65288 Economy Profile: Dominican Republic © 2012 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-8833-4 E-ISBN: 978-0-8213-8834-1 DOI: 10.1596/978-0-8213-8833-4 ISSN: 1729-2638 Printed in the United States Doing Business 2012 Dominican Republic 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 25 Getting electricity ....................................................................................................................... 36 Registering property .................................................................................................................. 42 Getting credit .............................................................................................................................. 52 Protecting investors ................................................................................................................... 59 Paying taxes ................................................................................................................................ 69 Trading across borders .............................................................................................................. 77 Enforcing contracts .................................................................................................................... 86 Resolving insolvency .................................................................................................................. 93 Data notes ................................................................................................................................... 99 Resources on the Doing Business website ............................................................................ 104 Doing Business 2012 Dominican Republic 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is (except for the paying taxes indicators, which cover the for a local entrepreneur to open and run a small to period January–December 2010). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 10 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts and transparency of government procurement, resolving insolvency. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 183 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 46 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 32 in Latin America and the Caribbean, comparisons and benchmarks are valid across 24 in East Asia and the Pacific, 24 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 18 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2012 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and indicators for Dominican Republic. To allow useful recommends regulatory reforms. The data, along with comparison, it also provides data for other selected information on ordering Doing Business 2012, are economies (comparator economies) for each indicator. available on the Doing Business website at The data in this report are current as of June 1, 2011 http://www.doingbusiness.org. Doing Business 2012 Dominican Republic 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: Latin America & Caribbean business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Upper middle income medium-size businesses through their life cycle. Economies are ranked from 1 to 183 by the ease of Population: 10,225,482 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 4,860.00 percentile rankings on each of the 10 topics included in the index in Doing Business 2012: starting a business, DB2012 rank: 108 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2011 rank: 105 investors, paying taxes, trading across borders, Change in rank: -3 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see Note: See the data notes for sources and the data notes for more details). 1 definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. 1 Except for the ease of getting credit, for which the percentile rankings on its component indicators are weighted, the depth of credit information index at 37.5% and the strength of legal rights index at 62.5%. Doing Business 2012 Dominican Republic 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2012 Dominican Republic 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy the regional average (figure 1.2). The economy’s stands in the aggregate ranking on the ease of doing rankings on the topics included in the ease of doing business is useful. Also useful is to know how it ranks business index provide another perspective (figure compared with other economies and compared with 1.3). Figure 1.2 How Dominican Republic and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2012 Dominican Republic 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Dominican Republic ranks on Doing Business topics Source: Doing Business database. Doing Business 2012 Dominican Republic 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing This measure shows the distance of each economy to business tells only part of the story, so do changes in the ―frontier,‖ a synthetic measure based on the most that ranking. Yearly movements in rankings can efficient practice or highest score observed for each provide some indication of changes in an economy’s Doing Business indicator across all economies and regulatory environment for firms, but they are always years included in the Doing Business sample since relative. An economy’s ranking might change because 2005. Nine areas of business regulation are covered. of developments in other economies. An economy that Comparing the measure for an economy at 2 points in implemented business regulation reforms may fail to time allows users to assess how much the economy’s rise in the rankings (or may even drop) if it is passed regulatory environment as measured by Doing by others whose business regulation reforms had a Business has changed over time—how far it has moved more significant impact as measured by Doing toward (or away from) the most efficient practices and Business. strongest regulations in areas covered by Doing Moreover, year-to-year changes in the overall rankings Business (figure 1.4). The results may show that the do not reflect how the business regulatory pace of change varies widely across the areas environment in an economy has changed over time— measured. They also may show that an economy is or how it has changed in different areas. To aid in relatively close to the frontier in some areas and assessing such changes, Doing Business 2012 relatively far from it in others. introduces the distance to frontier measure. Figure 1.4 How far has Dominican Republic come in the areas measured by Doing Business? Distance to frontier, 2005 and 2011 Note: For economies added to the Doing Business sample after 2005, the starting point is the year in which they were added: 2006 for Montenegro; 2007 for Brunei Darussalam, Liberia and Luxembourg; 2008 for The Bahamas, Bahrain and Qatar; and 2009 for Cyprus and Kosovo. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2012 Dominican Republic 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist— numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Dominican Republic Best performer globally Trinidad and Tobago Dominican Republic Dominican Republic Suriname DB2012 Puerto Rico (U.S.) Jamaica DB2012 Guyana DB2012 Indicator Haiti DB2012 DB2012 DB2012 DB2012 DB2012 DB2011 Starting a Business 140 138 87 180 23 173 74 New Zealand (1) (rank) Procedures (number) 7 8 8 12 6 13 9 Canada (1)* Time (days) 19 19 26 105 7 694 43 New Zealand (1) Cost (% of income per 18.2 19.2 14.6 314.2 7.2 115.0 0.9 Denmark (0.0)* capita) Paid-in Min. Capital (% 55.7 62.6 0.0 23.2 0.0 0.5 0.0 82 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 105 98 28 139 49 98 93 China (1) (rank) Procedures (number) 14 14 8 9 8 11 17 Denmark (5) Time (days) 216 216 195 1129 145 461 297 Singapore (26)* Cost (% of income per 82.1 92.3 17.5 764.5 227.5 72.0 6.0 Qatar (1.1) capita) Doing Business 2012 Dominican Republic 11 Best performer globally Trinidad and Tobago Dominican Republic Dominican Republic Suriname DB2012 Puerto Rico (U.S.) Jamaica DB2012 Guyana DB2012 Indicator Haiti DB2012 DB2012 DB2012 DB2012 DB2012 DB2011 Getting Electricity (rank) 123 124 144 75 112 38 24 Iceland (1) Procedures (number) 7 7 7 4 6 4 5 Germany (3)* Time (days) 87 87 109 66 96 58 61 Germany (17) Cost (% of income per 356.7 405.3 518.7 4032.8 354.6 647.1 7.9 Japan (0.0) capita) Registering Property 105 107 104 131 103 170 175 New Zealand (3) (rank) Procedures (number) 7 7 6 5 6 6 8 Portugal (1)* Time (days) 60 60 75 301 37 197 162 Portugal (1) Cost (% of property 3.7 3.7 4.6 6.6 7.5 13.8 7.0 Slovak Republic (0.0) value) Getting Credit (rank) 78 75 166 159 98 159 40 United Kingdom (1)* Strength of legal rights 3 3 4 3 8 5 8 New Zealand (10)* index (0-10) Depth of credit 6 6 0 2 0 0 4 Japan (6)* information index (0-6) Public registry coverage 35.9 28.5 0.0 0.7 0.0 0.0 0.0 Portugal (86.2) (% of adults) Private bureau coverage 54.3 47.3 0.0 0.0 0.0 0.0 46.0 New Zealand (100.0)* (% of adults) Protecting Investors 65 60 79 166 79 181 24 New Zealand (1) (rank) Extent of disclosure 5 5 5 2 4 1 4 France (10)* index (0-10) Doing Business 2012 Dominican Republic 12 Best performer globally Trinidad and Tobago Dominican Republic Dominican Republic Suriname DB2012 Puerto Rico (U.S.) Jamaica DB2012 Guyana DB2012 Indicator Haiti DB2012 DB2012 DB2012 DB2012 DB2012 DB2011 Extent of director 4 4 5 3 8 0 9 Singapore (9)* liability index (0-10) Ease of shareholder suits 8 8 6 4 4 5 7 New Zealand (10)* index (0-10) Strength of investor 5.7 5.7 5.3 3.0 5.3 2.0 6.7 New Zealand (9.7) protection index (0-10) Paying Taxes (rank) 94 82 115 118 172 34 65 Canada (8) Payments (number per 9 9 35 46 72 17 39 Norway (4) year) Time (hours per year) 324 324 263 184 414 199 210 Luxembourg (59) Trading Across Borders 45 39 82 145 97 105 52 Singapore (1) (rank) Documents to export 6 6 7 8 6 8 5 France (2) (number) Hong Kong SAR, Time to export (days) 8 9 19 33 21 25 14 China (5)* Cost to export (US$ per 1040 916 730 1185 1410 995 843 Malaysia (450) container) Documents to import 7 7 8 10 6 6 6 France (2) (number) Time to import (days) 10 10 22 31 22 25 19 Singapore (4) Cost to import (US$ per 1150 1150 745 1545 1420 1065 1260 Malaysia (435) container) Enforcing Contracts 83 83 73 96 126 178 169 Luxembourg (1) (rank) Doing Business 2012 Dominican Republic 13 Best performer globally Trinidad and Tobago Dominican Republic Dominican Republic Suriname DB2012 Puerto Rico (U.S.) Jamaica DB2012 Guyana DB2012 Indicator Haiti DB2012 DB2012 DB2012 DB2012 DB2012 DB2011 Time (days) 460 460 581 530 655 1715 1340 Singapore (150) Cost (% of claim) 40.9 40.9 25.2 42.6 45.6 37.1 33.5 Bhutan (0.1) Procedures (number) 34 34 36 35 35 44 42 Ireland (21)* Resolving Insolvency 154 153 138 162 26 157 133 Japan (1) (rank) Time (years) 3.5 3.5 3.0 5.7 1.1 5.0 4.0 Ireland (0.4) Cost (% of estate) 38 38 29 30 18 30 25 Singapore (1)* Recovery rate (cents on 9.5 9.1 17.6 5.8 65.3 8.6 17.9 Japan (92.7) the dollar) Note: The methodology for the paying taxes indicators changed in Doing Business 2012; see the data notes for details. For these indicators, the best performer globally is the economy that has implemented the most efficient practices in its tax system and is not necessarily the one with the highest ranking. For more information on “no practice� marks, see the data notes for details. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2012 Dominican Republic 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day business in an economy by recording all Procedure completed once final document is procedures that are officially required or commonly received done in practice by an entrepreneur to start up and formally operate an industrial or commercial No prior contact with officials business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must deposit before registration (or within 3 months). Official costs only, no bribes The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Has a start-up capital of 10 times income per and that there has been no prior contact with capita. officials. It also assumes that all government and nongovernment entities involved in the process  Has a turnover of at least 100 times income per capita. function without corruption. And it assumes that the business:  Does not qualify for any special benefits.  Is a limited liability company, located in the  Does not own real estate. largest business city.  Is 100% domestically owned.  Conducts general commercial or industrial activities. Doing Business 2012 Dominican Republic 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Dominican procedures, takes 19 days, costs 18.2% of income per Republic? According to data collected by Doing capita and requires paid-in minimum capital of 55.7% Business, starting a business there requires 7 of income per capita (figure 2.1). Figure 2.1 What it takes to start a business in Dominican Republic Paid-in minimum capital (% of income per capita): 55.7 Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Dominican Republic 16 STARTING A BUSINESS Globally, Dominican Republic stands at 140 in the other useful information for assessing how easy it is for ranking of 183 economies on the ease of starting a an entrepreneur in Dominican Republic to start a business (figure 2.2). The rankings for comparator business. economies and the regional average ranking provide Figure 2.2 How Dominican Republic and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2012 Dominican Republic 17 STARTING A BUSINESS What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to start a business in Dominican 2.1). That can help identify where the potential for Republic today, data over time show which aspects of improvement is greatest. Table 2.1 The ease of starting a business in Dominican Republic over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 138 140 Procedures (number) 9 9 9 9 9 8 8 8 7 Time (days) 77 77 74 72 22 19 19 19 19 Cost (% of income per 28.3 25.4 30.8 30.2 31.1 19.4 17.3 19.2 18.2 capita) Paid-in Min. Capital (% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 62.6 55.7 of income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Dominican Republic 18 STARTING A BUSINESS Equally helpful may be the benchmarks provided by Dominican Republic on ways to improve the ease of the economies that today have the best performance starting a business. And changes in regional averages regionally or globally on the procedures, time, cost or can show where Dominican Republic is keeping up— paid-in minimum capital required to start a business and where it is falling behind. (figure 2.3). These economies may provide a model for Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2012 Dominican Republic 19 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In the case of paid-in minimum capital, 82 economies globally and 21 economies in Latin America & Caribbean have no paid-in minimum capital. Source: Doing Business database. Doing Business 2012 Dominican Republic 20 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Dominican Republic (table 2.2)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.2 How has Dominican Republic made starting a business easier—or not? By Doing Business report year DB Year Reform The Dominican Republic made starting a business easier by DB2012 eliminating the requirement for a proof of deposit of capital when establishing a new company. The Dominican Republic made it more difficult to start a business by setting a minimum capital requirement of DB2011 100,000 Dominican pesos ($2,855) for its new type of company, sociedad de responsabilidad limitada (limited liability company). DB2010 No reform. Entrepreneurs can now complete several start-up formalities DB2009 online, including name verification, and commercial and tax registration. