82824 Economy Profile: Dominican Republic Doing Business 2014 Dominican Republic 2 © 2013 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 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 Unported license (CC BY 3.0) http://creativecommons.org/licenses/by/3.0. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2013. Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Additional copies of all 11 editions of Doing Business may be purchased at www.doingbusiness.org. Cover design: The Word Express Doing Business 2014 Dominican Republic 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits........................................................................................... 24 Getting electricity ....................................................................................................................... 34 Registering property .................................................................................................................. 41 Getting credit .............................................................................................................................. 50 Protecting investors ................................................................................................................... 57 Paying taxes ................................................................................................................................ 66 Trading across borders .............................................................................................................. 73 Enforcing contracts .................................................................................................................... 81 Resolving insolvency .................................................................................................................. 90 Employing workers .................................................................................................................... 95 Data notes ................................................................................................................................. 102 Resources on the Doing Business website ............................................................................ 108 Doing Business 2014 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 2012). 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 11 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, resolving transparency of government procurement, insolvency and employing workers. 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 189 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 47 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 25 in East Asia and the Pacific, 25 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 20 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 2014 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Dominican Republic. To allow useful business regulatory reforms. The data, along with comparison, it also provides data for other selected information on ordering Doing Business 2014, 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, 2013 http://www.doingbusiness.org. Doing Business 2014 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 189 by the ease of Population: 10,276,621 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 5,470 percentile rankings on each of the 10 topics included in the index in Doing Business 2014: starting a business, DB2014 rank: 117 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2013 rank: 112* investors, paying taxes, trading across borders, Change in rank: -5 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the DB 2014 DTF: 61.05 percentile rankings on its component indicators (see the data notes for more details). The employing workers DB 2013 DTF: 60.97 indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented Change in DTF: 0.05 in this year’s economy profile. The aggregate ranking on the ease of doing business * DB2013 ranking shown is not last year’s published benchmarks each economy’s performance on the ranking but a comparable ranking for DB2013 that indicators against that of all other economies in the captures the effects of such factors as data Doing Business sample (figure 1.1). While this ranking corrections and the addition of 4 economies (Libya, tells much about the business environment in an Myanmar, San Marino and South Sudan) to the economy, it does not tell the whole story. The ranking on sample this year. See the data notes for sources and the ease of doing business, and the underlying definitions. 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. Doing Business 2014 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 2014 Dominican Republic 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy’s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Dominican Republic and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2014 Dominican Republic 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Dominican Republic ranks on Doing Business topics Source: Doing Business database. Doing Business 2014 Dominican Republic 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far on average an Yearly movements in rankings can provide some indication economy is from the best performance achieved by any of changes in an economy’s regulatory environment for economy on each Doing Business indicator since 2005, firms, but they are always relative. except for the getting electricity indicators, which were introduced in 2009. Moreover, year-to-year changes in the overall rankings do not reflect how the business regulatory environment in an Comparing the measure for an economy at 2 points in economy has changed over time—or how it has changed time allows users to assess how much the economy’s in different areas. To aid in assessing such changes, regulatory environment as measured by Doing Business has changed over time—how far it has moved toward (or away from) the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.4). Figure 1.4 How far has Dominican Republic come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 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 Dominican Republic Dominican Republic Colombia DB2014 Puerto Rico (U.S.) Panama DB2014 Jamaica DB2014 Mexico DB2014 Indicator Haiti DB2014 DB2014 DB2013 DB2014 DB2014 Starting a Business 144 138 79 187 23 48 25 18 New Zealand (1) (rank) Procedures (number) 7 7 9 12 5 6 5 6 New Zealand (1)* Time (days) 18.5 18.5 15.0 97.0 6.0 6.0 6.0 6.0 New Zealand (0.5) Cost (% of income per 17.3 18.3 7.5 264.8 6.4 19.7 7.2 0.9 Slovenia (0.0) capita) Paid-in Min. Capital (% 46.0 49.3 0.0 19.1 0.0 0.0 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 121 113 24 141 52 40 62 172 China (1) (rank) Hong Kong SAR, Procedures (number) 14 14 8 9 8 11 16 18 China (6) Time (days) 216.0 216.0 54.0 1,129.0 135.0 82.0 99.5 189.0 Singapore (26.0) Doing Business 2014 Dominican Republic 11 Best performer globally Dominican Republic Dominican Republic Colombia DB2014 Puerto Rico (U.S.) Panama DB2014 Jamaica DB2014 Mexico DB2014 Indicator Haiti DB2014 DB2014 DB2013 DB2014 DB2014 Cost (% of income per 67.9 72.7 295.4 627.1 207.1 353.1 66.0 354.4 Qatar (1.1) capita) Getting Electricity 127 125 101 67 132 133 16 38 Iceland (1) (rank) Procedures (number) 7 7 5 4 6 7 5 5 10 Economies (3)* Time (days) 82 82 105 60 96 85 35 32 Germany (17) Cost (% of income per 301.0 322.3 541.6 3,800.1 540.6 369.1 10.3 376.7 Japan (0.0) capita) Registering Property 115 111 53 138 114 150 74 131 Georgia (1) (rank) Procedures (number) 7 7 7 5 6 7 7 8 4 Economies (1)* Time (days) 60.0 60.0 13.0 312.0 36.0 74.0 29.5 193.5 New Zealand (1.0)* Cost (% of property 3.7 3.7 2.0 7.2 9.5 5.3 2.3 0.9 5 Economies (0.0)* value) Getting Credit (rank) 86 82 73 165 109 42 55 13 Malaysia (1)* Strength of legal rights 3 3 5 3 8 6 5 9 10 Economies (10)* index (0-10) Depth of credit 6 6 5 2 0 6 6 5 31 Economies (6)* information index (0-6) Public registry coverage 59.7 44.1 0.0 1.1 0.0 0.0 0.0 0.0 Portugal (100.0)* (% of adults) Private bureau 59.8 60.0 83.8 0.0 0.0 100.0 60.8 100.0 22 Economies (100.0)* coverage (% of adults) Protecting Investors 98 95 6 170 80 68 80 16 New Zealand (1) (rank) Extent of disclosure 5 5 9 2 4 8 4 7 10 Economies (10)* Doing Business 2014 Dominican Republic 12 Best performer globally Dominican Republic Dominican Republic Colombia DB2014 Puerto Rico (U.S.) Panama DB2014 Jamaica DB2014 Mexico DB2014 Indicator Haiti DB2014 DB2014 DB2013 DB2014 DB2014 index (0-10) Extent of director 4 4 8 3 8 5 4 6 Cambodia (10) liability index (0-10) Ease of shareholder 6 6 8 4 4 4 8 8 3 Economies (10)* suits index (0-10) Strength of investor 5.0 5.0 8.3 3.0 5.3 5.7 5.3 7.0 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 106 102 104 132 168 118 175 110 (1) Payments (number per Hong Kong SAR, 9 9 10 47 36 6 52 16 year) China (3)* United Arab Emirates Time (hours per year) 324 324 203 184 368 334 417 218 (12) Trading Across Borders 33 33 94 151 118 59 11 87 Singapore (1) (rank) Documents to export 5 5 4 8 6 4 3 5 Ireland (2)* (number) Time to export (days) 8 8 14 33 20 11 10 15 5 Economies (6)* Cost to export (US$ per 1,040 1,040 2,355 1,200 1,530 1,450 625 1,300 Malaysia (450) container) Documents to import 6 6 6 10 7 4 3 8 Ireland (2)* (number) Time to import (days) 10 10 13 31 17 11 9 15 Singapore (4) Cost to import (US$ per 1,145 1,150 2,470 1,555 2,130 1,740 965 1,350 Singapore (440) container) Enforcing Contracts 81 81 155 96 131 71 127 101 Luxembourg (1) (rank) Doing Business 2014 Dominican Republic 13 Best performer globally Dominican Republic Dominican Republic Colombia DB2014 Puerto Rico (U.S.) Panama DB2014 Jamaica DB2014 Mexico DB2014 Indicator Haiti DB2014 DB2014 DB2013 DB2014 DB2014 Time (days) 460 460 1,288 530 655 400 686 620 Singapore (150) Cost (% of claim) 40.9 40.9 47.9 42.6 45.6 31.0 50.0 25.6 Bhutan (0.1) Procedures (number) 34 34 34 35 35 38 32 39 Singapore (21)* Resolving Insolvency 159 156 25 189 31 26 112 21 Japan (1) (rank) no Time (years) 3.5 3.5 1.7 1.1 1.8 2.5 2.5 Ireland (0.4) practice no Cost (% of estate) 38 38 6 18 18 25 8 Norway (1) practice Outcome (0 as no piecemeal sale and 1 as 0 0 1 1 1 0 1 practice going concern) Recovery rate (cents on 8.8 8.7 70.3 0.0 64.2 67.6 27.5 73.4 Japan (92.8) the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. * 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 2014 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 (2 business in an economy by recording all procedures cannot start on the same day). procedures officially required or commonly done in Procedures that can be fully completed practice by an entrepreneur to start up and online are an exception to this rule. formally operate an industrial or commercial Procedure completed once final document is business—as well as the time and cost required to received complete these procedures. It also records the paid-in minimum capital that companies must No prior contact with officials deposit before registration (or within 3 months). Cost required to complete each procedure The ranking on the ease of starting a business is (% of income per capita) the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost Official costs only, no bribes and paid-in minimum capital requirement. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business: • Has a start-up capital of 10 times income per • Is a limited liability company, located in the capita. largest business city and is 100% domestically • Has a turnover of at least 100 times income per owned. capita. • Has between 10 and 50 employees. • Does not qualify for any special benefits. • Conducts general commercial or industrial • Does not own real estate. activities. Doing Business 2014 Dominican Republic 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Dominican procedures, takes 18.5 days, costs 17.3% of income per Republic? According to data collected by Doing capita and requires paid-in minimum capital of 46.0% 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): 46.0 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Dominican Republic 16 STARTING A BUSINESS Globally, Dominican Republic stands at 144 in the other useful information for assessing how easy it is for ranking of 189 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 2014 Dominican Republic 17 STARTING A BUSINESS What are the changes over time? The benchmarks provided by the economies that over 2.3) can help show what is possible in making it easier time have had the best performance regionally or to start a business. And changes in regional averages globally on the procedures, time, cost or paid-in can show where Dominican Republic is keeping up— minimum capital required to start a business (figure and where it is falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2014 Dominican Republic 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety economies globally have no paid-in minimum capital requirement. DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Dominican Republic 19 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 2.1)? 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 2.1 How has Dominican Republic made starting a business easier—or not? By Doing Business report year DB year Reform A virtual facility was established were registration formalities DB2009 could be completed online, and tax cost was reduced substantially. DB2010 No reform as measured by Doing Business. The Dominican Republic made it more difficult to start a business by setting a minimum capital requirement of 100,000 DB2011 Dominican pesos ($2,855) for its new type of company, sociedad de responsabilidad limitada (limited liability company). 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. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 20 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 professionals and the study of laws, regulations and (SRL) publicly available information on business entry in Paid in Minimum Capital Requirement: DOP that economy. Following is a detailed summary of 100,000 those procedures, along with the associated time and cost. These procedures are those that apply to Start-up Capital: 10 times GNI per capita 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 4,755 for its company’s name. Currently, the interested party may enter www.onapi.gov.do to check and purchase the name online. Less than one day 1 DOP 4,755 Since December 31, 2012, the cost for publication was unified with the (online procedure) cost to check and purchase the company’s name. This unification was due to article 114 of the Law no. 20 00 and article 74 of the Decree Law no. 326 06. Procedure can be done online Arrange for the publication of the company name in the monthly publication of the National Office of Industrial Property (Oficina Nacional de la Propriedad Industrial) The company name announcement is published in a national circulation newspaper in about 10 days. The National Office of Industrial Property publishes the list of requested corporate names and their petitioners twice a month. After that publication, third parties may lodge protests 10 days no charge 2 within 45 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 propriedad industrial-national- Intellectual Property). After the petition or request of the registration of a commercial or trade Doing Business 2014 Dominican Republic 21 Time to No. Procedure Cost to complete complete name is made the National Office of Industrial Property (ONAPI) has a time limit of five (5) business days to issue the Formal Certificate. Since December 31, 2012, the cost for publication was unified with the cost to check and purchase the company’s name. This unification was due to article 114 of the Law no. 20 00 and article 74 of the Decree Law no. 326 06. After requesting the registration of the commercial name, in a term of 5 business days, ONAPI issues its response; if the registration is accepted, immediately the Certificate of Registry is handed over. 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 Eficiencia Recaudatoria (from April 1st 2007) the incorporation taxes (simultaneous with 3 1% of the capital have been unified and only one tax should be paid that accounts as 1% previous of the amount of the authorized capital. The incorporation tax can also procedure) be paid directly at the Internal Revenue Service office (Dirección General de Impuestos Internos) and Banco de Reservas. If the amount does not exceed DOP 10,000, it can be paid in cash. Register the company in the Chamber of Commerce and obtain the identification number (RNC) on-line The company is registered at the Chamber of Commerce. The following documents have to be filed at the Mercantile Registry at the Chamber of Commerce: - Bylaws properly signed; - General Constitutive Assembly with its corresponding list of presence of Associates; 5 days DOP 10,800 4 - List of the distribution of each of the associate’s 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 Industrial Property (ONAPI). Doing Business 2014 Dominican Republic 22 Time to No. Procedure Cost to complete complete Incorporation fees are based on the company’s authorized capital and are calculated according to the fee schedule established by the Chamber of Commerce and Production. 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 issue the fiscal receipts. 2 days no charge 5 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 www.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 work schedules and vacation periods. (simultaneous with 6 DOP 250 previous Fees for registering local employees with the Department of Labor: procedure) 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 Social Security Office (Consejo Nacional de Seguridad Social, CNSS) 1 day The company shall registered and file the list of its employees at the (simultaneous with 7 Social Security National Treasury (Tesorería Nacional de la Seguridad no charge previous Social, TNSS), a dependency of the main social security office (Consejo procedure) Nacional de Seguridad Social, CNSS). According to the Law 188-07 dated August 2007 the TNSS is under the Doing Business 2014 Dominican Republic 23 Time to No. Procedure Cost to complete complete obligation of updating the above mentioned percentages. Under Law 87-01, employers must register employees at the CNSS within 3 days of hiring them or upon the start of business. This procedure can be done online: http://www.tss.gov.do/ or at the Tesorería Nacional de la Seguridad Social. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Dominican Republic 24 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 Submitting 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 land telephone line cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a completion (if required for use as collateral or warehouse in the economy’s largest business city, for transfer of the warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another 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 that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final Doing Business uses several assumptions about the document is received business and the warehouse, including the utility connections. No prior contact with officials The business: Cost required to complete each procedure (% of income per capita) • Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city. • Will be connected to water, sewerage (sewage system, septic tank or their • Is domestically owned and operated. equivalent) and a fixed telephone line. The • Has 60 builders and other employees. connection to each utility network will be 10 The warehouse: meters (32 feet, 10 inches) long. • Is a new construction (there was no • Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions). • Has complete architectural and technical plans prepared by a licensed architect or • Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 Dominican Republic 25 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 216.0 days and costs 67.9% 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: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Dominican Republic 26 DEALING WITH CONSTRUCTION PERMITS Globally, Dominican Republic stands at 121 in the ranking provide other useful information for assessing ranking of 189 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 2014 Dominican Republic 27 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to deal with time have had the best performance regionally or construction permits. And changes in regional globally on the procedures, time or cost required to averages can show where Dominican Republic is deal with construction permits (figure 3.3) help show keeping up—and where it is falling behind. Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2014 Dominican Republic 28 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Dominican Republic 29 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 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How has Dominican Republic made dealing with construction permits easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 30 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, civil engineers, construction lawyers, DOP 13,250,000 Warehouse Value : construction firms, utility service providers and public officials who deal with building regulations. The procedures, along with the associated time and These procedures are those that apply to a cost, are summarized below. company and structure 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 copy (simple, unnotarized) of the real property deed for the plot (does not have to be recently obtained 7 days DOP 1,080 1 • A cadastral plan • 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 1,080.00. If the land-use permit is requested separately from the no- objection certification, the fee is DOP 530.00. If requested separately from the land-use permit, the no-objection certification fee is DOP 550.00. In both cases, the requests must be accompanied by the inspection request. Doing Business 2014 Dominican Republic 31 Time to No. Procedure Cost to complete complete Obtain approval of project design drawings by the Municipal Council, and of the construction license by the Ministry of Public Works and Communications The request for approval of the project design drawings must be 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 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 2 days), the municipality forwards the request to the Ministry of Public 141 days DOP 97,545 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 75.00 per sq. m. For a warehouse of 1300.6 sq. m. the total cost will be DOP 97,545.00. * Receive inspection by the Municipal Council (Departamento de Planeamiento Urbano) The inspection is a prerequisite for the Municipal Council’s project design approval and is undertaken by the municipal authorities. 1 day DOP 500 3 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 500.00. Receive inspection by the Ministry of Public Works and Communications An inspector from the Inspection Department of the Ministry of Public 4 Works (Departamento de Inspección de la Secretaría de Estado de 1 day no charge 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 5 1 day DOP 16,852 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 Doing Business 2014 Dominican Republic 32 Time to No. Procedure Cost to complete complete 2,800.00 per sq. m (1,300.6 sq. m. x DOP 2,800.00 = DOP 3,640,000.00). Thus, the applicable administrative fees (based on a project value of DOP 3,640,000.00) for this procedure are as follows: • Internal taxes: DOP 464.00 • Construction permit, equivalent to 2.5 X 1,000 of the construction cost: DOP 9,104.20 • Fee for the Dominican College of Engineers and Architects (CODIA), equivalent to 2 x 1,000 of the construction cost: DOP 7,280.00. Obtain recibo de entrada from Ministry of Public Works and 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) 6 • Form F-3 DGPU, provided by the municipal authorities 10 days no charge • 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 It is unnecessary to interrupt construction, either during construction 1 day DOP 232 7 inspections or between the inspection request date and the actual inspection. Receive an inspection before the space between galleries (entrepiso) is completed 8 1 day DOP 232 Receive an inspection before the roof of the project is completed The inspection is carried out by an inspector from the Inspection Department of the Ministry of Public Works and Communications 1 day DOP 232 9 (Departamento de Inspeccion de la Secretaria de Estado de Obras Publicas y Comunicaciones). Doing Business 2014 Dominican Republic 33 Time to No. Procedure Cost to complete complete 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 A contract must be executed with the Corporation of Aqueducts and 45 days DOP 25,632 12 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 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 6 days DOP 1,160 14 internal taxes of DOP 1,160.00 (five times the tax of DOP 232.00). This inspection verifies if the transit regulations have been fulfilled and examines the roof’s impermeability, the sanitary installations, the electrical installations, and the door, floor, and window installations. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Dominican Republic 34 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 to either the low-voltage or the medium- • Is a new construction being connected to voltage distribution network and either overhead electricity for the first time. or underground, whichever is more common in the economy and area where the warehouse is • Has 2 stories, both above ground, with a located. The length of any connection in the total surface of about 1,300.6 square customer’s private domain is negligible. meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square • Requires crossing of a 10-meter road but all the feet). works are carried out in a public land, so there is no crossing into other people's private property. The electricity connection: • Involves installing one electricity meter. The • Is 150 meters long and is a 3-phase, 4-wire Y, monthly electricity consumption will be 0.07 140-kilovolt-ampere (kVA) (subscribed gigawatt-hour (GWh). The internal electrical capacity) connection. wiring has been completed. Doing Business 2014 Dominican Republic 35 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity requires 7 procedures, takes 82 days and costs 301.0% 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: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Dominican Republic 36 GETTING ELECTRICITY Globally, Dominican Republic stands at 127 in the another perspective in assessing how easy it is for an ranking of 189 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 2014 Dominican Republic 37 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Dominican Republic Best performer in Dominican Republic Dominican Republic Best performer Indicator Latin America & DB2014 DB2013 globally DB2014 Caribbean DB2014 Rank Trinidad and Tobago 127 125 Iceland (1) (10) Procedures (number) St. Vincent and the 7 7 10 Economies* (3) Grenadines (3) Time (days) 82 82 St. Kitts and Nevis (18) Germany (17) Cost (% of income per Trinidad and Tobago capita) 301.0 322.3 Japan (0.0) (7.0) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Dominican Republic 38 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in technical standards, procurement practices and Dominican Republic (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Dominican Republic made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Dominican Republic 39 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 the neighborhood of the warehouse. EDESUR analyses the 1 interconnection plans and suggest corrections. Two or three visits to 45 calendar days DOP 2,500.0 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 further 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 Once the interconnection plans have been approved by EDESUR, the 2 client hires an electrician to build the electric system (medium voltage 7 calendar days DOP 500,000.0 net, substation, meter, etc.) Receive external inspection by EDESUR 3 EDESUR comes to check that the works follow the approved plan and 7 calendar days no charge raises observations to correct those works which do not follow the approved plans. The client must request the inspection when he Doing Business 2014 Dominican Republic 40 Time to No. Procedure Cost to complete complete 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). 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 distribution network. The client must submit the final letter of approval 7 calendar days DOP 500.0 4 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 must pay the stamp duty of CODIA. The client must pay within 3 months. 