- DOMINICAN REPUBLIC
- USA - WYOMING
The Dominican Republic: A Secret Tax Haven?
Many investors think of the Bahamas, Belize, The Turks & Caicos, and any number of other jurisdictions when contemplating an offshore incorporated company or offshore banking relationship. However, there may be some circumstances when a forming an Dominican Incorporated Company is a smart choice. Find out what the advantages are, and if a Dominican Republic Company is right for you…..
When many people think about Offshore Incorporations or Trusts, the Dominican Republic is one of the last places that come to mind. To be sure, the Dominican Republic is not a traditional tax haven as the Isle of Man, the Bahamas, Panama or some other jurisdictions. Even so, that may be even more of a reason for investors to consider forming a Dominican Company to protect their real estate or vacation property. In addition, the Dominican Republic does offer investors Tax-Free Banking and US dollar accounts.
Why Form a Dominican Company?
Like any other strategy to protect your assets and gain tax advantages, the main goal of asset protection is the separation of personal property from the beneficial owner. In other words, if your assets are not in your name, they cannot be taken away from you if a lawsuit arises or if someone wishes to attach your property for some reason. In essence you do not own the property, a completely separate entity does. But this is not the only real benefit of a Dominican Company. Owning your Dominican Republic Vacation property, real estate or investments via an incorporated company also provides tremendous tax advantages.
Here is Why We Make This Suggestion:
While it is true that other tax haven jurisdictions may be a better choice for general asset protection or tax strategies, any investor considering the Dominican Republic should form a separate Dominican Company for the following reasons:
1. Title of Real Estate and Bank Accounts
The Dominican Republic is an emerging market. With less than 16% of the tourists coming from the US, it has also remained sort of an undiscovered market for many investors. Because of this, The Dominican Republic offers some of the best real estate bargains and returns from time deposit investments in the entire Caribbean, but obscurity has its price. The meaning is that The Dominican Republic is not as sophisticated as say the Bahamas or Panama with regards to foreign ownership of real estate or investments. While the new legislation has greatly liberalized and improved foreign ownership of land, most government offices and banks are not familiar with the idea of property that is being purchased or titled in the name of an offshore trust or IBC. You will have a difficult time getting property or bank accounts titled in the name of a US Delaware corporation, Bahamas IBC or other offshore entity. Not because it is against the law or because of some other issue, simply because Dominicans are not used to dealing with these type of structures and do not have the experience. So, to have a asset protection program in place for your Dominican holdings and to prevent a slew of tap dancing at the title transfer office (or down at the bank), the formation of local company speeds things up and prevents questions. Also, generally speaking, it is always a good idea to compartmentalize your holdings anyway. The meaning is, keep you investments or properties separated. Your Dominican holdings with one entity, your offshore mutual funds from Europe with a Panamanian Foundation and so on.
2. The New Capital Gains Tax
The real benefit to owning your Vacation Property or other real estate through a local Dominican Corporation, is tax savings. Most foreign investors are unaware of the very recent capital gains tax imposed into the tax code. The fact of the matter is, I would wager to guess that most Dominicans are probably not aware of it either. If you ask most Dominican Real Estate agents, they will most likely give you the boiler plate reply regarding title transfer tax, but may indicate that there is no capital gains tax in the Dominican Republic. While this used to be true in the past, it is not the case today. Fear not, we have a solution.
Most governments assess capital gains and property title transfer taxes when a property title changes hands. This is true for real estate in the United States, Europe or Tim-buk-tu. The solution then is to never change the title of ownership. If the property title name does not change, there is no title transfer tax, nor is there an official sales document indicating the new purchase price (and thus a way to determine the capital gain due). Instead, sell or transfer the entity that owns the real estate through a private transaction. Not only is this perfectly legal, it is also a common practice that wealthy Dominicans have been doing for years.
In reality, the new buyer is not taking direct possession of the property, they are taking control, via stock ownership and/or the directorship, of a company that happens to own the property. Thus eliminating a taxable real estate transaction.
How to Form A Dominican Company
Articles of Incorporation – Like most jurisdictions, a standard document is drafted to indicate the company purpose, tenants, direction and officers. The company purpose can be as general or as specific as the client wishes. We suggest, as with all of our client incorporation, that the articles include such language that gives the client complete and sole authority over bank accounts or company contracts.
Company Name – Since most foreigners are not aware of the Dominican Incorporation, you will not find many companies in the registrar that contain names in other than the Spanish Language.
We have, however, successfully incorporated company names in the English language for clients. All Dominican companies end with the denotation of C x A or S.A. The C x A notation is uniquely used in the Dominican Republic, but just like the terms “Inc, Ltd. or S.A.”, indicates that this is an incorporated company. As with other jurisdictions, clients must provide three choices of the company name to make sure that the desired name is not currently registered or in use by another incorporated company.
