SANTO DOMINGO.- Law 158-01 was enacted on October 9, 2001, through which the Promotion of Tourism Development for the poles of scarce development and new poles in provinces and localities of great potential is established, better known as the Confotur Law, which created the Official Tourism Promotion Fund.
Its first “Whereas” clause states “that it is in the State’s interest to promote the increase of activities that contribute to the social and economic development of the country and to foster the necessary conditions for the creation of an appropriate climate so that local, foreign or multinational companies are attracted to invest resources in the creation of new businesses and the generation of jobs.”.
The Fiscal Modernization Bill presented to the country last Monday by the Government and taken yesterday to the National Congress, eliminates seven articles related to incentives, which motivated the creation of this legislative piece, one of the pillars on which real estate investments in the Dominican Republic have been based in recent years.
This proposal repeals paragraphs II, III, and IV of Article 1; Article 2; the sole paragraph of Article 3; and Articles 4, 5, 6, 7, and 14 of the aforementioned law. But what is the content of these paragraphs and articles?
Paragraph II, Article I
“To this effect, this law and its regulations establish the incentives that will be granted, as a stimulus, to the projects and investments that contribute to the achievement of the identified objectives and goals.”.
Paragraph III.- (Modified by Law 318-04, dated December 23, 2004)
“The tourist areas of Puerto Plata or Amber Coast, and its municipalities; Cabeza de Toro and Punta Palmilla, in the province of La Altagracia; Santo Domingo; Samaná with its municipalities, and others that have or have not benefited from incentives in hotel facilities, will now be benefited according to the following conditions and scope:
a) Investments made in the development of tourism activities and complementary offers established in Article 3 of Law No. 158-01, of October 9, 2001, amended by Law No. 184-02 of November 23, 2002, with the exception of numeral 1, corresponding to hotel facilities, resorts and/or hotel complexes, will benefit from one hundred percent (100%) of the exemption regime established by this law.
b) Investments in tourism activities indicated in numeral 1 of Article 3 of Law No. 158-01, of October 9, 2001, amended by Law No. 184-02, of November 23, 2002, corresponding to hotel facilities, resorts and/or hotel complexes in the structures existing to date, will only benefit from the exemption established in Article 4, paragraph.
c) Law No. 158-01, of October 9, 2001, amended by Law No. 184-02, regarding the exemption from the payment of one hundred percent (100%) of import taxes and other taxes that may be applicable on machinery, equipment, materials and movable goods that are necessary for the modernization, improvement and renewal of said facilities, after compliance with the requirements demanded by this law, provided that they demonstrate that they have a minimum of five (5) years of construction.”.
Paragraph IV.- (Modified by Law 184-02, of November 23, 2002)
“With the exception of the municipalities and sections indicated in paragraph I of this article, which are: The municipality of Las Lagunas de Nisibón and the sections of El Macao, Uvero Alto and Juanillo, in the province of La Altagracia, which will benefit from the entire exemption regime established by this law, the province of La Altagracia and its municipalities will only have access to the tax exemption facilities for the construction and equipping of their hotels, and not to the exemption from income tax for a period of ten (10) years, as will be received by the other regions contemplated in this law. The same limitations will apply to the province of Santiago and its municipalities.”.
Article 2, on the purpose of the incentives (deleted)
“All natural or legal persons domiciled in the country who undertake, promote or invest capital in any of the activities indicated in article 3 and in the tourist centers and/or provinces and/or municipalities described in the previous article may take advantage of the incentives and benefits granted by this legislation.
Paragraph: (Added by Law 184-02, of November 23, 2002)
“Likewise, individuals or legal entities that develop new projects or complementary offerings to those contained in Article 3, through concession, lease, or any other form of agreement with the Dominican State in the tourist destinations listed in Article 1 of this law, may also benefit from the incentives and benefits of this law.”.
Article 3, single paragraph deleted:
“The establishment in national territory of companies dedicated to the tourism activities indicated below is declared to be of special interest to the Dominican State:
1. Hotel facilities, resorts and/or hotel complexes.
2. Construction of facilities for conventions, fairs, international congresses, festivals, shows and concerts.
3. Companies dedicated to the promotion of cruise activities that establish, as the home port for the origin and final destination of their vessels, any of the ports specified in this law;
4. Construction and operation of amusement parks and/or ecological parks and/or theme parks;
5. Construction and/or operation of port and maritime infrastructure serving tourism, such as marinas and harbors;
6. Construction and/or operation of tourist infrastructure, such as aquariums, restaurants, golf courses, sports facilities and any other that may be classified as an establishment belonging to tourist activities;
7. Small and medium-sized enterprises whose market is mainly based on tourism (handicrafts, ornamental plants, tropical fish, breeding farms of small endemic reptiles and others of a similar nature);
8. Basic service infrastructure companies for the tourism industry, such as aqueducts, treatment plants, environmental sanitation, garbage and solid waste collection
Paragraph: (Added by Law 184-02, of November 23, 2002)
“The exemptions agreed upon for the activities indicated in items 2, 3, 4, 5, 6, of this article, shall apply in the same way to tourist accommodations or other facilities or activities of any nature built or promoted to complement them such as, villas, plots, lots, apartments, moorings for boats etc., whether they are intended to be operated by the promoters or developers or sold to other natural or legal persons, provided that they are part of a classified project.”.
