The Dominican Republic's Rescue Plan For The World's Middle Class
over seventeen years to date our firm has been assisting
clients with the residency application process and the
naturalized citizenship process in the Dominican
Republic. Just as has been the case in other
jurisdictions, some things have changed over the years, and we
believe it to be paramount that we are in the forefront to
provide the best possible service and advice to our clients
accordingly. Below you will find a brief summary of the
new immigration law signed by previous President Fernandez
back in 2011, plus some information about the retiree and
investor immigration legislation passed previously, which is
still in effect along with some other attractive immigration
laws as well. It is important to note that this new
immigration law from 2011 only applies to the ORDINARY
RESIDENCY process, and the law in no way effects the
naturalized citizenship application process which remains as
it was previously. Which is to explain what has changed
is the waiting time for holders of ordinary residency in terms
of getting to the point whereby they can apply for naturalized
citizenship, but the ability to apply (and be granted)
naturalized citizenship in the Dominican Republic has NOT
changed. In fact, a number of our clients have
successfully been granted citizenship recently, as have our
past clients over the previous number of years prior.
In regards to the investor immigration law we briefly mentioned above, we believe that this law possibly is one of the best laws of it's kind in comparison to what is offered in some other countries. Meaning, the Dominican Republic basically took a look at the retiree immigration programs in Costa Rica, Panama and a few other jurisdictions - and they improved upon them in terms of age and financial requirements (making it much more attractive we think compared to these other countries mentioned). But incorporated with this law is some additional legislation aimed at different categories of investors and it is this legislation that has become attractive for many of our clients as well. Of course with that said, everyone is different and everyone has different goals. For some, the ability to obtain a legal residency status alone is enough to satisfy their goals. For others, the desire to acquire a second citizenship or second passport as quickly and as conveniently as possible (with cost factors considered as well) is the main objective. However and regardless of your goals or intent, do keep in mind that the Dominican Republic fully recognizes and accepts dual citizenship. At no time will an applicant be asked to swear an oath renouncing current citizenship nor physically be asked to surrender a previous passport from another country.
The Dominican Republic Does NOT Offer Economic Citizenship (something Better)
When trying to make a comparison between the process available in the Dominican Republic and some other jurisdictions, it is important to note that Dominican Republic does NOT have an instant or economic citizenship program (in fact, they never did). And as a side note to that comment, there have been some individuals and or firms promoting some kind of quick Dominican Republic citizenship process that claims to result in a very short termination of citizenship and a passport for the applicant. However, please be aware that some of those programs may involve the use of, shall we say, unofficial means and maybe in some cases outright illegal methods. Our firm does NOT condone such practices nor would even consider offering such programs to our clients. However, with the above said, should you have an interest in the correct and legal process, the Dominican Republic offers a situation that is fairly simple and straight forward – and a reduced time line in terms of eligibility for citizenship applications for certain circumstances and kinds of applications.
In terms of the different application avenues, there is no investment requirement for those clients wishing to pursue the ordinary residency process, but qualified investors DO benefit from a faster track citizenship application process. To contrast this with other jurisdictions offering what is called instant or economic citizenship, some programs elsewhere may cost US$70,000 (or more), or require a US$300,000 (or more) investment in real estate – and such programs may still take perhaps 6 months or more to complete anyway. However, in the Dominican Republic, clients have the opportunity to pursue a process that costs less than US$25,000 – which is less than ONE THIRD the cost of some processes in other countries. Of course the difference is going to be the time line, but if a process that allows you to obtain citizenship and a passport in less than two years combined with a third of the cost of some other countries (or maybe even more of a savings) is appealing to you, then the Dominican Republic is one of your options.
Because the Dominican Republic is one of the most beautiful countries in the Caribbean, and currently still has some of the lowest priced real estate in comparison to other Caribbean destinations, it is a country of choice for many people - - and it has earned a reputation as one of the best places to live or retire. In addition, banking in US Dollar and Euros is available, plus with local currency investment rates up to 10%, it means that investors can enjoy a very comfortable income from their investments, from a relatively small investment. As part of our core group of services, or included in the residency fee, is our personal assistance with banking and investment account introductions for our clients (we gladly take clients to visit some of the local financial institutions and introduce them to an English speaking account officer, but we have NO referral arrangement with any bank or brokerage firm – and clients certainly are under no obligation to work with any of the institutions we might suggest). In addition, we certainly do not manage money or act as signatories on any accounts, but we do provide any advice and assistance we can otherwise. After all, it is YOUR money and not ours, and you should be the only person in control of it.