1 calendar day DOP 5,000.0 5 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 (Brigada de Trabajo Con Tensión). If the works cannot be carried out 15 calendar days DOP 25,000.0 6 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 contract. The deposit equals twice the client's bill in RD$. That is 7 calculated on the basis of the capacity declared by the client or as a 7 calendar days DOP 120,583.9 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 2014 Dominican Republic 41 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. Procedures that can be fully completed online are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure (% of property value) • Are limited liability companies, 100% domestically and privately owned. Official costs only, no bribes • Are located in the economy’s largest No value added or capital gains taxes included business city. and no rezoning is required. • Have 50 employees each, all of whom are • Has no mortgages attached and has been nationals. under the same ownership for the past 10 • Perform general commercial activities. years. The property (fully owned by the seller): • Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story • Has a value of 50 times income per capita. warehouse of 929 square meters (10,000 The sale price equals the value. square feet). The warehouse is in good • Is registered in the land registry or cada- condition and complies with all safety stre, or both, and is free of title disputes. standards, building codes and legal requirements. There is no heating system. The • Is located in a periurban commercial zone, property will be transferred in its entirety. Doing Business 2014 Dominican Republic 42 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 60.0 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: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Dominican Republic 43 REGISTERING PROPERTY Globally, Dominican Republic stands at 115 in the other useful information for assessing how easy it is for ranking of 189 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 2014 Dominican Republic 44 REGISTERING PROPERTY What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to register time have had the best performance regionally or property. And changes in regional averages can show globally on the procedures, time or cost required to where Dominican Republic is keeping up—and where complete a property transfer (figure 5.3) help show it is falling behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2014 Dominican Republic 45 REGISTERING PROPERTY Cost (% of property value) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Dominican Republic 46 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 5.1)? Table 5.1 How has Dominican Republic made registering property easier—or not? By Doing Business report year DB year Reform The Dominican Republic adopted an Efficient tax collection law to reduce and simplify the taxes collected by the tax authority DB2009 in property transactions. As a result, taxes are reduced from around 4.3% of property value to a single 3% transfer tax. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 47 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 through information collected from local property City: Santo Domingo lawyers, notaries and property registries. These procedures are those that apply to a transaction Property Value: DOP 10,858,829 matching the standard assumptions used by Doing Business in collecting the data (see the section in The procedures, along with the associated time and this chapter on what the indicators cover). cost, are summarized below. 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 property has no liens and there are no other conflicts related to it. DOP 540 (DOP 15 - 25 days The time varies in each district. In Santo Domingo it takes about 15-20 (simultaneous 500, plus stamp 1 days, while in the interior of the country it is faster. duties for DOP 30 with procedure 2) The fees since January 2012 are established in Resolution No. 11-2011 of and DOP 10) the Council of the Judiciary Branch of December 14, 2011. * Site inspection to establish the exact location of the property A surveyor ("agrimensor") inspects the site in order to establish the exact 2 days location of the property. DOP 5,000 – 2 (simultaneous This is not mandatory, but a way the buyer has to protect against 12,000 with procedure 1) potential problems. Notarization of the sale purchase agreement After the agreement is reached and the documentation has been exchanged by the parties, the sale purchase agreement must be 0.25 – 1% of the 3 1 day notarized by the public notary. property price The notary freely establishes its fees. Doing Business 2014 Dominican Republic 48 Time to No. Procedure Cost to complete complete Request the appraisal of the property at the Dirección General de Impuestos Internos (Tax Authority) The parties must submit an application to the Tax Authority (Dirección General de Impuestos) for the valuation of the property. 1 day no cost 4 The Tax Authority decides which cases will need a valuation, and then an appointment for the inspection of the property is scheduled. The 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 An inspector of the Tax Authority visits the property in order to confirm 14 days no cost 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 3% of property 6 1 day institutions and cooperatives, if such real estate property has a value value (transfer tax) under DOP$1,000,000.00 adjustable upon inflation (approximately USD$28,572). 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 Doing Business 2014 Dominican Republic 49 Time to No. Procedure Cost to complete complete new one, with no additional cost. Buyer files the property transfer request before the Title Registrar´s Office When filing request for property registration before the Title Registrar´s 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. 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 7 on March 2005 to replace the previous law from 1947, introduced 20 - 30 days DOP 150 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. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Dominican Republic 50 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 borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s Strength of legal rights index (0–10) financial history (positive or negative)—valuable Rights of borrowers and lenders through information to consider when assessing risk. And collateral laws they permit borrowers to establish a good credit Protection of secured creditors’ rights through history that will allow easier access to credit. Sound bankruptcy laws collateral laws enable businesses to use their assets, especially movable property, as security to generate Depth of credit information index (0–6) capital—while strong creditors’ rights have been Scope and accessibility of credit information associated with higher ratios of private sector credit distributed by public credit registries and 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 whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the • Has up to 100 employees. secured transactions system, involving a secured • Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and • Is a private, incorporated, limited liability the strength of legal rights index. company. • Has its headquarters and only base of operations in the largest business city. Doing Business 2014 Dominican Republic 51 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Dominican Republic stands at 86 in the collateral and bankruptcy laws in Dominican Republic ranking of 189 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 2014 Dominican Republic 52 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 DB2013 DB2014 Rank .. .. .. .. .. .. .. .. 82 86 Strength of legal rights 3 3 3 3 3 3 3 3 3 3 index (0-10) Depth of credit 5 5 6 6 6 6 6 6 6 6 information index (0-6) Public registry coverage 19.2 19.2 11.9 13.3 33.9 29.7 28.5 35.9 44.1 59.7 (% of adults) Private bureau 29.4 34.6 57.1 35.4 35.0 46.1 47.3 54.3 60.0 59.8 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Dominican Republic 53 GETTING CREDIT One way to put an economy’s score on the getting in 2013 and shows the number of economies with this credit indicators into context is to see where the score in 2013 as well as the regional average score. economy stands in the distribution of scores across Figure 6.3 shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Dominican Republic Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2013 information index (0–6), 2013 Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Source: Doing Business database. Doing Business 2014 Dominican Republic 54 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 DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 55 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 credit registry and/or credit bureau (if one exists). To bankruptcy laws. For the strength of legal rights index, construct the depth of credit information index, a a score of 1 is assigned for each of 8 aspects related to score of 1 is assigned for each of 6 features of the legal rights in collateral law and 2 aspects in credit registry or credit bureau (see summary of bankruptcy law. scoring below). Summary of scoring for the getting credit indicators in Dominican Republic Dominican Latin America & OECD high income Indicator Republic Caribbean average average Strength of legal rights index (0-10) 3 6 7 Depth of credit information index (0-6) 6 5 5 Public registry coverage (% of adults) 59.7 31.5 42.9 Private bureau coverage (% of adults) 59.8 63.1 73.9 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Regional averages for the credit registry coverage exclude economies with no credit registry. Regional averages for the credit bureau coverage exclude economies with no credit bureau. Strength of legal rights index (0–10) Index score: 3 Can any business use movable assets as collateral while keeping possession of the assets; and Yes 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 automatically No 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? Doing Business 2014 Dominican Republic 56 Strength of legal rights index (0–10) Index score: 3 Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor No defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is No liquidated? Are secured creditors either not subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure, or does the law provide secured Yes creditors with grounds for relief from an automatic stay or/and sets a time limit to it? 