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Dominican Republic is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and City: Santo Domingo register a new firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Sociedad de Responsabilidad Limitada (SRL) professionals and the study of laws, regulations and Start-up capital: 10 times GNI per capita publicly available information on business entry in that economy. Following is a detailed summary of Paid-in minimum capital (% of income per those procedures, along with the associated time capita): 55.7 and cost. These procedures are those that apply to a company matching the standard assumptions (the ―standardized company‖) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Dominican Republic—and the time and cost Time to No. Procedure Cost to complete complete Check company name and purchase it on-line With the introduction of the virtual portal : the applicant can search and pay for a fee of DOP 3,607 for its company name. Currently, the 1 day DOP 4747 1 interested party may enter www.onapi.gov.do to check if the name has been registered or not. The www.creatuempresa.gob.do website is in an upgrade process and still not working as of June 01, 2011. Arrange for the publication of the company name in the monthly publication of the National Office of Industrial Property (Oficina Nacional de la Propiedad Industrial) The company name announcement is published in a national circulation newspaper in about 10 days. The company name announcement is published in a national circulation newspaper only the 15 or 30 of each month. The National Office of Industrial Property publishes the list of requested business/corporate names and their petitioners twice a 2 month. After that publication, third parties may lodge protests within 45 10 days DOP 971 days. The publication receipt suffices for the company to continue with subsequent simultaneous formalities. The publication can also be in the virtual portal of www.onapi.gov.do (oficina nacional de propiedad industrial-national office of the intelectual property) The Decree 326-06 dated 8 August, 2006 modifies Article 66 of the Application Ruling of Law 20-00, establishing that after the petition or request of the registration of a commercial or trade name is made the National Office of Industrial Property (ONAPI) has a time limit of five (5) Doing Business 2012 Dominican Republic 22 Time to No. Procedure Cost to complete complete business days to issue the Formal Certificate. The actual value for the publication is DOP 971. After requesting the registration of the commercial name, in a term of 5 labor days, ONAPI issues its response; if the registration is accepted, immediately the Certificate of Registry is handed over, for which an amount of DOP 971 has to be paid, to cover the costs of publication. If ONAPI rejects the registration of the commercial name, a term of 60 days is given to the solicitor to answer the rejection. When the publication is paid, ONAPI, publishes the registered name, with the information of the certificate, in the official bulletins that are published every two weeks (15 and 30 of each month) in a newspaper of national circulation (currently "El Nacional"). * Payment of Incorporation tax The relevant incorporation taxes are paid by certified check issued to the Collector of the Internal Revenue Department (Colector de Impuestos Internos), through online banking (BHD and Leon banks) or at the counter at Banco del Progreso. According to new Law of 1 day (simultaneous 3 Eficiencia Recaudatoria (from April 1st 2007) , the incorporation taxes with previous 1% of the capital have been unifie and only one tax should be paid that accounts as 1% procedure) of the amount of the authorized capital. The incorporation tax can also be paid directly at the Internal Revenue Service offices (Dirección General de Impuestos Internos). Also, if the ammount does not exceed DOP 5,000, it can be paid in cash. This tax is also payable at the counter of Banco de Reservas. Register the company in the Chamber of Commerce and obtain the identification number (RNC) on-line The company is registered online at www.creatuempresa.gob.do. The identification (RNC) is also obtained through the same portal. However the virtual portal is currently in an upgrade process due to the new company law that brings new type of companies like the SRL and the EIRL. It is necessary to include these new companies in the portfolios of offers that the portal provide. Currently and until the portal is operational, the registration is being done physically by visiting the registry at the Chamber of Commerce and the tax number (RNC) is obtained from the tax office's virtual portal www.dgii.gov.do. 4 The following documents have to be filed at the Mercantile Registry at 5 days DOP 8,800 the Chamber of Commere: - By-Laws properly signed and sealed with the company’s seal; - General Constitutive Assembly with its corresponding list of presence of Associates; - List of the distribution of each of the associates investment to the company and their corresponding amounts of corporate quotas; - Application Form for registration of Limited Liability Company, duly completed and signed by the authorized manager or agent (must attach original power of attorney, if applicable) . - Association Partnership Agreement - Receipt of payment of incorporation taxes - Photocopies of identity card - Copy of Business Name Registration issued by the National Office of Doing Business 2012 Dominican Republic 23 Time to No. Procedure Cost to complete complete Industrial Property (ONAPI) Within three (3) days, the Mercantile Registry Certificate will be issued. Incorporatin fees are based on the company’s authorized capital and are calculated according to the fee schedule established by each Chamber of Commerce and Production every two years. Fees do not vary significantly by location. Fees for document registration: - Originals: DOP 200 (each document). - Copies: DOP 200 (each document). - Usual cost: DOP 800 (one set of originals, copies are for free). In this case DOP 8000 for the incorporation and DOP 800 for the registration of the documents. File for the National Taxpayers Registry at the Internal Revenue Service (DGII) and apply for fiscal receipts. According to Decree 254–06, companies that render services or whose operations require the transfer of goods must issue receipts with a fiscal number (numero de comprobante fiscal). The application can be made online. Within 5 working days, the Internal Tax Directorate must analyze the information and notify the taxpayer (either physically or electronically) of the administrative resolution of the authorization to 2 days no charge 5 issue the fiscal receipts. Even in the case that the application for the National Taxpayers Registry is made online, through the Internal Revenue Service’s webpage, physical documents still need to be filed at the Internal Revenue Service. Additionally, even if the incorporation is undertaken via the virtual portal creatuempresa.gob.do, physical documents still need to be filed both at the Mercantile Registry and the Internal Revenue Service. * Register local employees with the Department of Labor Forms DGT-3, DGT-4, and the employer’s registration form (registro nacional laboral, RNL) must be completed within the first week of employment. The following forms, found at the local Department of Labor office, must be filed: a list of permanent personnel and employee 2 days (simultaneous 6 work schedules and vacation periods. with previous DOP 250 procedure) Fees for registering local employees with the Department of Labor: The book of visits costs DOP 250, whereas the Registration of personnel Form costs DOP 300 for each 50 employees This procedure can be completed only once the taxpayer's identification number has been obtained. * Register employees at the main social security office (Consejo 1 day (simultaneous no charge 7 Nacional de Seguridad Social, CNSS) with previous Doing Business 2012 Dominican Republic 24 Time to No. Procedure Cost to complete complete To control the contributions made by the company (the employer) and procedure) the employee, every company shall be registered and file the list of its employees at the Social Security National Treasury (Tesorería Nacional de la Seguridad Social, TNSS), a dependency of the main social security office (Consejo Nacional de Seguridad Social, CNSS). The TNSS distributes all the contributions to each plan’s corresponding administrator. According to the Law 188-07 dated August 2007 the TNSS is under the obligation of updating the above mentioned percentages. Accordingly, the new percentages are as follows (these new provisions came into effect on August 2009 and will be effective until July 2010): - Retirement Plan of 9.97 % of the employee's salary to the Administradora de Fondos de Pensiones (AFP) (7.10% by the employer and 2.87 % by the employee at a public or private organization) - Health plan: Administradora de Riesgos de Salud (ARS), 10.13% of the employee’s salary as of August 1, 2009 (7.09% by the employer and 3.04% by the employee) - Labor risk plan: Administradora de Riesgos Laborales (ARL) Under Law 87-01, employers must register employees at the CNSS within 3 days of hiring them or upon the start of business. New ARS provisions came into effect on May 1, 2007. According to law, the contribution should be 9% of the employee´s salary. That contribution is paid 70% by the employer and 30% by the employee. This procedure can be done online : http://www.tss.gov.do/ or at the Tesorería Nacional de la Seguridad Social. The ARL contributions are set according to the risk index of the activities carried out. A taxpayer's identification number is required to proceed with TSS registration of an entity. This procedure may, however, be carried out simultaneously with registration with the Department of Labor. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Dominican Republic 25 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Completing all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy’s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it Time required to complete each procedure can be used as collateral or transferred to another (calendar days) entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day percentile rankings on its component indicators: procedures, time and cost. Procedure completed once final document is received To make the data comparable across economies, Doing Business uses several assumptions about the No prior contact with officials business and the warehouse, including the utility Cost required to complete each procedure (% connections. of income per capita) The business: Official costs only, no bribes  Is a limited liability company operating in  Will be connected to water, sewerage the construction business and located in (sewage system, septic tank or their the largest business city. equivalent) and a fixed telephone line. The  Is domestically owned and operated. connection to each utility network will be 10 meters (32 feet, 10 inches) long.  Has 60 builders and other employees.  Will be used for general storage, such as of The warehouse: books or stationery (not for goods requiring  Is a new construction (there was no special conditions). previous construction on the land).  