Investing in the Dominican Republic through an LLC: Benefits and Risks

Published on October 3, 2025 and written by Cyril Jarnias

Investing in the Dominican Republic through a Real Estate Civil Society (SCI)

Investing in the Dominican Republic through a Real Estate Civil Society (SCI) can offer exciting opportunities for investors seeking portfolio diversification while enjoying tropical beauty and a booming economy.

Thanks to attractive tax benefits and a relatively accessible process for foreigners, creating an SCI presents a practical solution for acquiring real estate in this sought-after destination.

Challenges to Anticipate

However, it’s crucial to navigate this context carefully to avoid potential pitfalls, such as:

• Exchange rate fluctuations
• Understanding local laws
• Remote management

This article examines the ins and outs of investing through an SCI to equip you with the necessary tools to maximize your profits while minimizing risks.

Optimizing the Legal Structure for Investments in the Dominican Republic

The Dominican Republic offers a favorable environment for foreign investors through equal treatment and an open legal framework. The main types of accessible legal structures are:

• Limited Liability Company (S.R.L.): Suitable for SMEs, requires at least two partners and minimum share capital.
• Corporation (S.A.): Suitable for large projects, requires at least two shareholders and higher share capital.
• General Partnership: Structure based on mutual trust of partners, unlimited liability.
• Limited Liability Sole Proprietorship (E.I.R.L.): Ideal for individual entrepreneurs separating their personal assets.

The choice depends on the project size, desired level of responsibility, and business objectives.

Structure Type	Number of Partners/Shareholders	Minimum Capital	Liability
S.R.L.	2+	100,000 DOP	Limited
S.A.	2+	30,000 DOP	Limited
General Partnership	≥2	Variable	Unlimited
E.I.R.L.	1	None	Limited

For real estate investment, the Real Estate Civil Society (SCI) offers several specific advantages:

• Flexibility in managing real estate properties
• Easy distribution of shares among partners
• Simplified asset transfer
• Enhanced protection against partners’ personal contingencies

Steps to create an SCI include:

1. Drafting articles of association specifying the corporate purpose, contributions, and management method
2. Registration with the local Mercantile Registry
3. Obtaining a Dominican tax number (RNC)
4. Publication in an official journal if necessary

Costs include:

• Notary fees for drafting the articles of association
• Administrative registration fees
• Possible local taxes

Regarding taxation:

• The Dominican Republic applies the principle of territorial taxation; only locally generated income is taxable.
• Bilateral agreements sometimes allow avoiding double taxation on certain financial flows.
• Tax incentives exist through programs like CONFOTUR in the tourist real estate sector.

Key points to optimize legal protection:

• Carefully choose the appropriate jurisdiction based on operational or tax needs
• Ensure precise and exhaustive drafting of partnership articles to anticipate all conflict or succession scenarios
• Establish suitable contracts from the outset covering foreign investment and its guarantees

To watch for during your legal structuring:

• Underestimating local regulatory obligations can expose you to penalties or cancellation of legal acts
• Ignoring specific land rights in the Dominican market can lead to administrative blockages or disputes
• Poor tax planning can result in excessive taxation or loss of benefits

Recommended best practices:

Optimize your structure by:
• Thorough preliminary analysis of the real estate project;
• Rigorous selection of the appropriate company type;
• Systematic consultation with specialized local advisors;
• Immediate implementation of protective contractual tools;
• Regular monitoring of Dominican legislative developments.

The judicious adoption of an SCI, coupled with a proactive approach to local legal and tax compliance, is today the preferred method to securely sustain real estate investments in the Dominican Republic while fully benefiting from its attractive potential for diversified foreign investors.

Tax Benefits of Real Estate Purchase via an SCI in the Dominican Republic

The Real Estate Civil Society (SCI) constitutes a particularly attractive tax optimization tool for investors in the Dominican Republic, allowing them to benefit from advantages that significantly differ from those available to individual investors.

Tax Benefits of SCI for Real Estate Investors:

• Reduction of Property Tax (IPI):
  Properties held via an SCI can benefit from the same exemptions as individuals, but the collective structure allows pooling and optimizing these exemptions. For example, by structuring property ownership, it’s possible to remain below exemption thresholds or benefit from a reduced rate on the taxable base.
• Deductions on Financial Charges and Depreciation:
  The SCI subject to corporate tax (IS) in the Dominican Republic offers the possibility to deduct all expenses related to property management (loan interest, maintenance, management fees, insurance, local taxes, etc.) from the company’s taxable income.
  Moreover, the SCI under IS can practice real estate depreciation, which significantly reduces taxable profit and thus the tax due each year.
  Concrete example: For a property valued at $300,000, depreciated over 20 years (i.e., $15,000/year), this amount is deducted each year from rental income, reducing the SCI’s taxable base.
• Optimization of Inheritance and Transfer Rights:
  Holding property via an SCI facilitates asset transfer: it’s possible to gradually transfer partnership shares to heirs while benefiting from allowances on the value of transferred shares.
  Furthermore, the valuation of partnership shares often includes a discount related to joint ownership or minority status, reducing the tax cost of transfer compared to direct property transfer.
• Collective Management and Asset Protection:
  Partners’ liability is limited to their contributions, thus protecting their personal assets. The transfer of SCI shares is more flexible and tax-advantageous than selling in one’s own name, especially in family transfers.