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? Depth of credit information index (0–6) Credit bureau Credit registry Index score: 6 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 Yes 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. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 53,744 37,033 Number of individuals 3,835,943 3,848,263 Source: Doing Business database. Doing Business 2014 Dominican Republic 57 PROTECTING INVESTORS Protecting investors matters 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 protect minority shareholders, investors may be reluctant to provide funding to companies through Extent of disclosure index (0–10) the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor protections: transparency of related-party Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission transactions (extent of disclosure index), liability for of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during trial (ease of shareholder suits index). The Access to internal corporate documents ranking on the strength of investor protection index is (directly or through a government inspector) the simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of • Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). the company purchase used trucks from another company he owns. • Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of • The price is higher than the going price for used Buyer where permitted, even if this is not trucks, but the transaction goes forward. specifically required by law. • All required approvals are obtained, and all The transaction involves the following details: required disclosures made, though the transaction is prejudicial to Buyer. • Mr. James, a director and the majority shareholder of the company, proposes that • Shareholders sue the interested parties and the members of the board of directors. Doing Business 2014 Dominican Republic 58 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections against self- protection index (figure 7.1). While the indicator does dealing in Dominican Republic? The economy has a not measure all aspects related to the protection of score of 5.0 on the strength of investor protection minority investors, a higher ranking does indicate that index, with a higher score indicating stronger an economy’s regulations offer stronger investor protections (see the summary of scoring at the end of protections against self-dealing in the areas measured. this chapter for details). Globally, Dominican Republic stands at 98 in the ranking of 189 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 2014 Dominican Republic 59 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 DB2013 DB2014 Rank .. .. .. .. .. .. .. 95 98 Extent of disclosure 5 5 5 5 5 5 5 5 5 index (0-10) Extent of director 0 0 0 0 4 4 4 4 4 liability index (0-10) Ease of shareholder 7 7 7 7 8 8 6 6 6 suits index (0-10) Strength of investor protection index (0- 4.0 4.0 4.0 4.0 5.7 5.7 5.0 5.0 5.0 10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Dominican Republic 60 PROTECTING INVESTORS One way to put an economy’s scores on the protecting 2013 and shows the number of economies with this investors indicators into context is to see where the score in 2013 as well as the regional average score. economy stands in the distribution of scores across Figure 7.3 applies to the extent of director liability economies. Figure 7.2 highlights the score on the index, and figure 7.4 to the ease of shareholder suits extent of disclosure index for Dominican Republic in index. Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on the extent of Number of economies with each score on the extent of director liability index (0–10), 2013 disclosure index (0–10), 2013 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 Dominican Republic 61 PROTECTING INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Number of economies with each score on the ease of shareholder suits index (0–10), 2013 Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2014 Dominican Republic 62 PROTECTING INVESTORS The scores recorded over time for Dominican Republic changes over time in the regional average score on on the strength of investor protection index may also this index. be revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the protections. Source: Doing Business database. Doing Business 2014 Dominican Republic 63 PROTECTING INVESTORS Economies with the strongest protections of minority reasonable time. As a result, reforms to strengthen investors from self-dealing require detailed disclosure investor protections may move ahead on different and define clear duties for directors. They also have fronts—such as through new or amended company well-functioning courts and up-to-date procedural laws, securities regulations or civil procedure rules. rules that give minority shareholders the means to What investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Dominican Republic (table 7.2)? Table 7.2 How has Dominican Republic strengthened investor protections—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. The Dominican Republic adopted a new company law that strengthened investor protections by requiring greater DB2010 corporate disclosure, director liability and shareholder access to information. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 64 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for are assigned to each based on a range of conditions Dominican Republic are based on detailed information relating to disclosure, director liability and shareholder collected through a survey of corporate and securities suits in a standard case study transaction (see the data lawyers about securities regulations, company laws notes at the end of this chapter). The summary below and court rules of evidence and procedure. To shows the details underlying the scores for Dominican construct the extent of disclosure, extent of director Republic. liability and ease of shareholder suits indices, scores Summary of scoring for the protecting investors indicators in Dominican Republic Latin America & Dominican OECD high income Indicator Caribbean Republic average average Extent of disclosure index (0-10) 5 4 7 Extent of director liability index (0-10) 4 5 5 Ease of shareholder suits index (0-10) 6 6 7 Strength of investor protection index (0-10) 5.0 4.9 6.2 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 5 What corporate body provides legally sufficient Board of directors and Mr. James is 2 approval for the transaction? not allowed to vote Whether disclosure of the conflict of interest by Mr. Existence of a conflict without any 1 James to the board of directors is required? specifics Whether immediate disclosure of the transaction to 0 No disclosure obligation the public and/or shareholders is required? Whether disclosure of the transaction in published Disclosure on the transaction and Mr. 2 periodic filings (annual reports) is required? James' conflict of interest Whether an external body must review the terms of 0 No the transaction before it takes place? Extent of director liability index (0-10) 4 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 1 Yes causes to the company? Whether shareholders can hold Mr. James liable for Liable for negligence or influencing the damage that the Buyer-Seller transaction causes 1 the approval of the transaction to the company? Doing Business 2014 Dominican Republic 65 Score Score description Whether shareholders can hold members of the approving body liable for the damage that the Buyer- 1 Liable for negligence Seller transaction causes to the company? Whether a court can void the transaction upon a Not possible or only in case of Seller's 0 successful claim by a shareholder plaintiff? fraud or bad faith Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 1 Yes the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 No shareholder plaintiff? Whether fines and imprisonment can be applied 0 No against Mr. James? Ease of shareholder suits index (0-10) 6 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 0 No filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 0 No transaction? Whether the plaintiff can obtain any documents from Any information that is relevant to the 3 the defendant and witnesses during trial? subject matter of the claim Whether the plaintiff can request categories of documents from the defendant without identifying 0 No specific ones? Whether the plaintiff can directly question the 2 Yes, without approval from the judge defendant and witnesses during trial? Whether the level of proof required for civil suits is 1 Yes lower than that of criminal cases? Strength