By Francisco Tavárez
Special for El Immobiliario
The Dominican Republic had a remarkable performance in attracting foreign capital in the past year. Foreign Direct Investment (FDI) reached a record US$5,032.3 million, an 11.3% increase compared to 2015, according to preliminary data from the Central Bank of the Dominican Republic. This result consolidates the country's position as the leading recipient of FDI in Central America and the Caribbean.
Of that total, the real estate sector captured a significant 15.7%, amounting to US$790 million, while the tourism sector represented 26.3% of the total, confirming that the Dominican real estate sector is a magnet for foreign investors.
However, the country faces some challenges hidden behind the record FDI inflows, which warrants correcting distortions and confronting a series of obstacles that could surface sooner rather than later in a turbulent, unpredictable and unstable international scenario like the current one.
On the one hand, the legal framework is sound on paper: Law 16-95 guarantees free repatriation, and the CONFOTUR incentives (Law 158-01) offer tax extensions of up to 15 years. But in practice, investors face slow bureaucracy, discretionary permits, and a lack of predictability in tax criteria.
Sophisticated capital doesn't shy away from rules; it "sneaks away from uncertainty." A project may be profitable, but if the procedures drag on or the tax interpretation changes mid-project, the risk discourages further investment. Furthermore, many foreigners discover too late that local profits can be nullified by their home countries' tax authorities if they don't properly structure their investment, taking into account crucial factors such as double taxation.
Roadmap for taking the leap
For the country to consistently surpass the US$5 billion mark and consolidate its leadership, the government and the private sector must act in two ways: simplify and digitize processes, enabling an efficient one-stop shop for construction permits and access to incentives. Investors should not have to navigate multiple institutions, complying with a permitting process that discourages and hinders investment growth.
Furthermore, it is crucial that tax regulations be stable and predictable, with clear rules and binding consultation mechanisms regarding investment structures (trusts, offshore companies). Investors need certainty for the next 20 years as an investment scenario.
Redefine and modernize incentives, extending the benefits of CONFOTUR, including initiatives for affordable housing and urban regeneration.
Improving transparency and professionalization by adopting international standards is key, as is encouraging efforts to combat informality in the workforce. In the tax arena, specialized advice is important to guide investment considering double taxation at source. Finally, participation in dialogue forums to co-design public policy solutions paves the way for public-private collaboration and cooperation.
With less bureaucracy and greater tax efficiency, the next leap (toward US$7 billion) is within reach. The key question is: will we continue to attract investment despite the system, or will we attract it because of it?
This article was originally published in the print edition of El Inmobiliario , issue no. 14.
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