Will take 30 weeks to construct (excluding all  Has complete architectural and technical delays due to administrative and regulatory plans prepared by a licensed architect. requirements). Doing Business 2012 Dominican Republic 26 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to construction permits there requires 14 procedures, build a warehouse in Dominican Republic? According takes 216 days and costs 82.1% of income per capita to data collected by Doing Business, dealing with (figure 3.1). Figure 3.1 What it takes to comply with formalities to build a warehouse in Dominican Republic Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Dominican Republic 27 DEALING WITH CONSTRUCTION PERMITS Globally, Dominican Republic stands at 105 in the ranking provide other useful information for assessing ranking of 183 economies on the ease of dealing with how easy it is for an entrepreneur in Dominican construction permits (figure 3.2). The rankings for Republic to legally build a warehouse. comparator economies and the regional average Figure 3.2 How Dominican Republic and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2012 Dominican Republic 28 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? While the most recent Doing Business data reflect how which aspects of the process have changed—and easy (or difficult) it is to deal with construction permits which have not (table 3.1). That can help identify where in Dominican Republic today, data over time show the potential for improvement is greatest. Table 3.1 The ease of dealing with construction permits in Dominican Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 98 105 Procedures (number) 14 14 14 14 14 14 14 Time (days) 216 216 216 216 216 216 216 Cost (% of income per 180.5 165.3 155.1 124.4 95.9 92.3 82.1 capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practice� marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Dominican Republic 29 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by Republic on ways to improve the ease of dealing with the economies that today have the best performance construction permits. And changes in regional regionally or globally on the procedures, time or cost averages can show where Dominican Republic is required to deal with construction permits (figure 3.3). keeping up—and where it is falling behind. These economies may provide a model for Dominican Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2012 Dominican Republic 30 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Dominican Republic 31 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Dominican Republic (table 3.2)? Construction is one of them. In an effort to ensure Table 3.2 How has Dominican Republic made dealing with construction permits easier— or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 32 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Dominican BUILDING A WAREHOUSE Republic are based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified City : Santo Domingo by Doing Business through information collected from experts in construction licensing, including Estimated architects, construction lawyers, construction firms, DOP 13,250,000 Warehouse Value : utility service providers and public officials who deal with building regulations. These procedures The procedures, along with the associated time and are those that apply to a company and structure cost, are summarized below. matching the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Dominican Republic —and the time and cost Time to No. Procedure Cost to complete complete Obtain a certificate to use the land and possibly, one of no objection ("certificación de no objeción, certificación de uso de suelo") The land-use certificate confers the right to build on the plot, but it does not authorize construction. The certificate ensures that the project conforms to zoning regulations. It is a prerequisite for other procedures. The request for this permit may include a request for the certification of "no objection." The request must be accompanied by several documents related to the land, including (a) a copy (simple, 1 unnotarized) of the real property deed for the plot (does not have to be 7 days DOP 1,080 recently obtained; (b) a cadastral plan; (c) a map of the project’s location; and (d) a first draft of the project design drawings. Should the no-objection certification be requested along with the permit for use of land, the cost involved in such procedure is DOP 1,080. If the land-use permit is requested separately from the no- objection certification, the fee is DOP 530. If requested separately from the land-use permit, the no-objection certification fee is DOP 550. In both cases, the requests must be accompanied by the inspection request. Obtain approval of project design drawings by the Municipal Council, and of the construction license by the Ministry of Public Works and Communications 2 The request for approval of the project design drawings must be 141 days DOP 97,545 accompanied by several documents, including the property deed, the cadastral plan, and project design drawings, certified by an architect or engineer registered at the Dominican College of Engineers and Architects (CODIA) by the corresponding Municipal Council. BuildCo Doing Business 2012 Dominican Republic 33 Time to No. Procedure Cost to complete complete must request an inspection upon filing the project drawings. Doing so is a prerequisite for other procedures. If the certification of no objection to the project construction is not requested along with the land use permit, it must be requested along with this procedure. Once the request is approved by the Municipal Council (usually after 14 days), the municipality forwards the request to the Ministry of Public Works and Communications. The ministry then grants a construction license for the project (usually in another 14 days). The license is granted to the project itself and not to BuildCo. During this process, BuildCo must follow up with both agencies to ensure license processing. The construction must be initiated within 6 months from the date of issuance of the license. The license expires if construction work has not begun within 6 months. According to Resolution # 5, 2004 of the National District Office (Ayuntamiento del Distrito Nacional de Santo Domingo) the official cost for the construction of a warehouse is DOP 75 per square meter. For a warehouse of 1300.6 square meters the total cost will be DOP 97,545. * Receive inspection by the Municipal Council (Departamento de Planeamiento Urbano) The inspection is a prerequisite for the Municipal Council’s project 1 day DOP 500 3 design approval and is undertaken by the municipal authorities. According to Resolution # 5, 2004 of the National District Office (Ayuntamiento del Distrito Nacional de Santo Domingo) the official cost for this inspection is DOP 500. Receive inspection by the Ministry of Public Works and Communications 4 An inspector from the Inspection Department of the Ministry of Public 1 day no charge Works (Departamento de Inspección de la Secretaría de Estado de Obras Públicas) inspects the site to determine the project’s magnitude and taxes and license fees. Pay license fees and taxes associated with the construction license and obtain proof of payment Fees are paid once the license has been approved and the inspector has valued the project. The formula used by the Ministry of Public Works and Communications to determine construction fees is DOP 2,800 per square meter (1,300 sq. m. x DOP 2,800 = DOP 3,640,000). Thus, the applicable administrative fees (based on a project value of 1 day DOP 20,484 5 DOP 3,640,000) for this procedure are as follows: - Internal taxes: DOP 464. - Construction permit, equivalent to 2.5 X 1,000 of the construction cost: DOP 9,100. - Fee for the Dominican College of Engineers and Architects (CODIA), equivalent to 2 x 1,000 of the construction cost: DOP 7,280. The total cost to complete this process is DOP 20,484. 6 Obtain recibo de entrada from Ministry of Public Works and 10 days no charge Doing Business 2012 Dominican Republic 34 Time to No. Procedure Cost to complete complete Communications The following documents are filed before the Ministry of Public Works and Communications: - Deed of real estate property. - Cadastral plan. - No objection certification, issued by the municipal authorities (see Procedure 1). - Form F-3 DGPU, provided by the municipal authorities. - Evidence of payment of the taxes for the construction permit. - Plans, duly certified by the corresponding municipal authorities. - Plans, duly approved by the Directorate of Terrestrial Transit (Direccion General de Transito Terrrestre). - Structural calculations. - Permit for the use of land. Receive an inspection before the lintel (zapata) of the project is made 7 1 day DOP 232 It is unnecessary to interrupt construction, either during construction inspections or between the inspection request date and the actual inspection. Receive an inspection before the space between galleries (entrepiso) is completed 1 day DOP 232 8 Receive an inspection before the roof of the project is completed The inspection is carried out by an inspector from the Inspection 1 day DOP 232 9 Department of the Ministry of Public Works and Communications (Departamento de Inspeccion de la Secretaria de Estado de Obras Publicas y Comunicaciones). Request water and sewage connection 10 1 day no charge Receive on-site inspection for water and sewage connection 11 1 day no charge Receive water and sewage connection 12 45 days DOP 22,000 A contract must be executed with the Corporation of Aqueducts and Sewage System of Santo Domingo. * Receive on-site inspection and connection to telephone 13 12 days DOP 4,000 Notify the Ministry of Public Works and Communications of the building completion, and obtain final approval (inspection) Once notified of construction completion, the Ministry of Public Works 6 days DOP 1,160 14 undertakes a final on-site inspection. Usually, the inspectors visit the site in about a week or so. To obtain final inspection, BuildCo must pay internal taxes of DOP 1,160 (five times the tax of DOP 232). This inspection verifies if the transit regulations have been fulfilled and Doing Business 2012 Dominican Republic 35 Time to No. Procedure Cost to complete complete examines the roof’s impermeability, the sanitary installations, the electrical installations, and the door, floor, and window installations. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Dominican Republic 36 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is 150 meters long.  Is a new construction being connected to  Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either overhead  Has 2 stories, both above ground, with a or underground, whichever is more common in total surface of about 1,300.6 square the economy and in the area where the meters (14,000 square feet), and is built on warehouse is located. The length of any a plot of 929 square meters (10,000 square connection in the customer’s private domain is feet). negligible. The electricity connection:  Involves installing one electricity meter. The monthly electricity consumption will be 0.07  Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2012 Dominican Republic 37 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity requires 7 procedures, takes 87 days and costs 356.7% connection in Dominican Republic? According to data of income per capita (figure 4.1). collected by Doing Business, getting electricity there Figure 4.1 What it takes to obtain an electricity connection in Dominican Republic Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Dominican Republic 38 GETTING ELECTRICITY Globally, Dominican Republic stands at 123 in the another perspective in assessing how easy it is for an ranking of 183 economies on the ease of getting entrepreneur in Dominican Republic to connect a electricity (figure 4.2). The rankings for comparator warehouse to electricity. economies and the regional average ranking provide Figure 4.2 How Dominican Republic and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2012 Dominican Republic 39 GETTING ELECTRICITY Even more helpful than rankings for other economies economies, the practices of their utilities may provide a may be the indicators underlying those rankings (table model for Dominican Republic on ways to improve the 4.1). If obtaining a new electricity connection requires ease of getting electricity. Regional and global averages fewer procedures, less time or less cost in other on these indicators may provide useful benchmarks. Table 4.1 The ease of getting electricity in Dominican Republic and comparator economies Latin America & Global average Trinidad and Puerto Rico Dominican Caribbean Suriname Republic Jamaica average Tobago Guyana (U.S.) Haiti Indicator Rank 123 144 75 112 38 24 72 .. Procedures (number) 7 7 4 6 4 5 5 5 Time (days) 87 109 66 96 58 61 65 111 Cost (% of income per capita) 356.7 518.7 4032.8 354.6 647.1 7.9 593.7 1,942.3 Source: Doing Business database. Doing Business 2012 Dominican Republic 40 GETTING ELECTRICITY What are the details? The indicators reported here for Dominican Republic OBTAINING AN ELECTRICITY CONNECTION are based on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local City: Santo Domingo distribution utility—identified by Doing Business. Data are collected from the distribution utility, then Name of Utility: EdeSur completed and verified by electricity regulatory agencies and independent professionals such as The procedures are those that apply to a warehouse electrical engineers, electrical contractors and and electricity connection matching the standard construction companies. The electricity distribution assumptions used by Doing Business in collecting the utility surveyed is the one serving the area (or areas) in data (see the section in this chapter on what the which warehouses are located. If there is a choice of indicators cover). The procedures, along with the distribution utilities, the one serving the largest associated time and cost, are summarized below. number of customers is selected. Summary of procedures for getting electricity in Dominican Republic—and the time and cost Time to No. Procedure Cost to complete complete Obtain approval of electrical plans from EDESUR A certified electrician of the client designs the interconnection plans and sends them to EDESUR for approval. In those plans the electrician specifies the nature of the transformer to be installed. Two copies of the plans need to be submitted to nearest commercial office of EDESUR to 1 the neighbourhood of the warehouse. EDESUR analyses the 45 calendar days DOP 2,500.0 interconnection plans and suggest corrections. Two or three visits to EDESUR to correct plans are usual. A tax of RD$ 1,500 must be paid at the time of submission of the application by the client and RD$ 500 for any futher visit for submission of corrected plans. When the final connections have been approved, the client will have to submit 6 copies of the plans and will get back 5 of them duly stamped by EDESUR. An electrician hired by the client does the external works 2 Once the interconnection plans have been approved by EDESUR, the 7 calendar days DOP 500,000.0 client hires an electrician to build the electric system (medium voltage net, substation, meter, etc.) Receive external inspectin by EDESUR EDESUR comes to check that the works follow the approved plan and raises observations to correct those works which do not follow the 3 approved plans. The client must request the inspection when he 7 calendar days no charge considers everything is ready for interconnection. The first inspections do not bear any cost, but EDESUR charges RD$ 500 for each inspection after the third one. EDESUR delivers a letter of approval (carta de Aceptación de la Obra). Doing Business 2012 Dominican Republic 41 Time to No. Procedure Cost to complete complete Receive interconnection estimate by EDESUR The interconnection estimate contains the cost that the client must pay to EDESUR to carry out the interconnection works to the electricity 7 calendar days DOP 500.0 4 distribution network. The client must submit the final letter of approval of EDESUR, two copies of the approved plans, a CD with the approved plan in DWG, a letter of request of estimate and he has to pay a stamp duty of RD$ 500. Client pays taxes to CODIA After receiving the interconnection estimate from EDESUR, the client 1 calendar day DOP 5,000.0 5 must pay the stamp duty of CODIA. The client must pay within 3 months. After payment has been done, EDESUR will carry out the interconnection works. Receive external works by EDESUR Interconnection works are carried out by EDESUR with a TCT team 15 calendar days DOP 25,000.0 6 (Brigada de Trabajo Con Tensión). If the works cannot be carried out with full voltage , EDESUR will stop the energy in the circuit and will charge that cost to the client. * Client signs supply contract with EDESUR and meter is installed The client has to open a user account with EDESUR. The client has to deposit an amount which is reimbursed at the cancelation of the 7 contract. The deposit equals twice the client's bill in RD$. That is 7 calendar days DOP 107,507.8 calculated on the basis of the capacity declared by the client or as a percentage of the substation capacity which would go between 60 to 80%. Law 125-01 establishes a payment of monthly interest for the deposit but this dispositions have not been implemented yet. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Dominican Republic 42 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day time and cost. Procedure completed once final document is received To make the data comparable across economies, several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are Cost required to complete each procedure used. (% of property value) The parties (buyer and seller): Official costs only, no bribes  Are limited liability companies, 100% No value added or capital gains taxes included domestically and privately owned.  Are located in the periurban area of the economy’s largest business city.  Has no mortgages attached and has been under the same ownership for the past 10  Have 50 employees each, all of whom are years. nationals.  Consists of 557.4 square meters (6,000 square  Perform general commercial activities. feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value. condition and complies with all safety standards, building codes and legal  Is registered in the land registry or requirements. The property will be transferred cadastre, or both, and is free of title in its entirety. disputes.  Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2012 Dominican Republic 43 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 60 days and costs 3.7% of the Dominican Republic? According to data collected by property value (figure 5.1). Doing Business, registering property there requires 7 Figure 5.1 What it takes to register property in Dominican Republic Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Dominican Republic 44 REGISTERING PROPERTY Globally, Dominican Republic stands at 105 in the other useful information for assessing how easy it is for ranking of 183 economies on the ease of registering an entrepreneur in Dominican Republic to transfer property (figure 5.2). The rankings for comparator property. economies and the regional average ranking provide Figure 5.2 How Dominican Republic and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2012 Dominican Republic 45 REGISTERING PROPERTY What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to register property in Dominican 5.1). That can help identify where the potential for Republic today, data over time show which aspects of improvement is greatest. Table 5.1 The ease of registering property in Dominican Republic over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 107 105 Procedures (number) 7 7 7 7 7 7 7 7 Time (days) 107 107 107 60 60 60 60 60 Cost (% of property value) 6.3 5.1 5.1 5.1 3.8 3.7 3.7 3.7 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practice� marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Dominican Republic 46 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by Republic on ways to improve the ease of registering the economies that today have the best performance property. And changes in regional averages can show regionally or globally on the procedures, time or cost where Dominican Republic is keeping up—and where required to complete a property transfer (figure 5.3). it is falling behind. These economies may provide a model for Dominican Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2012 Dominican Republic 47 REGISTERING PROPERTY Cost (% of property value) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Dominican Republic 48 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Dominican Republic (table 5.2)? Table 5.2 How has Dominican Republic made registering property easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. The cost of property registration fell, thanks to a reduction in DB2009 the transfer tax from 4.3% to 3%. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 49 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business City: Santo Domingo through information collected from local property Property Value: 8,977,360.8 lawyers, notaries and property registries. These procedures are those that apply to a transaction The procedures, along with the associated time and matching the standard assumptions used by Doing cost, are summarized below. Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for registering property in Dominican Republic—and the time and cost Time to No. Procedure Cost to complete complete * Obtain a judicial status certificate from the title Registry Office. A non-encumbrance certificate ("Certificado del Estado de la Propiedad") must be obtained from the Property Registry in order to ensure that the 15 - 20 days 1 property has no liens and there are no other conflicts related to it. (simultaneous with DOP 400 The time varies in each district. In Santo Domingo it takes about 15-20 procedure 2) days, while in the interior of the country it is faster. Fees have been increased by the Resolución nr. 9-2009. * Site inspection to establish the exact location of the property A surveyor ("agrimensor") inspects the site in order to establish the exact 2 days 2 location of the property. (simultaneous with DOP 5,000 – 12,000 This is not mandatory, but a way the buyer has to protect against procedure 1) potential problems. Notarization of the sale purchase agreement After the agreement is reached and the documentation has been 0.25 – 1% of the 3 exchanged by the parties, the sale purchase agreement must be 1 day property price notarized by the public notary. The notary freely establishes its fees. Request the appraisal of the property at the Dirección General de Impuestos Internos (Tax Authority) 4 The parties must submit an application to the Tax Authority (Dirección 1 day no cost General de Impuestos) for the valuation of the property. The Tax Authority decides which cases will need a valuation, and then an appointment for the inspection of the property is scheduled. The Doing Business 2012 Dominican Republic 50 Time to No. Procedure Cost to complete complete valuation will be used in the calculation of taxes. An inspector of the Tax Authority visits the property in order to confirm the amount of the appraisal. 5 14 days no cost An inspector of the Tax Authority visits the property in order to confirm the amount of the appraisal. Payment of taxes at the Dirección General de Impuestos (Tax Authority) After the inspection is over and the value of the property is calculated, a tax of 3% of the property value must be paid before the Dirección General de Impuestos (Tax Authority) before registering the property transfer, by virtue of de ―Eficiencia Recaudatoria‖ Law No. 173-07 dated July 17th, 2007. Transfer tax: 3% of property value (if there is a difference between the property value indicated in the purchase agreement and the one estimated by the Internal Revenue Department upon valuation, the higher value will be the one considered as valid for calculation of this transfer tax). However, said law provides an exemption of this tax in cases of transfer of real estate properties acquired by means of loans with financial institutions and cooperatives, if such real estate property has a value under DOP$1,000,000.00 adjustable upon inflation (approximately 3% of property value 6 1 day USD$28,572). (transfer tax) The property tax must be paid within the six (6) months following to the Sale and Purchase Agreement entered by the parties. Otherwise, surcharges will be applied. Surcharges amount to 10% of the sum not paid (the corresponding transfer taxes) for the first month or fraction of the month. To any additional delays the Tax authorities will charge a 4% (per month or fraction) over the 10% plus a 1.73% indemnity (per month or fraction). Moreover, on July 10, 2009, Law 182-09 was enacted granting a tax exemption on the 2% that must be paid to record a mortgage. This exemption only applies when it is proved that a new loan/mortgage has been obtained to pay off an existing loan secured with the same land. Consequently, the former mortgage would be cancelled to record the new one, with no additional cost. Buyer files the property transfer request before the Title Registrar´s Office 7 When filing request for property registration before the Title Registrar´s 20 - 30 days DOP 50 (Stamp duty) Office, stamp duties are paid. After all payments have been made and all documents are ready, the buyer will apply for registration of the property under his name at the Property Registry. Doing Business 2012 Dominican Republic 51 Time to No. Procedure Cost to complete complete The registrar will analyze the documentation and, if everything is correct, will register the property under the name of the buyer, issue a new Certificate of Title in the name of the buyer, cancel the old Certificate and will set the date for giving the new title to the buyer. Because of the higher workload, this procedure takes longer in Santo Domingo and Santiago than in other provinces. Registration can take at the most up to 90-180 days in Santo Domingo and Santiago and 60-90 days in other provinces. However, the new ―Ley de Registro de la Propiedad Inmobiliaria‖, passed on March 2005 to replace the previous law from 1947, introduced changes into the system seen up to now. The registrar has no more than 15 days to qualify the transfer. The filed documentation shall include: -Notarized purchase agreement (obtained in Procedure 3) - Real estate property taxes declaration and receipt of payment (obtained in Procedure 6). -Payment of stamp duties (obtained in Procedure 7). - Copy of identity documents for seller and buyer (such documents may vary whether seller and buyer are natural persons or companies). The land registry operates with the Torrens title system and is being digitalized since 2005. All new transactions are completed digitally, but all titles created before 2005 are not computerized yet. The registry has consultation room units (―Departamento de sala de consultas‖) where the registry’s electronic database is available. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Dominican Republic 52 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower’s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors’ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors’ rights have been associated with distributed by public credit registries and higher ratios of private sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. Doing Business uses case scenarios to determine  Has 100 employees. the scope of the secured transactions system,  Is 100% domestically owned, as is the lender. involving a secured borrower and a secured lender and examining legal restrictions on the use of The ranking on the ease of getting credit is based on movable collateral. These scenarios assume that the the percentile rankings on its component indicators: borrower: the depth of credit information index (weighted at 37.5%) and the strength of legal rights index  Is a private, limited liability company. (weighted at 62.5%).  Has its headquarters and only base of operations in the largest business city. Doing Business 2012 Dominican Republic 53 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Dominican Republic stands at 78 in the collateral and bankruptcy laws in Dominican Republic ranking of 183 economies on the ease of getting credit facilitate access to credit? The economy has a score of (figure 6.1). The rankings for comparator economies 6 on the depth of credit information index and a score and the regional average ranking provide other useful of 3 on the strength of legal rights index (see the information for assessing how well regulations and summary of scoring at the end of this chapter for institutions in Dominican Republic support lending and details). Higher scores indicate more credit information borrowing. and stronger legal rights for borrowers and lenders. Figure 6.1 How Dominican Republic and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2012 Dominican Republic 54 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how show where institutions and regulations have been well the credit information system and collateral and strengthened—and where they have not (table 6.1). bankruptcy laws in Dominican Republic support That can help identify where the potential for lending and borrowing today, data over time can help improvement is greatest. Table 6.1 The ease of getting credit in Dominican Republic over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 75 78 Strength of legal rights 3 3 3 3 3 3 3 3 index (0-10) Depth of credit 5 5 6 6 6 6 6 6 information index (0-6) Public registry coverage n.a. 19.2 11.9 13.3 33.9 29.7 28.5 35.9 (% of adults) Private bureau 29.4 34.6 57.1 35.4 35.0 46.1 47.3 54.3 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Dominican Republic 55 GETTING CREDIT One way to put an economy’s getting credit indicators index for Dominican Republic in 2011 and shows the into context is to see where the economy stands in the number of other economies having the same score in distribution of scores across other economies. Figure 2011. Figure 6.3 shows the same thing for the depth of 6.2 highlights the score on the strength of legal rights credit information index. Figure 6.2 Have legal rights for borrowers and lenders Figure 6.3 Have the coverage and accessibility of credit become stronger? information grown? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2011 information index (0–6), 2011 Source: Doing Business database. Source: Doing Business database. Doing Business 2012 Dominican Republic 56 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Dominican Republic (table 6.2)? Table 6.2 How has Dominican Republic made getting credit easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 57 GETTING CREDIT What are the details? The getting credit indicators reported here for The data on the legal rights of borrowers and lenders Dominican Republic are based on detailed information are gathered through a survey of financial lawyers and collected in that economy. The data on credit verified through analysis of laws and regulations as information sharing are collected through a survey of a well as public sources of information on collateral and public credit registry or private credit bureau (if one bankruptcy laws. For the strength of legal rights index, exists). To construct the depth of credit information a score of 1 is assigned for each of 8 aspects related to index, a score of 1 is assigned for each of 6 features of legal rights in collateral law and 2 aspects in the public credit registry or private credit bureau (see bankruptcy law. summary of scoring below). Summary of scoring for the getting credit indicators in Dominican Republic Dominican Latin America & Indicator OECD high income Republic Caribbean Strength of legal rights index (0-10) 3 6 7 Depth of credit information index (0-6) 6 3 5 Public registry coverage (% of adults) 35.9 10.1 9.5 Private bureau coverage (% of adults) 54.3 34.2 63.9 Strength of legal rights index (0–10) Index score: 3 Can any business use movable assets as collateral while keeping possession of the assets; Yes and any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of No its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend No automatically to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an No electronic database indexed by debtor's names? Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No debtor defaults outside an insolvency procedure? Doing Business 2012 Dominican Republic 58 Strength of legal rights index (0–10) Index score: 3 Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No business is liquidated? Are secured creditors either not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure, or the law Yes provides secured creditors with grounds for relief from an automatic stay or Does the law allow parties to agree in a collateral agreement that the lender may enforce its No security right out of court, at the time a security interest is created? Private credit Public credit Depth of credit information index (0–6) Index score: 6 bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative data distributed? Yes Yes 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as Yes No 1 financial institutions? Are more than 2 years of historical credit information Yes No 1 distributed? Is data on all loans below 1% of income per capita Yes Yes 1 distributed? Is it guaranteed by law that borrowers can inspect Yes No 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Coverage Private credit bureau Public credit registry Number of firms 56,833 31,042 Number of individuals 3,427,107 2,271,861 Source: Doing Business database. Doing Business 2012 Dominican Republic 59 PROTECTING INVESTORS Investor protections matter for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority Available legal remedies (damages, repayment shareholder protections against directors’ use of of profits, fines, imprisonment and rescission corporate assets for personal gain—or self-dealing. of the transaction) The indicators distinguish 3 dimensions of investor protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and Ease of shareholder suits index (0–10) shareholders’ ability to sue officers and directors for Access to internal corporate documents misconduct (ease of shareholder suits index). The (directly or through a government inspector) ranking on the strength of investor protection index is the simple average of the percentile rankings on Documents and information available during these 3 indices. To make the data comparable across trial economies, a case study uses several assumptions Strength of investor protection index (0–10) about the business and the transaction. Simple average of the extent of disclosure, The business (Buyer): extent of director liability and ease of shareholder suits indices  Is a publicly traded corporation listed on the economy’s most important stock exchange (or at least a large private company with multiple the company purchase used trucks from another shareholders). company he owns.  Has a board of directors and a chief executive  The price is higher than the going price for used officer (CEO) who may legally act on behalf of trucks, but the transaction goes forward. Buyer where permitted, even if this is not specifically required by law.  All required approvals are obtained, and all required disclosures made, though the transaction The transaction involves the following details: is prejudicial to Buyer.  Mr. James, a director and the majority  Shareholders sue the interested parties and the shareholder of the company, proposes that members of the board of directors. Doing Business 2012 Dominican Republic 60 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections in Dominican protection index (figure 7.1). While the indicator does Republic? The economy has a score of 5.7 on the not measure all aspects related to the protection of strength of investor protection index, with a higher minority investors, a higher ranking does indicate that score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Dominican Republic stands at 65 in the ranking of 183 economies on the strength of investor Figure 7.1 How Dominican Republic and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2012 Dominican Republic 61 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how And the global ranking on the strength of investor well regulations in Dominican Republic protect protection index over time shows whether the minority investors today, data over time show whether economy is slipping behind other economies in the protections have been strengthened (table 7.1). investor protections—or surpassing them. Table 7.1 The strength of investor protections in Dominican Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 60 65 Extent of disclosure 5 5 5 5 5 5 5 index (0-10) Extent of director 0 0 0 0 4 4 4 liability index (0-10) Ease of shareholder 7 7 7 7 8 8 8 suits index (0-10) Strength of investor 4.0 4.0 4.0 4.0 5.7 5.7 5.7 protection index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Dominican Republic 62 PROTECTING INVESTORS But the overall ranking on the strength of investor of director liability and ease of shareholder suits protection index tells only part of the story. Economies indices may also be revealing (figure 7.2). Equally may offer strong protections in some areas but not interesting may be the changes over time in the others. So the scores recorded over time for regional average scores for those indices. Dominican Republic on the extent of disclosure, extent Figure 7.2 Have investor protections become stronger? Strength of investor protection index (0-10) Extent of disclosure index (0-10) Doing Business 2012 Dominican Republic 63 PROTECTING INVESTORS Extent of director liability index (0-10) Ease of shareholder suits index (0-10) Note: The higher the score, the stronger the investor protections. The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Dominican Republic 64 PROTECTING INVESTORS Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or civil procedure well-functioning courts and up-to-date procedural rules. What investor protection reforms has Doing rules that give minority investors the means to prove Business recorded in Dominican Republic (table 7.2)? their case and obtain a judgment within a reasonable Table 7.2 How has Dominican Republic strengthened investor protections—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. A new company law was adopted that strengthened investor protections by DB2010 requiring greater corporate disclosure, director liability, and shareholder access to information. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 65 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for liability and ease of shareholder suits indices, a score is Dominican Republic are based on detailed information assigned for each of a range of conditions relating to collected through a survey of corporate and securities disclosure, director liability and shareholder suits in a lawyers and are based on securities regulations, standard case study transaction (see the notes at the company laws and court rules of evidence. To end of this chapter). The summary below shows the construct the extent of disclosure, extent of director details underlying the scores for Dominican Republic. Summary of scoring for the protecting investors indicators in Dominican Republic Dominican Latin America & Indicator OECD high income Republic Caribbean Extent of disclosure index (0-10) 5 4 6 Extent of director liability index (0-10) 4 5 5 Ease of shareholder suits index (0-10) 8 6 7 Strength of investor protection index (0-10) 5.7 5.1 6.0 Score Extent of disclosure index (0-10) 5 What corporate body provides legally sufficient approval for the transaction? 2 Whether disclosure of the conflict of interest by Mr. James to the board of directors is 1 required? Whether immediate disclosure of the transaction to the public and/or shareholders is 0 required? Whether disclosure of the transaction in published periodic filings (annual reports) is 2 required? Whether an external body must review the terms of the transaction before it takes place? 0 Extent of director liability index (0-10) 4 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller 1 transaction causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller 1 transaction causes to the company? Whether shareholders can hold members of the approving body liable for the damage that 1 the Buyer-Seller transaction causes to the company? Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 0 Doing Business 2012 Dominican Republic 66 Score Whether Mr. James pays damages for the harm caused to the company upon a successful 0 claim by the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 shareholder plaintiff? Whether fines and imprisonment can be applied against Mr. James? 1 Ease of shareholder suits index (0-10) 8 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction 1 documents before filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to 1 investigate the transaction? Whether the plaintiff can obtain any documents from the defendant and witnesses during 3 trial? Whether the plaintiff can request categories of documents from the defendant without 0 identifying specific ones? Whether the plaintiff can directly question the defendant and witnesses during trial? 2 Whether the level of proof required for civil suits is lower than that of criminal cases? 1 Strength of investor protection index (0-10) 5.7 Source: Doing Business database. Notes: Extent of disclosure index (0–10) Scoring for the extent of disclosure index is based on 5 components: Which corporate body can provide legally sufficient approval for the transaction 0 = CEO or managing director alone; 1 = shareholders or board of directors vote and Mr. James can vote; 2 = board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote. Whether disclosure of the conflict of interest by Mr. James to the board of directors is required 0 = no disclosure; 1 = disclosure of the existence of a conflict without any specifics; 2 = full disclosure of all material facts. Whether immediate disclosure of the transaction to the public, the regulator or the shareholders is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Whether disclosure of the transaction in the annual report is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Doing Business 2012 Dominican Republic 67 Whether it is required that an external body (for example, an external auditor) review the transaction before it takes place 0 = no; 1 = yes. Extent of director liability index (0–10) Scoring for the extent of director liability index is based on 7 components: Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company 0 = suits are unavailable or available only for shareholders holding more than 10% of the company’s share capital; 1 = direct or derivative suits available for shareholders holding 10% of share capital or less. Whether shareholders can hold Mr. James liable for the damage that the transaction causes to the company 0 = Mr. James is not liable or is liable only if he acted fraudulently or in bad faith; 1 = Mr. James is liable if he influenced the approval or was negligent; 2 = Mr. James is liable if the transaction is unfair or prejudicial to the other shareholders. Whether shareholders can hold the approving body (the CEO or members of the board of directors) liable for the damage that the transaction causes to the company 0 = members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1 = liable for negligence in the approval of the transaction; 2 = liable if the transaction is unfair or prejudicial to the other shareholders. Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0 = rescission is unavailable or available only in case of Seller’s fraud or bad faith; 1 = rescission is available when the transaction is oppressive or prejudicial to the other shareholders; 2 = rescission is available when the transaction is unfair or entails a conflict of interest. Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether both fines and imprisonment can be applied against Mr. James 0 = no; 1 = yes. Ease of shareholder suits index (0–10) Scoring for the ease of shareholder suits index is based on 6 components: What range of documents is available to the plaintiff from the defendant and witnesses during trial Score of 1 for each of the following: information that the defendant has indicated he intends to rely on for his defense; information that directly proves specific facts in the plaintiff’s claim; any information relevant to the subject matter of the claim; and any information that may lead to the discovery of relevant information. Doing Business 2012 Dominican Republic 68 Whether the plaintiff can directly examine the defendant and witnesses during trial 0 = no; 1 = yes, with prior approval by the court of the questions posed; 2 = yes, without prior approval. Whether the plaintiff can obtain categories of relevant documents from the defendant without identifying each document specifically 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital can request that a government inspector investigate the transaction without filing suit in court 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital have the right to inspect the transaction documents before filing suit 0 = no; 1 = yes. Whether the standard of proof for civil suits is lower than that for a criminal case 0 = no; 1 = yes. Strength of investor protection index (0–10) Simple average of the extent of disclosure, extent of director liability and ease of shareholder suits indices. Doing Business 2012 Dominican Republic 69 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless complexity in tax rules avoided. According to Tax payments for a manufacturing company Doing Business data, in economies where it is more in 2010 (number per year adjusted for difficult and costly to pay taxes, larger shares of electronic or joint filing and payment) economic activity end up in the informal sector— Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures the taxes and mandatory contributions that a Time required to comply with 3 major taxes medium-size company must pay in a given year as (hours per year) well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and payments as well as time taken to comply with tax Arranging payment or withholding laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 2 being applied to the total tax rate. To make the Profit or corporate income tax data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2009. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded.  Taxes and mandatory contributions include  Taxes and mandatory contributions are corporate income tax, turnover tax and all measured at all levels of government. labor taxes and contributions paid by the company.  A range of standard deductions and exemptions are also recorded. 2 The threshold is defined as the highest total tax rate among the top 30% of economies in the ranking on the total tax rate. It will be calculated and adjusted on a yearly basis. The threshold is not based on any underlying theory. Instead, it is intended to mitigate the effect of very low tax rates on the ranking on the ease of paying taxes. Doing Business 2012 Dominican Republic 70 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Dominican Republic stands at 94 in the taxes in Dominican Republic—and how much do firms ranking of 183 economies on the ease of paying taxes pay in taxes? On average, firms make 9 tax payments a (figure 8.1). The rankings for comparator economies year, spend 324 hours a year filing, preparing and and the regional average ranking provide other useful paying taxes and pay total taxes amounting to 21.3% information for assessing the tax compliance burden of profit (see the summary at the end of this chapter for businesses in Dominican Republic. for details). Figure 8.1 How Dominican Republic and comparator economies rank on the ease of paying taxes Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Dominican Republic 71 PAYING TAXES What are the changes over time? While the most recent Doing Business data reflect how aspects of the process have changed — and which easy (or difficult) it is to comply with tax rules in have not (table 8.1). That can help identify where the Dominican Republic today, data over time show which potential for easing tax compliance is greatest. Table 8.1 The ease of paying taxes in Dominican Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 82 94 Payments (number per 75 75 74 9 9 9 9 year) Time (hours per year) 232 286 286 480 324 324 324 Total tax rate (% profit) 36.2 36.5 40.2 35.7 39.0 40.7 41.7 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the rank on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Dominican Republic 72 PAYING TAXES Equally helpful may be the benchmarks provided by Republic on ways to ease the administrative burden of the economies that today have the best performance tax compliance. And changes in regional averages can regionally or globally on the number of payments or show where Dominican Republic is keeping up—and the time required to prepare and file taxes (figure 8.2). where it is falling behind. These economies may provide a model for Dominican Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2012 Dominican Republic 73 PAYING TAXES Total tax rate (% of profit) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. The best performer globally on an indicator has implemented the most efficient practices in its tax system but is not necessarily the one with the highest ranking on the indicator. In some cases 2 or more economies share the top regional ranking on an indicator. DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Dominican Republic 74 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Dominican Republic (table 8.2)? Many have lowered tax rates. Changes have brought Table 8.2 How has Dominican Republic made paying taxes easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. An online system for filing and paying taxes, piloted in 2006, is now fully operational. The Dominican Republic also DB2009 reduced the corporate income tax rate from 29% to 25%, and abolished several taxes, including the stamp duty. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 75 PAYING TAXES What are the details? The indicators reported here for Dominican Republic that the company completed during the year. are based on a standard set of taxes and contributions Respondents are asked how much in taxes and that would be paid by the case study company used by mandatory contributions the business must pay and Doing Business in collecting the data (see the section in what the process is for doing so. The taxes and this chapter on what the indicators cover). Tax contributions paid are listed in the summary below, practitioners are asked to review standard financial along with the associated number of payments, time statements as well as a standard list of transactions and tax rate. Summary of tax rates and administrative burden in Dominican Republic Dominican Latin America & Indicator OECD high income Republic Caribbean Payments (number per year) 9 32 13 Time (hours per year) 324 382 186 Profit tax (%) 21.3 19.9 15.4 Labor tax and contributions (%) 18.6 14.6 24.0 Other taxes (%) 1.8 13.2 3.2 Total tax rate (% profit) 41.7 47.7 42.7 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 1 online filing 82 25% 21.3 profits gross Pension contributions 1 online filing 80 7.10% 15.6 salaries Labor risk insurance gross 1 online filing 0 1.30% 1.5 contributions salaries gross Training tax (INFOTEP) 1 online filing 0 1.00% 1.1 salaries payments via check or Tax on electronic transfers 1 online filing 0 0.15% 1.1 electronic means Doing Business 2012 Dominican Republic 76 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate fuel DOP 6.3 per Fuel tax 1 0 consumptio 0.7 gallon n Health insurance gross 1 online filing 0 7.09% 0.4 contributions salaries Vehicle tax 1 0 DOP 2200 fixed fee 0 Value added tax (VAT) 1 online filing 162 16% value added 0 not included Totals 9 324 41.7 Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Dominican Republic 77 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining all the documents (excluding tariffs) associated with exporting and Inland transport and handling importing a standard shipment of goods by ocean transport, and the number of documents necessary Customs clearance and inspections to complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation requirements and procedures at customs and other Does not include ocean transport time regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business:  Is of medium size and employs 60 people.  Do not require refrigeration or any other  Is located in the periurban area of the special environment. economy’s largest business city.  Do not require any special phytosanitary or  Is a private, limited liability company, environmental safety standards other than domestically owned, formally registered accepted international standards. and operating under commercial laws and regulations of the economy.  Are one of the economy’s leading export or import products. The traded goods:  Are transported in a dry-cargo, 20-foot full  Are not hazardous nor do they include container load. military items. Doing Business 2012 Dominican Republic 78 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Dominican Globally, Dominican Republic stands at 45 in the Republic? According to data collected by Doing ranking of 183 economies on the ease of trading Business, exporting a standard container of goods across borders (figure 9.1). The rankings for requires 6 documents, takes 8 days and costs $1040. comparator economies and the regional average Importing the same container of goods requires 7 ranking provide other useful information for assessing documents, takes 10 days and costs $1150 (see the how easy it is for a business in Dominican Republic to summary of procedures and documents at the end of export and import goods. this chapter for details). Figure 9.1 How Dominican Republic and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2012 Dominican Republic 79 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to export or import in Dominican 9.1). That can help identify where the potential for Republic today, data over time show which aspects of improvement is greatest. Table 9.1 The ease of trading across borders in Dominican Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 39 45 Documents to export 7 7 6 6 6 6 6 (number) Time to export (days) 17 17 12 9 9 9 8 Cost to export (US$ per 770 770 815 916 916 916 1,040 container) Documents to import 10 10 7 7 7 7 7 (number) Time to import (days) 17 17 13 10 10 10 10 Cost to import (US$ per 990 990 1,015 1,150 1,150 1,150 1,150 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Equally helpful may be the benchmarks provided by Republic on ways to improve the ease of trading the economies that today have the best performance across borders. And changes in regional averages can regionally or globally on the documents, time or cost show where Dominican Republic is keeping up—and required to export or import (figure 9.2). These where it is falling behind. economies may provide a model for Dominican Doing Business 2012 Dominican Republic 80 TRADING ACROSS BORDERS Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2012 Dominican Republic 81 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2012 Dominican Republic 82 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Dominican Republic 83 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Dominican Republic (table 9.2)? risk-based inspections and electronic data interchange Table 9.2 How has Dominican Republic made trading across borders easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. Authorities reduced the time to export by improving the DB2009 online portal for customs documentation and payment. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 84 TRADING ACROSS BORDERS What are the details? The indicators reported here for Dominican Republic freight forwarders, shipping lines, customs brokers, are based on a set of specific procedural requirements port officials and banks. The procedural requirements, for trading a standard shipment of goods by ocean and the associated time and cost, for exporting and transport (see the section in this chapter on what the importing a standard shipment of goods are listed in indicators cover). Information on the procedures as the summary below, along with the required well as the required documents and the time and cost documents. to complete each procedure is collected from local Summary of procedures and documents for trading across borders in Dominican Republic Dominican Latin America & Indicator OECD high income Republic Caribbean Documents to export (number) 6 6 4 Time to export (days) 8 18 10 Cost to export (US$ per container) 1040 1,257 1,032 Documents to import (number) 7 7 5 Time to import (days) 10 20 11 Cost to import (US$ per container) 1150 1,546 1,085 Procedures to export Time (days) Cost (US$) Documents preparation 3 215 Customs clearance and technical control 2 125 Ports and terminal handling 1 400 Inland transportation and handling 2 300 Totals 8 1040 Procedures to import Time (days) Cost (US$) Documents preparation 5 240 Customs clearance and technical control 2 150 Ports and terminal handling 2 460 Inland transportation and handling 1 300 Totals 10 1150 Doing Business 2012 Dominican Republic 85 TRADING ACROSS BORDERS Documents to export Documents to import Bill of lading Bill of lading Certificate of origin Cargo release order Commercial Invoice Certificate of origin Customs export declaration Commercial invoice Packing List Formulario Declaración Unica Aduanera Pre-shipment inspection clean report of findings Packing list Terminal handling receipts Doing Business 2012 Dominican Republic 86 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and the judge or court officer What do the indicators cover? Steps to file and serve the case Doing Business measures the efficiency of the judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects data relating to the time, cost and procedural Time required to complete procedures complexity of resolving a commercial lawsuit. The (calendar days) ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its Time for trial and obtaining judgment component indicators: procedures, time and cost. Time to enforce the judgment The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This No bribes distinguishes the case from simple debt Average attorney fees enforcement. To make the data comparable across economies, Doing Business uses several Court costs, including expert fees assumptions about the case: Enforcement costs  The seller and buyer are located in the economy’s largest business city.  