Authorized Capital – The authorized capital of the company must be expressed in Dominican Pesos and can be any amount the client wishes. For the purpose of initial costs, taxes and the annual registration fee, we suggest that the client form the company with the minimum required capital, which is 10,000 Dominican Pesos or less than US$800 under current exchange rates. The authorized capital is indicated on the incorporation documents, but the client need not prove this amount via bank deposit or otherwise.
Stockholders or Founders – Unlike some jurisdictions, the Dominican company does require that seven individuals form the company. Usually, these persons are also the stockholders as well, but certainly do not necessarily have control. This is accomplished for the client through the use of six nominee Dominican shareholders, with the client either acting the first dominant shareholder with 94% of the stock, or by the client’s other offshore entity as the predominant shareholder.
Directors of the Company – The Dominican Company requires that three individuals are assigned to take the positions of President, Vice-President and Secretary. Usually we suggest that the client take the position of President, and as such is the only director who is duly authorized to sign on bank accounts or engage in other business on behalf of the company. We also suggest that a spouse or other trusted person be named as the Secretary for convenience of authorizing company resolutions (see the company seal or “Sello”)
Company Seal or “Sello” – Each Dominican company must use a company seal, which only the secretary will use in conjunction with his or her signature to verify company documents or resolutions.
We automatically obtain a company seal for the client when we create a corporation.
Requirements for purchasing a commercial folding company in the Dominican Republic:
1) Full copy of the passport of the new partners.
2) Email, telephone and address in Dominican Republic.
3) Description and capital contribution to be subscribed by each partner.
4) Social object of the new commercial company.
5) Description of the amounts of social contributions for each new partner.
6) Signature of the documents constitutive of the new commercial company.
7) Estimated time of 45 days for constitution.
New company: US $2.400
Ready made company with history: US $4.000
INCORPORATION OF A PANAMANIAN COMPANY
This rate includes:
- Articles of Incorporation in Spanish duly certified with Apostille
- Certificate of incorporation duly legalized with Apostille
- Share certificates and other corporate books/ledgers required by Panamanian law on the opening of a new company.
- In regard to requests for additional services of minutes of meetings after incorporation, we charge US $550.00 in fees per individual transaction, HOWEVER, if we receive your instructions to draft and record all minutes at the same time, we are willing to charge a sole US $550.00 fee per event, for:
- Minutes of a meeting of the board of directors authorizing the issuance of shares.
- Minutes of a meeting of the board of directors authorizing the opening of a bank account duly certified with Apostille.
- Minutes of the meeting of the board of directors authorizing the issuance of a general power of attorney.
- We charge US $385.00 for any one (1) Power of Attorney duly legalized with Apostille.
- We charge US $330.00 per director (all Panamanian companies need three directors) per year, if you need us to give you said directors, then we charge US $990.00 per year maintenance fee.
- We also charge US $770.00 (legal tariff approved by Panama Lawyers Association and the Panamanian Supreme Court) for the yearly corporate resident agency fee before the Panamanian Public Registry authorities.
- We charge US $150.00 per each additional Public Registry Certificate required (first one is included in the incorporation).
- To this sum you must add payment of the first year annual corporate tax to the Panamanian government of US $300.00 per year.
- All other expenses (communications, courier, notarizations, registry rights, etc.) are covered in the flat rate quoted.
SUMMARY: Therefore, our standard incorporation costs for a new company will be:
- Incorporation Fee: US $1,700.00
- First year expenses: US $770.00
- Notary: US $170.00
- Bank charges of international transfer: US $50.00
TOTAL: US $2,700.00
After the first year, the annual maintenance fee of the company is $770.00 that includes resident agent, and government annual charge of the company.
OPENING BANK ACCOUNT IN PANAMA
We can assist you in the process of opening a bank accounts in banking institutions of well know prestige, offering the service of preparing all the necessary documentation, as it is the case of the opening bank account application forms, in the drafting or obtainment of the legal documents required, legalization of minutes of corporations or offshore companies which we manage, and guiding you during the process.
REQUIREMENTS TO OPEN BANK ACCOUNT IN PANAMA:
To open a bank account, in Panama require the following:
- A copy of your Passport
- A copy of a second ID showing your address (like a Driver License or a Health card).
- A copy of a utility bill showing your address.
- Two financial reference letters. These letters can be issued by any bank, credit union or brokerage firm that has dealt with you in the past. The letters should be on the company’s official letterhead, and be signed by an official of the firm, with clear contact details, they should be made out to the bank where you will apply. If you have another account in Panama, a letter from them will be requested.
