies but a common practice in our local market for over two (2) decades.

TRUSTS MARKET IN THE DR

The Dominican Republic is not, by any measure, the typical offshore haven and therefore is not subject to the pressure of the international community, contrary to other jurisdictions. Despite that, and considering that it is the biggest market economy in Central America and the Caribbean, and one of the fastest growing economies in the world, some of the features this country offers are top-tier.

Furthermore, the Dominican Government is taking important steps to attract more foreign investment and become a more competitive destination. In that regard, the Dominican Republic enacted Law 189-11 for the Development of the Mortgage Market and Trusts (hereinafter referred to as the “Trust Law”).

The Trust Law provides some features that match those of the main trusts jurisdictions around the world including:

  • Capital gain tax does not apply when trust assets are returned either to the settlor or to the beneficiaries, as established in the trust document.
  • Income generated by the assets given upon trust are not subject to income tax; this applies no matter the source of income (local or international);
  • Only corporate trustees are allowed to provide trustees services previous approval of the corresponding regulator;
  • Retention of control by settlor, who could also be a beneficiary, if necessary (settlor directed trust);
  • Protection of the assets given upon trust from creditors of the settlor and beneficiaries, unless the trust is created with the purpose of promoting fraud or to negatively affect the rights of third parties originated before the creation of the trust (creditors must prove fraud);
  • Settlors and beneficiaries could be either entities or individuals;
  • Trustees are obliged to provide accounts regarding the trust at least twice a year (unless agreed otherwise).

Despite the foregoing, it is important to consider the following:

  • Transfer of assets to the trust fund is subject to transfer tax (for example, real estate).
  • Trustees must distribute
    non-distributed trust benefits yearly (by year-end). Such distributions, if any, are subject to a 10% dividend withholding. Beneficiaries must obtain advice in their jurisdictions regarding the tax implications of this scenario;
  • Trust instrument must be registered in the public registry (but not other documents like financial statements or letter of wishes).

Considering some of the advantages abovementioned, establishing a trust under the laws of the Dominican Republic could be a wise decision regarding, but not limited to, the following assets:

  • Bonds
  • Cash
  • Commercial names
  • Patents
  • Shares
  • Trademarks

In addition, the Dominican Republic enacted, over twenty (20) years ago, its Foreign Investment Statute establishing, among other topics, the equality of treatment between nationals and foreigners, something relatively common today in emerging economies but a common practice in our local market for over two (2) decades.