The buyer orders custom-made goods,  The dispute on the quality of the goods then fails to pay. requires an expert opinion.  The seller sues the buyer before a  The judge decides in favor of the seller; there competent court. is no appeal.  The value of the claim is 200% of income  The seller enforces the judgment through a per capita. public sale of the buyer’s movable assets.  The seller requests a pretrial attachment to secure the claim. Doing Business 2012 Dominican Republic 87 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Dominican Republic stands at 83 in the dispute through the courts in Dominican Republic? ranking of 183 economies on the ease of enforcing According to data collected by Doing Business, contracts (figure 10.1). The rankings for comparator enforcing a contract requires 34 procedures, takes 460 economies and the regional average ranking provide days and costs 40.9% of the value of the claim (see the other useful benchmarks for assessing the efficiency of summary at the end of this chapter for details). contract enforcement in Dominican Republic. Figure 10.1 How Dominican Republic and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2012 Dominican Republic 88 ENFORCING CONTRACTS What are the changes over time? While the most recent Doing Business data reflect how indicators over time help identify which areas have easy (or difficult) it is to enforce a contract in changed and where the potential for improvement is Dominican Republic today, data on the underlying greatest (table 10.1). Table 10.1 The ease of enforcing contracts in Dominican Republic over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 83 83 Time (days) 580 580 580 460 460 460 460 460 460 Cost (% of claim) 40.9 40.9 40.9 40.9 40.9 40.9 40.9 40.9 40.9 Procedures (number) 34 34 34 34 34 34 34 34 34 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Dominican Republic 89 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by for Dominican Republic on ways to improve the the economies that today have the best performance efficiency of contract enforcement. And changes in regionally or globally on the number of steps, time or regional averages can show where Dominican Republic cost required to enforce a contract through the courts is keeping up—and where it is falling behind. (figure 10.2). These economies may provide a model Figure 10.2 Has enforcing contracts become easier over time? Procedures (number) Time (days) Doing Business 2012 Dominican Republic 90 ENFORCING CONTRACTS Cost (% of claim) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Dominican Republic 91 ENFORCING CONTRACTS Economies in all regions have improved contract periodic reviews to clear inactive cases from the docket enforcement in recent years. A judiciary can be and by making procedures faster. What reforms improved in different ways. Higher-income economies making it easier (or more difficult) to enforce contracts tend to look for ways to enhance efficiency by has Doing Business recorded in Dominican Republic introducing new technology. Lower-income economies (table 10.2)? often work on reducing backlogs by introducing Table 10.2 How has Dominican Republic made enforcing contracts easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 92 ENFORCING CONTRACTS What are the details? The indicators reported here for Dominican Republic other court regulations, as well as through surveys are based on a set of specific procedural steps completed by local litigation lawyers (and, in a quarter required to resolve a standardized commercial dispute of the economies covered by Doing Business, by through the courts (see the section in this chapter on judges as well). The procedures for resolving a what the indicators cover). These procedures, and the commercial lawsuit, and the associated time and cost, time and cost of completing them, are identified are listed in the summary below. through study of the codes of civil procedure and Summary of procedures for enforcing a contract in Dominican Republic—and the time and cost Dominican Latin America & Indicator OECD high income Republic Caribbean Time (days) 460 707.78 518.03 Filing and service 20 Trial and judgment 320 Enforcement of judgment 120 Cost (% of claim) 40.9 31.21 19.71 Attorney cost (% of claim) 25 Court cost (% of claim) 7.5 Enforcement Cost (% of claim) 8.4 Procedures (number) 34 40.03 31.42 Source: Doing Business database. Doing Business 2012 Dominican Republic 93 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Recovery rate for creditors (cents on the well as public information on bankruptcy systems. dollar) The ranking on the ease of resolving insolvency is Measures the cents on the dollar recovered based on the recovery rate, which is recorded as by creditors cents on the dollar recouped by creditors through Present value of debt recovered reorganization, liquidation or debt enforcement (foreclosure) proceedings. The recovery rate is a Official costs of the insolvency proceedings are deducted function of time, cost and other factors, such as lending rate and the likelihood of the company Depreciation of furniture is taken into continuing to operate. account To make the data comparable across economies, Outcome for the business (survival or not) Doing Business uses several assumptions about the affects the maximum value that can be business and the case. It assumes that the recovered company:  Is a domestically owned, limited liability company operating a hotel.  Has 201 employees, 1 main secured creditor  Operates in the economy’s largest business and 50 unsecured creditors. city.  Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2012 Dominican Republic 94 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses Globally, Dominican Republic stands at 154 in the characterize the top-performing economies. How ranking of 183 economies on the ease of resolving efficient are insolvency proceedings in Dominican insolvency (figure 11.1). The rankings for comparator Republic? According to data collected by Doing economies and the regional average ranking provide Business, resolving insolvency takes 3.5 years on other useful benchmarks for assessing the efficiency of average and costs 38% of the debtor’s estate. The insolvency proceedings in Dominican Republic. average recovery rate is 9.5 cents on the dollar. Figure 11.1 How Dominican Republic and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2012 Dominican Republic 95 RESOLVING INSOLVENCY What are the changes over time? While the most recent Doing Business data reflect the efficiency has changed—and where it has not (table efficiency of insolvency proceedings in Dominican 11.1). That can help identify where the potential for Republic today, data over time show where the improvement is greatest. Table 11.1 The ease of resolving insolvency in Dominican Republic over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 153 154 Time (years) 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 Cost (% of estate) 38 38 38 38 38 38 38 38 38 Recovery rate (cents on 5.9 5.6 5.4 7.4 8.4 8.9 8.9 9.1 9.5 the dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. ―No practice‖ indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for ―no practice‖ economies is 0. Source: Doing Business database. Doing Business 2012 Dominican Republic 96 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by Republic on ways to improve the efficiency of the economies that today have the best performance insolvency proceedings. And changes in regional regionally or globally on the time or cost of insolvency averages can show where Dominican Republic is proceedings or on the recovery rate (figure 11.2). keeping up—and where it is falling behind. These economies may provide a model for Dominican Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2012 Dominican Republic 97 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Dominican Republic 98 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Dominican Republic (table 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Dominican Republic made resolving insolvency easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Dominican Republic 99 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the ECONOMY CHARACTERISTICS protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of Gross national income (GNI) per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2012 reports 2010 income per capita property. Second, they gauge the time and cost of as published in the World Bank’s World Development achieving a regulatory goal or complying with Indicators 2011. Income is calculated using the Atlas method (current US$). For cost indicators expressed regulation, such as the time and cost to enforce a as a percentage of income per capita, 2010 GNI in contract, go through bankruptcy or trade across U.S. dollars is used as the denominator. Data were borders. Third, they measure the extent of legal not available from the World Bank for Afghanistan; protections of property, for example, the protections Australia; The Bahamas; Bahrain; Brunei Darussalam; of investors against looting by company directors or Canada; Cyprus; Djibouti; the Islamic Republic of the range of assets that can be used as collateral Iran; Kuwait; New Zealand; Oman; Puerto Rico according to secured transactions laws. Fourth, a set of (territory of the United States); Qatar; Saudi Arabia; indicators documents the tax burden on businesses. Suriname; Taiwan, China; the United Arab Emirates; Finally, a set of data covers different aspects of West Bank and Gaza; and the Republic of Yemen. In employment regulation. these cases GDP or GNP per capita data and growth rates from the International Monetary Fund’s World The data for all sets of indicators in Doing Business Economic Outlook database and the Economist 3 2012 are for June 2011. Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and income group classifications, available at The Doing Business data are collected in a http://www.worldbank.org/data/countryclass. The standardized way. To start, the Doing Business team, World Bank does not assign regional classifications with academic advisers, designs a questionnaire. The to high-income economies. For the purpose of the questionnaire uses a simple business case to ensure Doing Business report, high-income OECD comparability across economies and over time—with economies are assigned the ―regional‖ classification assumptions about the legal form of the business, its OECD high income. Figures and tables presenting size, its location and the nature of its operations. regional averages include economies from all Questionnaires are administered through more than income groups (low, lower middle, upper middle 9,028 local experts, including lawyers, business and high income). consultants, accountants, freight forwarders, Population government officials and other professionals routinely administering or advising on legal and regulatory Doing Business 2012 reports midyear 2010 population statistics as published in World requirements. These experts have several rounds of Development Indicators 2011. interaction with the Doing Business team, involving conference calls, written correspondence and visits by the team. For Doing Business 2012 team members The Doing Business methodology offers several visited 40 economies to verify data and recruit advantages. It is transparent, using factual information respondents. The data from questionnaires are about what laws and regulations say and allowing subjected to numerous rounds of verification, leading multiple interactions with local respondents to clarify to revisions or expansions of the information collected. potential misinterpretations of questions. Having representative samples of respondents is not an issue; 3 The data for paying taxes refer to January – December 2010. Doing Business 2012 Dominican Republic 100 Doing Business is not a statistical survey, and the texts entrepreneurs reported in the World Bank Enterprise of the relevant laws and regulations are collected and Surveys or other perception surveys. answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because Subnational Doing Business indicators standard assumptions are used in the data collection, This year Doing Business published a subnational study comparisons and benchmarks are valid across for the Philippines and a regional report for Southeast economies. Finally, the data not only highlight the Europe covering 7 economies (Albania, Bosnia and extent of specific regulatory obstacles to business but Herzegovina, Kosovo, the former Yugoslav Republic of also identify their source and point to what might be Macedonia, Moldova, Montenegro and Serbia) and 22 reformed. cities. It also published a city profile for Juba, in the Information on the methodology for each Doing Republic of South Sudan. Business topic can be found on the Doing Business The subnational studies point to differences in website at http://www.doingbusiness.org/methodology/. business regulation and its implementation—as well as in the pace of regulatory reform—across cities in the same economy. For several economies subnational Limits to what is measured studies are now periodically updated to measure The Doing Business methodology has 5 limitations that change over time or to expand geographic coverage should be considered when interpreting the data. First, to additional cities. This year that is the case for the the collected data refer to businesses in the economy’s subnational studies in the Philippines; the regional largest business city and may not be representative of report in Southeast Europe; the ongoing studies in regulation in other parts of the economy. To address Italy, Kenya and the United Arab Emirates; and the this limitation, subnational Doing Business indicators projects implemented jointly with local think tanks in were created (see the section on subnational Doing Indonesia, Mexico and the Russian Federation. Business indicators). Second, the data often focus on a Besides the subnational Doing Business indicators, specific business form—generally a limited liability Doing Business conducted a pilot study this year on company (or its legal equivalent) of a specified size— the second largest city in 3 large economies