of investor protection index (0-10) 5.0 Source: Doing Business database. Doing Business 2014 Dominican Republic 66 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 Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic and joint filing and payment) difficult and costly to pay taxes, larger shares of 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 Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as 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 Arranging payment or withholding payments as well as time taken to comply with tax 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 1 Profit or corporate income tax being applied to the total tax rate. To make the 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, 2011. transactions taxes • The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes • Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the • Taxes and mandatory contributions are company. measured at all levels of government. • A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 25.5%. Doing Business 2014 Dominican Republic 67 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Dominican Republic stands at 106 in the taxes in Dominican Republic—and how much do firms ranking of 189 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 43.5% 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 Source: Doing Business database. Doing Business 2014 Dominican Republic 68 PAYING TAXES What are the changes over time? The benchmarks provided by the economies that over show what is possible in easing the administrative time have had the best performance regionally or burden of tax compliance. And changes in regional globally on the number of payments or the time averages can show where Dominican Republic is required to prepare and file taxes (figure 8.2) help keeping up—and where it is falling behind. Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2014 Dominican Republic 69 PAYING TAXES Total tax rate (% of profit) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 Dominican Republic 70 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 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Dominican Republic made paying taxes easier—or not? By Doing Business report year DB year Reform Effective 17 July 2007, corporate income tax rate reduced from 29% to 25%. Several taxes abolished, including stamp duty. DB2009 online filing and payment which was piloted in 2006, was fully implemented in 2007 and most tax payers are using it. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. The Dominican Republic increased the corporate income tax DB2013 rate. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 71 PAYING TAXES What are the details? The indicators reported here for Dominican LOCATION OF STANDARDIZED COMPANY Republic are based on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the City: Santo Domingo data (see the section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company The taxes and contributions paid are listed in the completed during the year. Respondents are asked summary below, along with the associated number of how much in taxes and mandatory contributions payments, time and tax rate. the business must pay and what the process is for doing so. Summary of tax rates and administrative burden in Dominican Republic Dominican Latin America & OECD high income Indicator Republic Caribbean average average Payments (number per year) 9 30 12 Time (hours per year) 324 369 175 Profit tax (%) 23.7 20.5 16.1 Labor tax and contributions (%) 18.6 14.7 23.1 Other taxes (%) 1.2 12.1 2.0 Total tax rate (% profit) 43.5 47.3 41.3 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. 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 29% 23.7 profit Employer paid - Pension gross 1 online filing 80 7.1% 15.6 contributions salaries Employer paid - Labor risk gross 1 online filing 0 1.3% 1.5 insurance contributions salaries Doing Business 2014 Dominican Republic 72 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 Employer paid - Training gross 1 online filing 0 1% 1.1 tax (INFOTEP) salaries payments via check Tax on electronic transfers 1 online filing 0 0.15% or 1.1 electronic means Employer paid - Health gross 1 online filing 0 7.09% 0.4 insurance contributions salaries Vehicle tax 1 0 RD$ 2,500 fixed fee 0 fuel RD$ 6.3 Fuel tax 1 0 consumpti 0 per gallon on value not Value added tax (VAT) 1 online filing 162 16% 0 added included Totals 9 324 43.5 Source: Doing Business database. Doing Business 2014 Dominican Republic 73 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, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other 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: military items. • Is of medium size and employs 60 people. • Do not require refrigeration or any other special environment. • Is located in the periurban area of the economy’s largest business city. • Do not require any special phytosanitary or environmental safety standards other than • Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and • Are one of the economy’s leading export or regulations of the economy. import products. The traded goods: • Are transported in a dry-cargo, 20-foot full container load. • Are not hazardous nor do they include Doing Business 2014 Dominican Republic 74 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Dominican Globally, Dominican Republic stands at 33 in the Republic? According to data collected by Doing ranking of 189 economies on the ease of trading Business, exporting a standard container of goods across borders (figure 9.1). The rankings for requires 5 documents, takes 8 days and costs $1040. comparator economies and the regional average Importing the same container of goods requires 6 ranking provide other useful information for assessing documents, takes 10 days and costs $1145 (see the how easy it is for a business in Dominican Republic to summary of procedures and documents at the end of export and import goods. this chapter for details). Figure 9.1 How Dominican Republic and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 Dominican Republic 75 TRADING ACROSS BORDERS What are the changes over time? The benchmarks provided by the economies that over possible in making it easier to trade across borders. time have had the best performance regionally or And changes in regional averages can show where globally on the documents, time or cost required to Dominican Republic is keeping up—and where it is export or import (figure 9.2) help show what is falling behind. Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2014 Dominican Republic 76 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2014 Dominican Republic 77 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Dominican Republic 78 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 9.1)? risk-based inspections and electronic data interchange Table 9.1 How has Dominican Republic made trading across borders easier—or not? By Doing Business report year DB year Reform Improvements in the area of the online portal, risk-based DB2009 inspections, and banking sector, led to a decrease in export and import time. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 79 TRADING ACROSS BORDERS What are the details? The indicators reported here for Dominican LOCATION OF STANDARDIZED COMPANY Republic are based on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this City: Santo Domingo chapter on what the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each The procedural requirements, and the associated time procedure is collected from local freight forwarders, and cost, for exporting and importing a standard shipping lines, customs brokers, port officials and shipment of goods are listed in the summary below, banks. along with the required documents. Summary of procedures and documents for trading across borders in Dominican Republic Dominican Latin America & OECD high income Indicator Republic Caribbean average average Documents to export (number) 5 6 4 Time to export (days) 8 17 11 Cost to export (US$ per container) 1,040 1,283 1,070 Documents to import (number) 6 7 4 Time to import (days) 10 19 10 Cost to import (US$ per container) 1,145 1,676 1,090 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 3 215 Customs clearance and technical control 2 200 Ports and terminal handling 1 325 Inland transportation and handling 2 300 Totals 8 1,040 Procedures to import Time (days) Cost (US$) Documents preparation 5 235 Doing Business 2014 Dominican Republic 80 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 2 200 Ports and terminal handling 2 410 Inland transportation and handling 1 300 Totals 10 1,145 Documents to export Documents to import Bill of lading Bill of lading Commercial Invoice Cargo release order Customs export declaration Commercial invoice Packing List Customs import declaration (Declaración Unica Aduanera) Pre-shipment inspection clean report of findings Packing list Source: Doing Business database. Terminal handling receipts Doing Business 2014 Dominican Republic 81 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment Time required to complete procedures What do the indicators cover? (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case: • The seller and buyer are located in the economy’s largest business city. • The dispute on the quality of the goods requires an expert opinion. • The buyer orders custom-made goods, then fails to pay. • The judge decides in favor of the seller; there is no appeal. • The seller sues the buyer before a competent court. • The seller enforces the judgment through a public sale of the buyer’s movable assets. • The value of the claim is 200% of income per capita. • The seller requests a pretrial attachment to secure the claim. Doing Business 2014 Dominican Republic 82 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Dominican Republic stands at 81 in the dispute through the courts in Dominican Republic? ranking of 189 economies on the ease of enforcing According to data collected by Doing Business, contracts (figure 10.1). The rankings for comparator contract enforcement takes 460 days, costs 40.9% of economies and the regional average ranking provide the value of the claim and requires 34 procedures (see other useful benchmarks for assessing the efficiency of the 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 2014 Dominican Republic 83 ENFORCING CONTRACTS What are the changes over time? The benchmarks provided by the economies that over help show what is possible in improving the efficiency time have had the best performance regionally or of contract enforcement. And changes in regional globally on the number of steps, time or cost required averages can show where Dominican Republic is to enforce a contract through the courts (figure 10.2) keeping up—and where it is falling behind. Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2014 Dominican Republic 84 ENFORCING CONTRACTS Procedures (number) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Dominican Republic 85 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 10.1)? often work on reducing backlogs by introducing Table 10.1 How has Dominican Republic made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 86 ENFORCING CONTRACTS What are the details? The indicators reported here for Dominican COURT NAME Republic are based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the City: Santo Domingo section in this chapter on what the indicators cover). These procedures, and the time and cost of Claim Value LCU: 405734 completing them, are identified through study of the codes of civil procedure and other court Civil and Commercial regulations, as well as through surveys completed Court Name: Court of First Instance of by local litigation lawyers (and, in a quarter of the the National District economies covered by Doing Business, by judges as well). The procedures for resolving a commercial lawsuit, and the associated time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Dominican Republic—and the time and cost Dominican Latin America & OECD high income Indicator Republic Caribbean average average Time (days) 460 734 529 Filing and service 20 Trial and judgment 320 Enforcement of judgment 120 Cost (% of claim) 40.9 31.0 21.0 Attorney cost (% of claim) 25.0 Court cost (% of claim) 7.5 Enforcement Cost (% of claim) 8.4 Procedures (number) 34 40 31 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Doing Business 2014 Dominican Republic 87 ENFORCING CONTRACTS No. Procedure Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. A third person formally notifies Defendant: A person other than the Plaintiff or his lawyer, such as a notary 2 public, formally notifies Defendant of Plaintiff’s request for payment. 3 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before the court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally * or in writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes 4 assigning a reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random * procedure, automated system, ruling of an administrative judge, court officer, etc. Arrangements for physical delivery of summons and complaint: Plaintiff takes whatever steps are * necessary to arrange for physical service of process on Defendant, such as instructing a court officer or a (private) bailiff. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to 5 Defendant is successful in the majority of cases. * Proof of service: Plaintiff submits proof of service to court. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either 6 physical or achieved by registering, marking, debiting or separating assets. (see assumption 5) Custody of assets attached prior to judgment: Defendant's attached assets are put under enforcement 7 officer's or (private) bailiff's care. (see assumption 5) Trial and judgment: Defendant’s filing of preliminary exemptions: Defendant presents preliminary exemptions to the court. * Preliminary exemptions differ from answers on the merits of the claim. Examples of preliminary exemptions are statute of limitations, jurisdictions, etc. Doing Business 2014 Dominican Republic 88 No. Procedure Plaintiff’s answer to preliminary exemptions: Plaintiff responds to the preliminary exemptions raised by * Defendant. Judge’s resolution on preliminary exemptions: Judge decides on preliminary exemptions separately from 8 the merits of the case. Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his defense or answer on the merits of the case. Defendant's written answer may or may not 9 include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Deadline for Plaintiff to answer Defendant's defense or answer: Judge sets the deadline by which Plaintiff 10 will be allowed to answer Defendant's defense or answer. Plaintiff’s written response to Defendant's defense or answer: Plaintiff responds to Defendant’s defense or 11 answer with a written pleading. Plaintiff's answer may or may not include a witness statements or expert (witness) statements. Filing of pleadings: Plaintiff and Defendant file written pleadings and submissions with the court and 12 transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 6-b of this case) Delivery of expert report by court-appointed expert: The independent expert appointed by the court * delivers his or her expert report to the court. (see assumption 6-b of this case) 13 Request for oral hearing or trial: Plaintiff applies for the date(s) for the oral hearing or trial. * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 14 adjournment to prepare for the oral hearing or trial. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the 15 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 16 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. 17 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 18 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 19 judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 20 judgment is available at the courthouse. 21 Plaintiff's receipt of a copy of written judgment: Plaintiff receives a copy of the written judgment. Doing Business 2014 Dominican Republic 89 No. Procedure Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. 22 The appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in 23 the law. Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Enforcement of judgment: Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented * by a lawyer during the enforcement of judgment phase. Plaintiff's approaching of court enforcement officer or (private) bailiff to enforce the judgment: To enforce 24 the judgment, Plaintiff approaches a court enforcement officer such as a court bailiff or sheriff, or a private bailiff. Plaintiff’s advancement of enforcement fees: Plaintiff pays the fees related to the enforcement of the 25 judgment. Plaintiff’s request for physical enforcement: As Plaintiff fears that Defendant might physically resist the * attachment of its movable goods, Plaintiff addresses a request to the judge or to the police authorities to obtain police assistance during the attachment of Defendant's movable goods. Judge's order for physical enforcement: The judge orders the police to assist with the physical 26 enforcement of the attachment of Defendant's movable goods. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 27 (private) bailiff requests Defendant to voluntarily comply with the judgment, giving Defendant a last chance to comply voluntarily with the judgment. Plaintiff’s identification of Defendant's assets for attachment: Plaintiff identifies Defendant's assets for 28 attachment. Notification of intent to attach: A court enforcement officer or (private) bailiff notifies other creditors of 29 the intent to attach Defendant's goods. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 30 assets). Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant 31 opposes aspects of the enforcement process before the judge. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 32 newspapers. 33 Sale through public auction: The Defendant’s movable property is sold at public auction. Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which 34 Plaintiff had advanced previously. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2014 Dominican Republic 90 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 Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through Recovery rate for creditors (cents on the reorganization, liquidation or debt enforcement dollar) (foreclosure) proceedings. The recovery rate is a Measures the cents on the dollar recovered function of time, cost and other factors, such as by creditors lending rate and the likelihood of the company continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account • Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered • Operates in the economy’s largest business city. • Has 201 employees, 1 main secured • Has a higher value as a going concern—and creditor and 50 unsecured creditors. the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 Dominican Republic 91 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses sold as piecemeal sale. The average recovery rate is 8.8 characterize the top-performing economies. How cents on the dollar. efficient are insolvency proceedings in Dominican Globally, Dominican Republic stands at 159 in the Republic? According to data collected by Doing ranking of 189 economies on the ease of resolving Business, resolving insolvency takes 3.5 years on insolvency (figure 11.1). The rankings for comparator average and costs 38% of the debtor’s estate, with the economies and the regional average ranking provide most likely outcome being that the company will be other useful benchmarks for assessing the efficiency of insolvency proceedings in Dominican Republic. Figure 11.1 How Dominican Republic and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 Dominican Republic 92 RESOLVING INSOLVENCY What are the changes over time? The benchmarks provided by the economies that over possible in improving the efficiency of insolvency time have had the best performance regionally or proceedings. And changes in regional averages can globally on the time or cost of insolvency proceedings show where Dominican Republic is keeping up—and or on the recovery rate (figure 11.2) help show what is where it is falling behind. Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2014 Dominican Republic 93 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. “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. Regional averages on time and cost exclude economies with a “no practice” mark. Source: Doing Business database. Doing Business 2014 Dominican Republic 94 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 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Dominican Republic made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Dominican Republic 95 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of employing workers methodology proposed by the employment, specifically as it affects the hiring and consultative group are available on the Doing Business redundancy of workers and the rigidity of working website (http://www.doingbusiness.org). The data on hours. Over the period from 2007 to 2011 employing workers are based on a detailed survey of improvements were made to align the methodology employment regulations that is completed by local for the employing workers indicators with the letter lawyers and public officials. Employment laws and and spirit of the International Labour Organization regulations as well as secondary sources are reviewed (ILO) conventions. Only 4 of the 188 ILO conventions to ensure accuracy. cover areas measured by Doing Business: employee To make the data comparable across economies, termination, weekend work, holiday with pay and night several assumptions about the worker and the work. The Doing Business methodology is fully business are used. consistent with these 4 conventions. The ILO conventions covering areas related to the Employing The worker: Workers indicators do not include the ILO core labor • Earns a salary plus benefits equal to the standards—8 conventions covering the right to economy’s average wage during the entire collective bargaining, the elimination of forced labor, period of his employment. the abolition of child labor and equitable treatment in • Has a pay period that is the most common for workers in the economy. employment practices. • Is a lawful citizen who belongs to the same race and religion as the majority of the Between 2009 and 2011 the World Bank Group worked economy’s population. with a consultative group—including labor lawyers, • Resides in the economy’s largest business city. employer and employee representatives, and experts • Is not a member of a labor union, unless from the ILO, OECD, civil society and the private membership is mandatory. sector—to review the employing workers methodology and explore future areas of research. A i The business: • Is a limited liability company. full report with the conclusions of the consultative • Operates in the economy’s largest business group is available at city. http://www.doingbusiness.org/methodology/employin • Is 100% domestically owned. g-workers. • Operates in the manufacturing sector. • Has 60 employees. This year Doing Business continued research collecting • Is subject to collective bargaining agreements additional data on regulations covering the in economies where such agreements cover probationary period for new employees. more than half the manufacturing sector and apply even to firms not party to them. Doing Business 2014 presents the data on the • Abides by every law and regulation but does not grant workers more benefits than employing workers indicators in an annex. The report mandated by law, regulation or (if applicable) does not present rankings of economies on the collective bargaining agreement. employing workers indicators nor include the topic in the aggregate ranking on the ease of doing business. Detailed data collected on labor regulations and the Doing Business 2014 Dominican Republic 96 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Dominican other things, the minimum wage for a 19-year-old Republic (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2014 Dominican Republic 97 EMPLOYING WORKERS Employment laws are needed to protect workers from past 5 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Dominican Republic contracting between employers and workers. Many adopt that affected the Doing Business indicators on economies that changed their labor regulations in the employing workers (table 12.1)? Table 12.1 What changes did Dominican Republic make in employing workers in 2013? DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Dominican Republic 98 EMPLOYING WORKERS What are the details? The data on employing workers reported here for lawyers and public officials. Employment laws and Dominican Republic are based on a detailed survey of regulations as well as secondary sources are reviewed employment regulations that is completed by local to ensure accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy’s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage for a 19-year old worker or an apprentice (US$/month) 270.3 Ratio of minimum wage to value added per worker 0.38 Source: Doing Business database. Doing Business 2014 Dominican Republic 99 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data Standard workday in manufacturing (hours) 8 hours 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in production? Maximum working days per week 5.5 Premium for night work (% of hourly pay) in case of continuous 0% operations Premium for work on weekly rest day (% of hourly pay) in case of 100% continuous operations Major restrictions on night work in case of continuous operations? No Major restrictions on weekly holiday in case of continuous operations? Yes Paid annual leave for a worker with 1 year of tenure (in working days) 14.0 Paid annual leave for a worker with 5 years of tenure (in working days) 14.0 Paid annual leave for a worker with 10 years of tenure (in working days) 14.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 14.0 working days) Source: Doing Business database. Doing Business 2014 Dominican Republic 100 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? No Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Source: Doing Business database. Doing Business 2014 Dominican Republic 101 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 4.0 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 4.0 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 4.0 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 4.0 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 3.8 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 20.9 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 41.8 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 22.2 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2014 Dominican Republic 102 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing 2 The data for paying taxes refer to January – December 2012. multiple interactions with local respondents to clarify Doing Business 2014 Dominican Republic 103 potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation—as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified Changes in what is measured size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully reasons the time delays reported in Doing Business completed online in just a few hours. This change 2014 would differ from the recollection of affects the time indicator for starting a business, Doing Business 2014 Dominican Republic 104 dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business and the distance to frontier measure. The business. ease of doing business ranking compares economies More complex aggregation methods—such as 3 For getting electricity the rule that each procedure must take a principal components and unobserved components— minimum of 1 day still applies because in practice there are no yield a ranking nearly identical to the simple average cases in which procedures can be fully completed online in less than a day. For example, even though in some cases it is possible to apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 Dominican Republic 105 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly identical to that from the simple average method because both since 2003 or the first year the indicator was collected. 5 these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 Dominican Republic 106 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. Doing Business 2014 Dominican Republic 108 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2014 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 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/ iphone Doing Business 2014 Dominican Republic 109