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3 Solid Reasons To Start Investing In The Dominican Republic

08 Mar
Photo looking directly up into the sky. Above are 4 palm trees and some white clouds. The palm trees are from the Dominican Republic

3 Solid Reasons To Start Investing In The Dominican Republic

I’d Go So Far As To Call This The World’s #1 Offshore Haven Today

The Dominican Republic first came onto my radar in 2005. It was the country’s undervalued beachfront property that got my attention back then.

I was among the first to shine the light on the DR for American property investors, but its miles and miles of soft-sand beaches had been attracting foreign tourists and European investors for decades before that. The French, especially, have been moving to and investing in the Dominican Republic for generations.

Today I want to focus your attention on the Dominican Republic in a bigger-picture way.

Now that I’ve gotten to know it as well as I have, I believe this island nation is as close to perfect as an offshore destination gets. It checks nearly every box on my flag-planting list.

I’d go so far as to describe it as the world’s best offshore haven.

Why The Dominican Republic

The Dominican Republic’s economy has been the fastest growing in the Americas in recent years. It grew 6% to 7% per year from 2014 to 2016 and 4.8% in 2017. Further growth for 2018 is projected at 4.5%.

Much of the expansion the country has been enjoying is thanks to millions of tourism dollars from North American and European travelers flocking to those sandy beaches I mentioned in ever–growing numbers.

Alongside economic growth, the country’s reelected President Danilo Medina has made education a priority, sponsoring literacy and vocational training programs for adults and building 2,500 new schools during his six years in office so far.

“The current administration is working hard to get this country beyond developing–world status,” one local businessman I spent time with recently told me.

The country’s infrastructure has improved dramatically since my first visit. Today new highways connect most of the resort and beach areas. The colonial zone in Santo Domingo is enjoying a face–lift. New roads and sidewalks are being built, and utility cables are being buried underground.

More flights from the United States make the island more accessible, and major international hotel chains are targeting the DR, specifically Santo Domingo, for new properties. Recently opened are a JW Marriott and an Embassy Suites by Hilton. Underway are an InterContinental and a Hard Rock Hotel.

Hard Rock International Hotel Being Built In Santo Domingo, DR. Hotel towers above the skyline. the sky is orange and purple at sunset
Hard Rock International Hotel Being Built In Santo Domingo, DR.

Meantime, Carnival is bringing a ship a day to Santo Domingo’s cruise dock.

The DR sees about 6 million tourists per year; about 60% of these are from North America. President Danilo’s administration is trying to attract more Chinese tourists and has also targeted Israel with success. Charters arrive regularly from that country.

Beyond tourism, the Dominican Republic’s economy relies on agriculture (bananas, coffee, and cocoa) and mining.

That’s the country big picture.

How Does The DR Stack Up As An Offshore Haven Specifically?

How does the DR stack up as an offshore haven specifically? It’s a top-tier choice for these flag-planting activities in particular:

  • Residency: A
  • Citizenship: A
  • Investing: A
  • Taxation: A
  • Banking: B+

The reasons to target the Dominican Republic for residency (either as a backup or because you’d like to live in the country) and alternative citizenship are compelling. This country offers some of the easiest and cheapest residency options available anywhere.

Generally speaking, gaining a second citizenship takes time or money.

The cost of economic citizenship from Dominica (not to be confused with the Dominican Republic), for example, will run you a minimum of US$100,000 plus fees for an individual and at least US$175,000 plus fees for a couple.

Furthermore, Dominica is a budget choice in this context. Other economic citizenship options are more costly.

If you don’t have or aren’t willing to spend the money to purchase second citizenship, you have to put in the time. Most countries require at least five years as a legal resident before you become eligible for naturalization.

The Dominican Republic requires only three years of residency… and that can be fast-tracked.

Dominican Republic Residency Options

The Dominican Republic offers ordinary and fast-track residency options. The fast track includes residency through investment as well as a program for retirees who can prove US$1,500 a month in pension income or US $2,000 in non-pension passive income.

Obtain residency under a fast-track option, and your naturalization process is fast-tracked, as well. You can start the application process for naturalization after just six months rather than waiting the full three years of residency. This means that you can complete the naturalization process in 12 to 18 months from the time you obtain your residency… and the speed of residency processing continues to improve, as more staff is added to the department.

You can’t count on this in every case, but it can be possible to have your residency card in as few as 30 days.

The invest-for-residency option requires an investment of US$200,000. However, unlike economic citizenship options where the “investment” is in fact a donation to a local development fund, you get your US$200,000 back… plus associated investment profits.

To qualify for the invest-for-residency option, you could put your money in a government bond, which are currently paying tax-free (in the DR) interest of 6.7% to 7.3%. Or you could put your money in a bank CD to earn 5%.

Alternatively, you could set up a company to start a business… or you could set up a company to manage a real estate investment (that is, a rental property).

The option to qualify for residency through an investment in a bank CD is relatively recent. The regulations, requirements, and opportunities associated with qualifying for residency and a passport in the Dominican Republic are changing in real time as the government is working aggressively to attract more foreign investment and more expats and retirees interested in living in the country.

Bottom line, this playing field is continually changing for the better.

I’ve written often over the past few years about real estate investment opportunities in this country. I am as bullish as ever on property markets in the DR in general and in specific target regions in particular. I have been researching and scouting and intend to make a significant investment in property here before the end of this year.

The taxation in the Dominican Republic is as good as it gets. This country taxes on a jurisdictional basis. This means that, as a resident, you’re taxed only on what you earn in the DR with an exception for some foreign investment income. Nonresidents are taxed on any income earned in the country.

Tax rates are relatively low, with the top marginal tax rate set at 25%. The corporate tax rate is 27%, but, like individuals, DR companies are taxed only on income earned in the country.

The one higher–than–average tax is capital gains tax, which is 27%.

The Dominican Republic has fewer banks and many more limited private and investment banking options than Panama. However, DR banks are more open to working with foreign (including American) clients.

In addition, DR banks will lend to foreigners for the purchase of real estate.

Lief Simon