No one can truly predict what will happen in our lives; but we believe that it is important to be somewhat better prepared for a wider degree of varying change through diversification than it would be if we placed all our confidence in one passport, one government, one country where we hold our bank accounts & property, and one possible outcome for our future. Through these options in the Dominican Republic Europeans and Canadians specifically can benefit by having the capacity to declare themselves non-resident in their home countries, thus gaining the chance for a tax-free lifestyle all the way around. Americans of course have the opportunity to pursue a second passport or second citizenship, aside from from the fact that retirement or relocation to the Dominican Republic can mean all the difference in the world as it pertains to an affordable middle class lifestyle (something that is becoming more costly and difficult to attain, and maintain, inside the US and Europe at the moment). Simply choosing one destination versus another, or say the Dominican Republic versus Florida (or some other destination), can also mean the difference of living well from your pension or investment income or being taxed to death going forward. This is no small consideration for someone possibly faced with the prospect of getting less than what they were promised in pension benefits and or having to possibly deal with inflation (currency devaluation) later on.
Ordinary Residency Process: Changes With The 2011 Dominican Republic Immigration Law
To permit someone reading this to understand the changes in comparison to the older process, we would like to offer a quick explanation at this point. Prior to the immigration law of October 2011 going into effect, the previous process involved an application for Provisional Residency as the first step in the residency process (which is still the case today for the ordinary residency process). Upon approval of the application, applicants were granted a yellow colored card valid for one year. Upon completion of that one year, applicants could renew their residency and ask for a change in status to Definitive or Permanent Residency, which resulted in a dark blue colored card issued by the Dominican Immigration Department, which was valid for two years. Upon completion of two years as a holder of this ordinary definitive or permanent residency status, you could then at that appoint apply for naturalized citizenship.
What is important to note is that the time line to apply for naturalized citizenship has not changed in that it still requires completion of two years of definitive or permanent residency. Which is to explain that the immigration law of October 2011 changes the amount of time for the ability to change to definitive or permanent residency from one year of Provisional Residency to now FIVE years of continuous Provisional Residency before one can have the opportunity to change over to the definitive or permanent ordinary residency. Simply stated or rephrased another way, prior to the October 2011 law, the paradigm was a total of 3 years of ordinary residency before applying for citizenship (one year provisional status and then two years of definitive or permanent status). Under the law of 2011, the current situation now in 2016 involves 5 years of provisional ordinary residency and then another 2 years of definitive or permanent ordinary residency for a total of 7 years before being able to apply for naturalized citizenship. However, there are other very attractive immigration and or citizenship related laws still in effect for NON ORDINARY applications that result in a much quicker process with some other benefits as well. Below is a reprint of an article we wrote for clients back in September of 2007 which explains the benefits of one such special law codified in 2007 (which remains in effect today):
The 2007 Special Investor Immigration Law: Still In Effect For 2016
Over the years, and in some other previous articles, I have made mention of the fact that certainly many countries are in competition with each other to attract business, investment and of course new upright citizens as well. This perhaps is obvious and what one might say is normal or logical as well. However, along these lines, we have identified a trend some time ago, that basically demonstrates a desire and need of the middle-class from the wealthier, industrialized welfare state countries to find some way to make ends meet, or otherwise said, to simply survive economically going forward. Often enough, this has involved the decision to move to another country, or otherwise said, to expatriate. Why is this so? Well, there are a number of factors currently converging upon these so-called wealthier nations, but the short version is that, taxes are going up, government national debt has gone through the roof, pension and social welfare benefits are in doubt, inflation is now once again translating into higher living costs for the average citizen (which includes food and fuel costs), and the bottom line is, personal survival is the name of the game. With that said, let us explore how the Dominican Republic, and other countries of a like mind, are coming to the rescue.
There certainly many countries out there that have similar attributes, in terms of choosing a country for relocation or retirement. For example, how many countries or jurisdictions are there that you can name, offering warm year round climate, palm trees, white sand beaches or any number of other things you might find appealing? You might come up with a very large list. However, after considering the similarities, often it comes down to other factors when making a relocation decision, which will include housing costs, taxes, cost of living, access to infrastructure, school or university choices if you have children, cost and access to quality medical care, and so on. Among all of these things, usually it becomes an issue of taxes and cost of living as the final denominator often enough. It is truly in this area that many countries have become competitive, in terms of luring new solvent citizens and retirees. And so, we have seen programs developed in Costa Rica, Panama and now the Dominican Republic to hopefully attract such people. But, to be very clear, it is not just retirees as the only group looking for a better and less taxing place to live. The current trends indicate that we are equally seeing younger people, and especially young middle class families that are moving as well. But, with that said, generally speaking, both groups are indeed looking for the same thing.
