Tourism in the Dominican Republic - a legal guide - Pellerano ...

FINANCIAL AND LEGAL FRAMEWORK
OF TOURIST ACTIVITIES
SOURCES OF FINANCING
FOR TOURIST PROJECTS
Multilateral organizations
The Dominican Republic is a member of many
multilateral organizations. The investor that decides to
execute a tourist project may thus benefit from the
financing programs that are available under different
schemes. Since tourism is a priority sector for the
country, such financing programs are available for
projects in these areas and, in fact, they have been a
key factor in the development of tourism in the country.
International organizations such as the World Bank
and the Inter American Development Bank (IADB) grant
credit facilities under good conditions for the realization
of projects in sectors considered important for the
development of the national economy, such as tourism.
In this regard, in the year 2001 the International
Financing Corporation (IFC), of the World Bank Group,
opened a branch in the country in order to be able to
provide direct financing to local companies in areas of
strategic importance for development. Furthermore,
also in that year the Dominican Republic became a
member of the Multilateral Investment Fund (MIF), a
fund managed by the IADB to provide financial
resources for private sector development, particularly
small enterprises.
There are also sources of financing available
through the European Investment Bank (EIB). This is an
institution of the European Union that, under the
framework of the Lome/Cotonou Convention, offers
long-term and low-interest loans for the financing of
projects in ACP countries. Among other sectors, the EIB
grants loans to the Dominican Republic in the tourist
sector, as well as transport and telecommunications
when the project is related to tourism development.
EIB loans are generally used for the application of
the National and Regional Indicative Programs set forth
by the Lome Convention, which are prepared jointly by
each ACP country and the EU every five years, and
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contain, among other information, an indication of the
economic areas that should benefit from the financial
support and the projects to be executed for such
purposes. These funds are channeled through the
European Development Fund Office of the Government.
Under the first financial protocol of the recently
approved Cotonou Agreement, which substitutes and
enlarges the benefits of the Lome Convention, a
substantial amount of financial resources will be made
available to ACP countries: more than 25 billion euros
over the next seven years.
For the period 2003-2008, the Dominican Republic
will receive approximately 200 million euros, of which
176 million will be for donations and the rest will be for
regional projects and loans channeled through local
banks.
International loans
International loans are not subject to any exchange
restrictions. The foreign creditor needs only to register
the loan at the Central Bank, and the debtor will then
be able to pay in foreign currency obtained through the
private exchange market any amounts due under the
agreement. Since 1994, when the need of prior
approval from the Central Bank was eliminated, this
registration is a mere formality for statistical purposes.
Under the Tax Code, interests on international loans
were subject to a 15% withholding tax, payable by the
local debtor. Law 147-00 on Tax Reform reduced this
rate to 5%. It should be noted that loans granted to
companies falling under the scope of Law 158-01 on
Promotion of Tourist Development are exempted from
the payment of this tax (see Section VI).
Local Financing
Financial institutions grant generally short or
medium term loans, with periods of one to five years,
but the financing of constructions and projects with
government funding can be long term, with periods of
ten to twenty years.
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