to assess and may not be representative of the regulation on within-country variations. The study collected data for other businesses, for example, sole proprietorships. Rio de Janeiro in addition to São Paulo in Brazil, for Third, transactions described in a standardized case Beijing in addition to Shanghai in China and for St. scenario refer to a specific set of issues and may not Petersburg in addition to Moscow in Russia. represent the full set of issues a business encounters. Fourth, the measures of time involve an element of judgment by the expert respondents. When sources Changes in what is measured indicate different estimates, the time indicators reported in Doing Business represent the median The methodology for 3 of the Doing Business topics values of several responses given under the was updated this year—getting credit, dealing with assumptions of the standardized case. construction permits and paying taxes. Finally, the methodology assumes that a business has First, for getting credit, the scoring of one of the 10 full information on what is required and does not components of the strength of legal rights index was waste time when completing procedures. In practice, amended to recognize additional protections of completing a procedure may take longer if the secured creditors and borrowers. Previously the business lacks information or is unable to follow up highest score of 1 was assigned if secured creditors promptly. Alternatively, the business may choose to were not subject to an automatic stay or moratorium disregard some burdensome procedures. For both on enforcement procedures when a debtor entered a reasons the time delays reported in Doing Business court-supervised reorganization procedure. Now the 2012 would differ from the recollection of highest score of 1 is also assigned if the law provides secured creditors with grounds for relief from an Doing Business 2012 Dominican Republic 101 automatic stay or moratorium (for example, if the regulatory environment for local entrepreneurs in each movable property is in danger) or sets a time limit for economy has changed over time. the automatic stay. Ease of doing business Second, because the ease of doing business index now The ease of doing business index ranks economies includes the getting electricity indicators, procedures, from 1 to 183. For each economy the ranking is time and cost related to obtaining an electricity calculated as the simple average of the percentile connection were removed from the dealing with rankings on each of the 10 topics included in the index construction permits indicators. in Doing Business 2012: starting a business, dealing Third, a threshold has been introduced for the total tax with construction permits, registering property, getting rate for the purpose of calculating the ranking on the credit, protecting investors, paying taxes, trading ease of paying taxes. All economies with a total tax across borders, enforcing contracts, resolving rate below the threshold (which will be calculated and insolvency and, new this year, getting electricity. The adjusted on a yearly basis) will now receive the same employing workers indicators are not included in this ranking on the total tax rate indicator. The threshold is year’s aggregate ease of doing business ranking. In not based on any underlying theory. Instead, it is addition to this year’s ranking, Doing Business presents meant to emphasize the purpose of the indicator: to a comparable ranking for the previous year, adjusted highlight economies where the tax burden on business for any changes in methodology as well as additions of 4 is high relative to the tax burden in other economies. economies or topics. Giving the same ranking to all economies whose total Construction of the ease of doing business index tax rate is below the threshold avoids awarding economies in the scoring for having an unusually low Here is one example of how the ease of doing business total tax rate, often for reasons unrelated to index is constructed. In the Republic of Korea it takes 5 government policies toward enterprises. For example, procedures, 7 days and 14.6% of annual income per economies that are very small or that are rich in capita in fees to open a business. There is no minimum natural resources do not need to levy broad-based capital required. On these 4 indicators Korea ranks in th th rd taxes. the 18 , 14 , 53 and 0 percentiles. So on average st Korea ranks in the 21 percentile on the ease of th starting a business. It ranks in the 12 percentile on Data challenges and revisions th getting credit, 25 percentile on paying taxes, 8 th th percentile on enforcing contracts, 7 percentile on Most laws and regulations underlying the Doing resolving insolvency and so on. Higher rankings Business data are available on the Doing Business indicate simpler regulation and stronger protection of website at http://www.doingbusiness.org. All the property rights. The simple average of Korea’s sample questionnaires and the details underlying the st percentile rankings on all topics is 21 . When all indicators are also published on the website. Questions economies are ordered by their average percentile on the methodology and challenges to data can be rankings, Korea stands at 8 in the aggregate ranking submitted through the website’s ―Ask a Question‖ on the ease of doing business. function at http://www.doingbusiness.org. More complex aggregation methods—such as principal components and unobserved components— Ease of doing business and distance to frontier 4 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a This year’s report presents results for 2 aggregate comparable time series since the year the relevant economy or topic measures: the aggregate ranking on the ease of doing was first included in the data set. The time series is available on the business and a new measure, the ―distance to frontier.‖ Doing Business website (http://www.doingbusiness.org). The Doing While the ease of doing business ranking compares Business report publishes yearly rankings for the year of publication as well as the previous year to shed light on year-to-year economies with one another at a point in time, the developments. Six topics and more than 50 economies have been distance to frontier measure shows how much the added since the inception of the project. Earlier rankings on the ease of doing business are therefore not comparable. Doing Business 2012 Dominican Republic 102 yield a ranking nearly identical to the simple average Consider the example of Canada. It stands at 12 in the 5 used by Doing Business. Thus, Doing Business uses aggregate ranking on the ease of doing business. Its the simplest method: weighting all topics equally and, ranking is 3 on both starting a business and resolving within each topic, giving equal weight to each of the insolvency, and 5 on protecting investors. But its 6 topic components. ranking is only 59 on enforcing contracts, 42 on trading across borders and 156 on getting electricity. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a Variation in performance across the indicator sets is ―no practice‖ mark. Similarly, an economy receives a not at all unusual. It reflects differences in the degree ―no practice‖ or ―not possible‖ mark if regulation exists of priority that government authorities give to but is never used in practice or if a competing particular areas of business regulation reform and the regulation prohibits such practice. Either way, a ―no ability of different government agencies to deliver practice‖ mark puts the economy at the bottom of the tangible results in their area of responsibility. ranking on the relevant indicator. Economies that improved the most across 3 or more The ease of doing business index is limited in scope. It Doing Business topics in 2010/11 does not account for an economy’s proximity to large Doing Business 2012 uses a simple method to calculate markets, the quality of its infrastructure services (other which economies improved the most in the ease of than services related to trading across borders and doing business. First, it selects the economies that in getting electricity), the strength of its financial system, 2010/11 implemented regulatory reforms making it the security of property from theft and looting, its easier to do business in 3 or more of the 10 topics macroeconomic conditions or the strength of 7 included in this year’s ease of doing business ranking. underlying institutions. Thirty economies meet this criterion: Armenia, Burkina Variability of economies’ rankings across topics Faso, Burundi, Cape Verde, the Central African Republic, Chile, Colombia, the Democratic Republic of Each indicator set measures a different aspect of the Congo, Côte d'Ivoire, The Gambia, Georgia, Korea, business regulatory environment. The rankings of an Latvia, Liberia, FYR Macedonia, Mexico, Moldova, economy can vary, sometimes significantly, across Montenegro, Morocco, Nicaragua, Oman, Peru, Russia, indicator sets. The average correlation coefficient São Tomé and Príncipe, Senegal, Sierra Leone, between the 10 indicator sets included in the Slovenia, the Solomon Islands, South Africa and aggregate ranking is 0.36, and the coefficients Ukraine. Second, Doing Business ranks these between any 2 sets of indicators range from 0.17 economies on the increase in their ranking on the ease (between protecting investors and getting electricity) of doing business from the previous year using to 0.57 (between starting a business and protecting comparable rankings. investors). These correlations suggest that economies rarely score universally well or universally badly on the Selecting the economies that implemented regulatory indicators. reforms in at least 3 topics and improved the most in the aggregate ranking is intended to highlight economies with ongoing, broad-based reform programs. 5 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to Distance to frontier measure Do It‖ (World Bank, Washington, DC, 2005). Principal components This year’s report introduces a new measure to and unobserved components methods yield a ranking nearly identical to that from the simple average method because both illustrate how the regulatory environment for local these methods assign roughly equal weights to the topics, since the businesses in each economy has changed over time. pairwise correlations among indicators do not differ much. An The distance to frontier measure illustrates the alternative to the simple average method is to give different weights distance of an economy to the ―frontier‖ and shows to the topics, depending on which are considered of more or less importance in the context of a specific economy. 6 7 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2012 Dominican Republic 103 the extent to which the economy has closed this gap The difference between an economy’s distance to over time. The frontier is a score derived from the most frontier score in 2005 and its score in 2011 illustrates efficient practice or highest score achieved on each of the extent to which the economy has closed the gap to the component indicators in 9 Doing Business indicator the frontier over time. sets (excluding the employing workers and getting The maximum (max) and minimum (min) observed electricity indicators) by any economy since 2005. In values are computed for the 174 economies included starting a business, for example, New Zealand has in the Doing Business sample since 2005 and for all achieved the highest performance on the time (1 day), years (from 2005 to 2011). The year 2005 was chosen Canada and New Zealand on the number of as the baseline for the economy sample because it was procedures required (1), Denmark and Slovenia on the the first year in which data were available for the cost (0% of income per capita) and Australia on the majority of economies (a total of 174) and for all 9 paid-in minimum capital requirement (0% of income indicator sets included in the measure. To mitigate the per capita). effects of extreme outliers in the distributions of the Calculating the distance to frontier for each economy rescaled data (very few economies need 694 days to involves 2 main steps. First, individual indicator scores complete the procedures to start a business, but many th are normalized to a common unit. To do so, each of need 9 days), the maximum (max) is defined as the 95 the 32 component indicators y is rescaled to (y − percentile of the pooled data for all economies and all min)/(max − min), with the minimum value (min) years for each indicator. representing the frontier—the highest performance on Take Colombia, which has a score of 0.21 on the that indicator across all economies since 2005. Second, distance to frontier measure for 2011. This score for each economy the scores obtained for individual indicates that the economy is 21 percentage points indicators are aggregated through simple averaging away from the frontier constructed from the best into one distance to frontier score. An economy’s performances across all economies and all years. distance to the frontier is indicated on a scale from 0 Colombia was further from the frontier in 2005, with a to 100, where 0 represents the frontier and 100 the score of 0.43. The difference between the scores shows lowest performance. an improvement over time. Doing Business 2012 Dominican Republic 104 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2012 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 183 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Reports http://www.doingbusiness.org/custom-query/ Access to Doing Business reports as well as subnational and regional reports, reform case Law library studies and customized economy and regional Online collection of business laws and profiles regulations relating to business and gender http://www.doingbusiness.org/reports/ issues http://www.doingbusiness.org/law-library/ Methodology http://wbl.worldbank.org/ The methodologies and research papers underlying Doing Business Contributors http://www.doingbusiness.org/methodology/ More than 9,000 specialists in 183 economies who participate in Doing Business Research http://www.doingbusiness.org/contributors/doing- Abstracts of papers on Doing Business topics business/ and related policy issues http://www.doingbusiness.org/research/ Doing Business 2012 Dominican Republic 105