Article 4 , on the incentives and benefits granted by law (deleted):
“Companies domiciled in the country that take advantage of the incentives and benefits of this law are exempt from paying taxes in one hundred percent (100%), applicable to the following items:
a) Of the income tax subject to incentives as indicated in article 2 of this law.
b) (Amended by Law 184-02, of November 23, 2002).
" From national and municipal taxes for the incorporation of companies, for increases in the capital of already incorporated companies, national and municipal taxes for the transfer of real estate rights, for sales, exchanges, contributions in kind and any other form of transfer of real estate rights, from the Tax on Luxury Housing and Undeveloped Land (IVSS). As well as from the fees, charges and quotas for the preparation of plans, studies, consultancies and supervision and the construction of the works to be executed in the tourism project in question, this last exemption applicable to the contractors in charge of the execution of the works;
c) (Amended by Law 184-02, of November 23, 2002)
“From import taxes and other taxes such as fees, duties, surcharges, including the Tax on Transfers of Industrialized Goods and Services (ITBIS), that may be applicable on the machinery, equipment, materials and movable goods that are necessary for the construction and for the first equipping and commissioning of the tourist facility in question.”.
Paragraph I
“National and international financing, and the interest thereon, granted to companies that are the object of these incentives will not be subject to any tax or withholding payment”;
Paragraph II. (Amended by Law 184-02, of November 23, 2002)
“Individuals or legal entities may deduct or exempt from their net taxable income the amount of their investments in tourism projects included within the scope of this law, and may apply up to twenty percent (20%) of their net taxable income to the amortization of said investments each year. In no case may the amortization period exceed five (5) years.”.
Paragraph III
“There will be a total and absolute exemption for the machinery and equipment necessary to achieve a high profile in the quality of the products (ovens, incubators, production control treatment plants and laboratories, among others), at the time of implementation.”.
Paragraph IV. (Added by Law 184-02, of November 23, 2002)
“The exemptions established by this law will be used by individuals or legal entities that make one or more investments directly with the promoters or developers in any of the activities indicated in its article 3, and in the tourist centers and provinces and municipalities described in its Article 1, excluding from such benefits any subsequent transfer in favor of third-party acquirers.”.
Article 5 , deleted:
“The establishment of new taxes, levies, fees, etc. is prohibited during the tax exemption period.”.
Article 6 , deleted:
“ The granting of the incentives and benefits referred to in this law shall be strictly limited to new projects whose construction begins after its promulgation.”.
Article 7, exemption period (deleted):
“The tax exemption period for each tourism project, business, or company will be ten (10) years, starting from the date of completion of the construction and equipping of the project subject to these incentives. A period not to exceed three (3) years is granted to begin the sustained and uninterrupted operation of the approved project; failure to comply with this period will result in the immediate loss of the acquired exemption right.
Article 14, on the requirements for the submission of files (deleted):
“ New projects that wish to take advantage of the incentives and benefits created by this legislation must be formulated and submitted together with the following documents:
1. An environmental impact study that considers the type of project, the required infrastructure, the impact zone, and the sensitivity of the area, approved by the Ministry* of State for Environment and Natural Resources in accordance with the General Law on Environment and Natural Resources, No. 64-00, of August 18, 2000, its regulations, standards, and sectoral laws. *Adapted according to the Decree that changes the name of the State Secretariats to Ministries.
2. An architectural preliminary design, as well as the preliminary engineering details thereof, prepared by a qualified Dominican professional or recognized firm of professionals, legally authorized to practice. Any advice, consultations, or participation of foreign specialists in the formulation of preliminary architectural or engineering studies, or in subsequent stages of project development, shall in all cases be carried out through a local professional firm or one duly authorized to practice, which shall be responsible for its preparation and legal liability;
3. Projects that plan to handle volumes of fuel and/or involve heavy vessel traffic must be accompanied by a contingency plan to prevent and control fuel spills.
Paragraph
"The projects must have the preliminary approval of the competent urban planning and municipal bodies in their jurisdiction.".