- Two professional or commercial reference letters, e.g.: accountants, financial consultants, lawyers, (if you have them from Panama, even better) etc. Again they should be on official letterheads with the relevant contact information.
- A photocopy of the last 2 years income tax returns.
- 1 Bank reference Letter.
- A Visit to Panama for an interview with the bank.
- The amount for opening the bank account it will depend of the banking policies
SUMMARY: Therefore, our standard fee for can assist you in the process of opening bank accounts will be:
- Legal assistance: US $990.00
- Expenses: US $110.00
TOTAL: US$ 1,100.00
Total to be wired for incorporation plus the bank account opening is US$ 3,800.00
Why Form an LLC in Wyoming?
Wyoming Limited Liability Companies have the best asset protection laws, low fees, no taxes and allow for anonymous ownership. Online stores, real estate investors, and holding companies are just some industries which see benefits from forming LLCs in Wyoming.
Forming a Wyoming LLC with us is simple and fast, keep your information anonymous and charge $399. This includes an operating agreement, free mail forwarding, business address and our partner acting as your registered agent the first year.
There are no additional business licenses or filing fees the first year. Note, if we create your Wyoming LLC, then we charge $399 which includes the filing fee and your first year of Wyoming registered agent service.
Maintaining the company in future years is simple. You are only required to file a $149 annual report with the Secretary of State and annual agent fee. The annual report is due the first day of the month in which you formed your LLC. There are no other state filings, e.g. there are no state tax returns to file.
Wyoming LLCs Are Private & Anonymous
Wyoming LLCs are advantageous because of the strict privacy laws governing them. The Secretary only knows who organizes the company which is us. Your name does not appear on the formation documents and is not asked for after, unlike Nevada. Your information does not go into any public database
Don’t worry, desiring anonymity is not wrong. You have a right to keep your affairs private and nothing to gain by displaying your wealth. When you elect for our service you receive an additional layer of privacy due to attorney-client privilege.
LLC Operating Agreement
Wyoming does not require an operating agreement. This thus begs the question of whether you should “bother” with one? The answer is yes. Though the reasons are different for single member as opposed to multi-member companies.
Single Member LLCs: The operating agreement is just an agreement between you and yourself. However, we have included a transfer on death provision. This means when you pass away your company will be given to whomever is named. Failing to name someone either means your company is dissolved or is forced through probate when you die. From our estate planning roots we know probate is public record, expensive and time consuming.
Multi Member LLCs: The operating agreement will define ownership percentages, declare what managers can and cannot do, act as a non-disclosure agreement, and prevent shareholders from selling to outsiders. Failing to sign an operating agreement amounts to a free for all.
Whether you have one or multiple members we advise completing the operating agreement as soon as possible. We include a free copy as part of your new company formation documents.
Employer Identification Number
A company’s EIN/TIN is the equivalent of a person’s Social Security Number. It is unique to your company. If you intend on opening a bank account, having employees, generating revenue or engaging in taxable activities, then you will need one. If you will only be using the LLC to anonymously title assets, but not to earn income, then an employer identification number is not required.
We will happily assist you with obtaining an Employer Identification Number / Taxpayer Identification Number from the IRS. Simply ask us and we will take care of the rest.
Wyoming LLC Taxes
Limited Liability Companies offer the ability to be taxed as partnerships, corporations or s-corporations. Each designation maintains the limited liability benefits. This hybrid structure is partly what drives the popularity of LLCs. If you choose the partnership designation, then you will be taxed according to your personal tax rate. Wyoming has no corporate income tax.
LLC For Non-Residents
Wyoming is a popular state for non-residents and those living overseas. This is due to the simplicity of forming and maintaining an LLC in Wyoming. There are no state taxes or tax returns to file. You only have to file a federal return, which is the same for all limited liability companies. Everything can be handled online. There is no need to visit.
One benefit of forming a Wyoming LLC is lower transaction costs. Establishing a US account and accepting checks and debit cards can reduce your transaction costs to below 1%, rather than paying 3-10% for other payment processing options.
You will require an EIN if you want to open a bank account. An EIN takes approximately 7 business days to obtain for a non-resident and we charge $250. We cannot assist with opening a bank account.
The last points to touch on are federal filings and a resellers certificate. Many mistakenly believe they need one to purchase wholesale. Many vendors will accept an EIN and a certificate is not necessary. If you desire more details please contact the Wyoming Department of Revenue. While Wyoming has no state income taxes, you may still be subject to Federal income taxes by the IRS if your income is sourced in the US. Generally, income sourced outside the US is not taxable. Further, regardless of your income, you will need to file a form 5472 to remain in compliance. This is a new requirement and carries still penalties if not filed in a timely manner.