Joint Ventures in Dominican Republic

In the Dominican Republic joint ventures are generally structured as contractual partnerships, such as a business partnership agreement, a form of business collaboration in which the risk and reward of a commercial activity are shared without creating a new company.

These contractual partnerships are formalized through an agreement between the parties, which may be individuals or legal persons, without the need for special formalities or registration. They do not have their own legal entity, company name, or registered office.   Profits or losses are distributed between the partners as agreed upon in the contract. Generally, these partnerships are for specific operations and are temporary in nature.

The Dominican Supreme Court of Justice defined the concept of a Joint Venture, while also making a very important contribution by establishing its constituent elements. In judgment No. 111 of July 24, 2020, the First Civil and Commercial Chamber of the Supreme Court of Justice established that: “A joint venture is an agreement established between two or more individuals or legal entities, who maintain their respective legal autonomy, for the purpose of achieving a common objective through the contribution of resources and shared administration. Several constituent elements can be extracted from this term: a) partnership between two or more individuals or legal entities; b) an agreement; c) the parties maintain their individualities; d) the contributions that the contracting parties must make may consist of money, goods, technology, services, etc.; e) a common objective; f) determining how the assets and resources (human, technological, financial, etc.) will be managed to achieve the proposed objective.”

The above caselaw recognizes the atypical nature of this contract, indicating that due to the lack of formal regulation in the Dominican legal system, such an agreement has no requirements other than the will of the parties and the provisions of the Dominican Civil Code. It specifies that the Joint Venture as a legal entity "is viewed as a commercial alliance where the life of the agreement must be established in order for it to be executed, since it commonly involves the creation of a new business, the development of a new product, the provision of a service, entering a foreign market, etc."

Foreign investors, whether they are joint ventures or not, are permitted to hold 100% ownership in most sectors under Law No. 16-95 on Foreign Investment. However, sector-specific regulations may impose local ownership or licensing requirements, particularly in industries such as telecommunications, finance, energy, and natural resources. Foreign investment must be registered with ProDominicana, an export and investment center of the Dominican Republic, to qualify for profit repatriation and other legal protections.

Yes, jurisdiction-specific considerations in the Dominican Republic significantly influence the structuring of joint ventures, including local tax implications, compliance with labor regulations, and restrictions on foreign property ownership, particularly in coastal regions, near the Haitian border, or within environmentally protected areas. Additionally, ventures operating in regulated sectors such as telecommunications, banking, mining, tourism, energy, health, or pharmaceuticals may require the appointment of local directors, obtaining specific licenses, or securing regulatory approvals. These factors collectively guide the choice of entity, governance, and operational framework for joint ventures in the country.

From a tax perspective, and in accordance with the principle of tax neutrality (which refers to the absence of tax pressure on taxpayers to avoid influencing or discouraging specific actions pursuant to Decree No. 408-10), joint ventures are recognized by the tax administration as a form of business concentration. These are classified either as coordination-based concentrations or subordination-based concentrations. 

Business concentrations, or any other comparable form of business organization—such as joint ventures—must comply with formal obligations and duties, including the filing of tax returns using the National Taxpayer Registry Number (RNC) assigned for such purposes. They must also identify the members of the interest group, designate a managing member, and pay the corresponding taxes on any profits or gains obtained. The tax administration may declare the existence of an economic unit either ex officio or upon request. The tax administration establishes the conditions for accounting registration and the filing of tax returns, whether jointly or individually, depending on the type of tax involved.

In principle, there is no requirement for prior approval to form a joint venture. However, if the joint venture constitutes an economic concentration with the potential to substantially restrict competition, it may be subject to review by the National Commission for the Defense of Competition under Law No. 42-08. While enforcement is limited, parties should assess competitive implications in high-impact sectors.

Assets can be contributed in cash, in-kind, or as services, provided they are clearly valued and documented. In-kind contributions are subject to third-party valuation, especially in the case of corporations. Transfers of certain assets, such as real estate or intellectual property, may trigger tax or registration obligations. The same requirements for companies will apply to joint ventures formed as companies.

Parties may agree to apply foreign law to govern their joint venture agreement, particularly concerning contractual obligations and dispute resolution. However, all matters relating to corporate formation, registration, internal governance, regulatory compliance, and operations within the Dominican Republic must adhere to Dominican law. Additionally, clauses providing for foreign arbitration are generally enforceable in the Dominican Republic, as long as they do not contravene Dominican public policy.

Key issues include defining capital contributions, governance arrangements, voting rights, dispute resolution mechanisms, profit distribution, confidentiality, non-compete clauses, and exit strategies. A well-drafted joint venture agreement is essential to clearly allocate rights and responsibilities and minimize legal and operational risks.

Under Law No. 479-08 on Commercial Companies and Individual Limited Liability Enterprises of the Dominican Republic, joint ventures themselves do not specifically require the appointment of officers or directors as a legal condition for their formalization. These governance requirements depend on the chosen corporate structure. A Limited Liability Company ("SRL") requires at least two partners and at least one manager, who must be a natural person but need not be Dominican or a resident. A Corporation ("SA") mandates a board of directors composed of at least three members and the appointment of a statutory auditor (comisario de cuentas). A Simplified Corporation ("SAS") provides flexibility, allowing its governance structure to be determined by its bylaws; it may be managed by a sole director, multiple directors, or a board, with a statutory auditor required only if the SAS issues private debt instruments. Although Dominican residency or nationality is generally not legally required for directors or officers, appointing a local representative is advisable for operational efficiency and regulatory compliance, particularly in regulated sectors.