Getting back to the theme we mentioned in the first paragraph, some countries wisely understand this trend and are actively seeking new, well heeled and solvent persons or families as new residents, and new citizens. In the case of what might be called developing nations, obviously such people (or new residents if you prefer) can bring skill sets, such as entrepreneurship, knowledge of certain industries, not to mention investment capital as well. To this end, some countries such as the Dominican Republic, have wisely sought to make the residency process and benefits for newcomers as attractive as possible. This ties in to some articles we have written in the past, whereby we have identified this trend of what we like to call - Trading Places. Which is to say, the high tax welfare states are loosing their best and brightest (as more and more citizens feel they are being abused and overwhelmed with taxes, higher cost of living, unfair trade and immigration policies, mismanagement, etc.) and are going to countries whereby they have a chance at a better existence. No nation is perfect, but there are limits to what some people would consider to be fair and correct. In any event, let us highlight what is going on in the Dominican Republic and why many of our clients have chosen the country accordingly.
For those people interested in retiring or relocating, who happen to have some stable source of income, either from government pension (Social Security), a private pension or annuity, or even independent income from investments (dividends or interest) - this is the ideal program for you. Since there is no age specified for participation, let us examine how this would apply in the practical world (and as a comparison to say, Panama as an example). Let us speculate that you are 40 years old, you have just sold your business, and are too young to qualify for retirement programs elsewhere solely because of your age (as would be the case in Panama). No problem in the case of the Dominican Republic. What you need to do is invest your funds into any kind of investment that will generate a steady monthly income of interest or dividends, anywhere in the world that you wish and not necessarily in the Dominican Republic. So, this could mean bank accounts, bonds or annuities that maybe you decide to have in Europe, Asia or anywhere else that suits you. In addition, you can also put some funds into local bonds or fixed income investments (bank certificates of deposit, commercial paper) inside the Dominican Republic in Pesos, in order to draw down a monthly income in the local currency as well. The financial requirement in such a case is that you must have an independent monthly income of at least US$2,000 and an additional US$250 per month for your spouse or children (if you are married with two children, then as an example, a total of US$2,750 per month in such an example). It does not matter where the investments are located, and there is no age limit to qualify (such as 50 plus in some other countries).
Let us say you are retired or close to retirement age. In that case you need to prove a monthly pension income of at least US$1,500 from any pension source, be it a government run pension or private one. In fact, theoretically, if a 40 year old applicant set up a private annuity, and started taking the annuity income right away, that should allow you to qualify as a retiree rather than an investor (with the lower amount applicable). But regardless of which status you chose, you benefit from: Zero Tax regarding the title transfer taxes when you purchase your first home or apartment and Zero Tax on interest income or dividends derived from investments abroad or local. In addition, Fifty Percent OFF any annual real estate taxes you might owe (remember that any real estate valued at RD$4 Million Pesos or about US$85,000 is 100 percent free from any annual property taxes regardless, but you would pay tax on the prorated value above that amount). This special provision cuts those potential taxes in half, should they apply, due to a real estate value being greater than US$85,000 - or RD$4 Million. Also, Fifty Percent OFF any capital gains taxes you earn as a shareholder of a company not involved in any commercial or industrial activities (in other words, a holding company only). Plus, Tax-Free importation of your personal effects and belongings as a new resident (although port fees, storage fees, and any related shipping costs of course must be paid by you directly as these things have nothing to do with taxation or duty). The only question you may have is: who then does not qualify? The answer is anyone involved in a commercial or business activity, or better stated, someone that is not simply a passive investor or retiree. So, if it is your goal to simply retire or live as a passive investor, then this program would be perfect for you. If you were interested in establishing a business, or conducting some other kind of commercial activity, then in such a case, you could not qualify for this specific program but would apply under another venue for residency (which of course still may be very attractive and many of our clients have in fact done so).
With regards to many of our European and Canadian clients, this retiree or passive investor program would be a very attractive solution tax wise, as in such a case, proof of residency in another country (outside of Europe or Canada respectively) allows such people to declare themselves non-resident in the former country, thus opting out of local taxation in the country of citizenship, meaning Canada or the EU. In other words, obviously if your investment or pension income is tax-free in the Dominican Republic, as your new home of residency and tax domicile, AND also tax-free in terms of your country of existing citizenship as well, then you have a 100 percent tax-free scenario, as it applies to investment or retirement income all the way around.
Americans of course still need to be concerned about tax implications as it pertains to US taxes, even though such income would be 100 percent tax-free in the Dominican Republic, as the US government certainly seeks to tax Americans on world-wide passive income (investment income, etc.) regardless. In other words, for Americans more so than any other nationality, to get the same benefit, renouncement of US citizenship would really be the key solution. But, there are of course some legitimate and legal strategies to employ without renouncing citizenship, and of course we work with our clients on some of these options, although the trend of US citizens renouncing has been on the increase over the past few years and seems to be growing.
About The Author: This article was written by John Schroder of Ascot Advisory Services. John's firm has been helping clients in the Dominican Republic for the last 17 years with residency application services, naturalized citizenship filing, banking assistance and legal services pertaining to real estate (title transfers, legal representation at closing, sales contract review). You can contact him by telephone at 809-756-1917 or click the about the author link above to reach a contact page to send an email directly.