SCI vs Individual Investment Comparison:

Criterion	SCI	Individual Investment
Expense Deductions	Optimized and expanded (all expenses, depreciation)	Limited based on property nature
Property Depreciation	Yes, under IS regime	No, except specific regime
Transfer/Inheritance	Allowances on shares, possible discount	Full ownership, limited allowances
Property Tax (IPI)	Poolable, optimization through structure	Individual, capped
Management Flexibility	High (modifiable articles)	Low

Example of Tax Savings Achieved with an SCI:

For a rental investment generating $25,000 in annual income:

• Deductible expenses (fees, interest, taxes): $7,000
• Depreciation: $12,000
• Taxable income: $6,000 (instead of $18,000 individually)
• Tax savings: up to 40% on the taxable base, depending on the chosen regime and partners’ situation

The legal structure of the SCI thus allows customizing taxation to each partner’s situation, optimizing expenses and transfers, and benefiting from a protective and flexible framework for real estate investment in the Dominican Republic.

Understanding the Specifics of Corporate Law in the Dominican Republic

The Dominican Republic offers several types of commercial companies adapted to different investor profiles and projects. The two most common forms are the Sociedad Anónima (SA) and the Sociedad de Responsabilidad Limitada (SRL).

Comparative Table of Main Characteristics:

Company Type	Partner Liability	Minimum Share Capital	Governance
SA (Corporation)	Limited to contributions	30,000,000 DOP	Board of Directors + Auditor
SRL	Limited to contributions	100,000 DOP	One or several managers

Particularities of Main Types:

• SRL
  • Minimum two partners, maximum fifty.
  • Capital divided into non-freely transferable partnership shares.
  • Ideal for SMEs and family businesses.
  • Flexible administration by one or several managers.
• SA
  • Capital divided into negotiable shares.
  • Complex structure, suitable for large companies.
  • Obligation of a Board of Directors and Auditor.

Other Available Forms:

• Limited Liability Sole Proprietorship (EIRL)
• Simplified Joint Stock Company (SAS)
• General Partnership
• Limited Partnership (simple or by shares)

Legal Process for Creation and Registration

List of main steps:

• Registration of trade name with the National Office of Industrial Property
• Payment of a formation tax equivalent to 1% of authorized capital
• Filing of constitutive articles with the competent Chamber of Commerce

For foreign investors:

• No specific obstacle to foreign investment in a Dominican company; they can hold up to 100% of capital depending on the chosen type
• Mandatory compliance with local procedures, including tax declaration, social registration, and anti-money laundering standards

Specific Tax Obligations

Summary list:

• Corporate tax at national standard rate
• Mandatory annual declaration to the General Directorate of Internal Taxes (DGII)

Potential Advantages for Foreign Investors

Main list:

• Facilitated access to Caribbean/Latin American market
• Relatively quick administrative process compared to some other regional countries

Common Pitfalls and Challenges

Essential list:

Local Practices & Legal Compliance

1. Local administrative complexity that can delay certain processes if all documents are not strictly compliant;
2. Frequent need to use a local agent or specialized lawyer to ensure full compliance with formalities;
3. Risks related to non-compliance with tax or customs regulations that can lead to civil/criminal penalties;
4. Rigorous control over financial flows so that all operations are recorded in accordance with Dominican anti-money laundering laws.

Investors must pay attention to the formalism required during statutory filing as well as proper accounting management from the start to avoid any dispute with the local tax administration.

Precise knowledge of the Dominican regulatory framework remains essential so that any activity is legally secure, tax-optimized, and fully compliant with international standards practiced in this Caribbean country.

Identifying Pitfalls to Avoid When Investing in Real Estate with an SCI

Main Pitfalls to Avoid in Real Estate Investment in the Dominican Republic via an SCI:

• Lack of Understanding of Local Legal Framework
  • Neglecting the specificity of Dominican laws on real estate and co-ownership can lead to conflicts or make the investment non-compliant.
  • The SCI’s articles of association must be adapted to the local context, particularly to define management modalities, partners’ rights and obligations, and profit distribution.
• Poor Evaluation of Acquisition and Management Costs
  • Underestimating registration fees, local taxes (property transfer, notary), legal fees, or specific banking fees.
  • Forgetting the real cost of management (property maintenance, common charges) in calculating expected returns.
• Neglect of Specific Taxation in the Dominican Republic
  • Ignoring differences between French taxation (classic SCI) and Dominican: local taxation on rental income, capital gains, or property taxes.
  • Not anticipating the potential impact of double taxation based on partners’ country of tax residence.
• Absence of In-Depth Analysis of Local Real Estate Market

Risk	Consequence
Overvaluation	Purchase above real price
Lack of Liquidity	Difficulty reselling
Poor Sector Selection	Disappointing returns

It’s essential to deeply study the local real estate supply (average prices by area, tourist or residential trends), as well as risks related to economic fluctuations.

• Insufficient Proactive Management of Potential Disputes
  • Poorly drafted articles of association can lead to:
    • Disagreements between partners on property use
    • Conflicts around annual profit distribution
    • Difficulties during exit/partial dissolution

Recommended Best Practices to Secure an Investment via an SCI in the Dominican Republic:

• Systematically surround yourself with:
  • A lawyer specialized in Dominican real estate law
  • An accountant familiar with international taxation
  • Local professionals recognized for their fine market knowledge
• Draft articles of association precisely:
  • Clearly define the manager’s role
  • Specify decision-making modalities and rules regarding entry/exit/transfers between partners
• Conduct a comprehensive preliminary audit:
  • Exhaustive cadastral verification
  • Independent comparative analysis of prices in each targeted sector

Key Takeaway:

A structured approach including local expertise, detailed analysis, and regulatory compliance significantly reduces all major risks inherent to this type of investment.