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2011 Investment Climate Statement - Dominica


2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report
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Openness to, and Restrictions upon, Foreign Investment

The Government of the Commonwealth of Dominica strongly encourages foreign direct investment, particularly in industries that create jobs, earn foreign currency, and have a positive impact on its citizens.

The government has instituted a number of investment incentives for businesses considering the possibility of locating in Dominica, encouraging both domestic and foreign private investment. Government policies provide liberal tax holidays, duty-free import of equipment and materials, exemption from value added tax on some capital investments, and withholding tax exemptions on dividends, interest payments and some external payments and income. Fiscal incentives are provided under various laws to encourage the establishment and expansion of both foreign and domestic investment.

All investment proposals are reviewed by the Invest Dominica Authority to ensure that the project is consistent with the national interest and provides economic benefits to the country. The Invest Dominica Authority provides ‘one stop shop facilitation” services to investors to guide them through the various stages of the investment process. Dominica encourages investment in the following sectors: hotel accommodation including eco-lodges, flagship boutique hotels; nature and adventure tourism services; fine dining restaurants; information and technology services; film, music and video production; agro-processing; manufacturing; bulk water export and bottled water operations; medical and nursing schools; health and wellness tourism; geothermal and biomass industries; biodiversity; aquaculture; and English language training services. Additional sectors may also be subject to approval. Only qualified projects are granted approval to be established in Dominica.

Foreign nationals receive the same legal protections as local citizens. The police and court systems are unbiased in commercial matters, and the government operates in a generally transparent manner. The judicial system generally upholds the sanctity of contracts, although court proceedings can last years. Dominica has a legal system based on British common law. The judiciary is independent, and trials are generally fair.

Local enterprises generally welcome joint ventures with foreign investors in order to access technology, expertise, markets, and capital. There is no general limit on the amount of foreign ownership or control in the establishment of a business, but business is subject to a government approval process. To successfully start a business in Dominica, the general process for an investor is to: 1) register or incorporate the business, 2) register with the Inland Revenue Division, 3) apply for a value-added tax registration number; 4) register with the Dominica Social Security; 5) obtain an Alien Land Holding License (if applicable); 6) seek permission from the Physical Planning Division (if applicable); 7) seek permission from other government agencies (if applicable; for example, if the investment is in the tourism sector, Discover Dominica Authority and the Environmental and Health Unit provide certifications as to standards, etc); and 8) apply for work permits. If fiscal incentives are being sought, depending upon the sector, an application is filed with the Invest Dominica Authority, where a screening committee reviews the application and makes a decision on the incentive application. The decision-making process is relatively fast, with the investor receiving a clear answer of approval, disapproval or a request for more information within two to four weeks. The purpose of the approval process for fiscal incentives is to ensure consistency with national interest policies, legal requirements, and net economic benefit. Where the investment is less than two million EC dollars, the decision is made by a subcommittee of the Cabinet, called the Approval Committee. If the investment is more than two millions EC dollars, the matter is submitted to the Cabinet for consideration and approval. It normally takes one month for the Cabinet to make a decision.

There are some special license requirements as to acquisition of land, development of buildings and expansion of existing construction, and special standards for various aspects of the tourism industry. Individuals or corporate bodies who are not citizens and who are seeking to acquire land may require a license prior to the execution of the transactions, depending upon the amount of land in question. An alien may hold less than one acre of land for residential purposes or less than three acres for commercial purposes without obtaining an alien landholding license; if more land is required then a license must be obtained, and the applicant must pay a fee equivalent to10% of the market value of the land. The Tourism Act of 2005 provides for the creation of standards for the tourism sector and the government through the Discover Dominica Authority regulates and certifies certain tourism services, such as food and hotel services, vendors, travel agents, taxi operators, hair braiders, tour operators, tour guides and water sports activities.

Measure

Year

Index/Ranking

TI Corruption Index

2010

5.2/44

Heritage Economic Freedom

2011

63.3/72

World Bank Doing Business

2011

85

MCC Government Effectiveness

N/A

N/A

MCC Rule of Law

N/A

N/A

MCC Control of Corruption

N/A

N/A

MCC Fiscal Policy

N/A

N/A

MCC Trade Policy

N/A

N/A

MCC Regulatory Quality

N/A

N/A

MCC Business Start Up

N/A

N/A

MCC Land Rights Access

N/A

N/A

MCC Natural Resource Mgmt

N/A

N/A

Conversions and Transfer Policies

Foreign investors in Dominica can repatriate all profits, dividends and import capital. There are no restrictions on the repatriation of dividends for totally foreign-owned firms; however a mixed foreign–domestic company may repatriate profits to the extent of its foreign participation.

There are no exchange controls in Dominica and the invoicing of foreign trade transactions may be made in any currency. Importers are not required to make prior deposits in local funds and export proceeds do not have to be surrendered to Government authorities or to authorized banks. There are no controls on transfers of funds. The Government of the Commonwealth of Dominica guarantees the free transfers of profits and repatriation of capital.

Expropriation and Compensation

Dominica employs a system of eminent domain to pay compensation when property needs to be acquired in the public interest. One matter is pending in arbitration concerning a dispute over an exclusive license to provide quasi-government services to the public.

Dispute Settlement

Dominica bases its legal system on the British common law system. The Magistrates and the High Court administer justice in Dominica. An appeal may be taken to the Organization of Eastern Caribbean States Court of Appeal, and final appeals are taken to the Judicial Committee of the Privy Council in the United Kingdom.

The United States and Dominica are both parties to the World Trade Organization (WTO). The WTO Dispute Settlement Panel and Appellate Body resolves disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes.

Performance Requirements and Incentives

While there are no formal performance requirements, government officials will more likely approve investments they believe will create jobs and increase exports and foreign exchange earnings. There are no requirements for participation either by nationals or by the Government in foreign investment projects.

There is no requirement that enterprises must purchase a fixed percentage of goods from local sources, but the Government encourages local sourcing.

Fiscal Incentives Act

In an effort to increase investment, Dominica has implemented a series of investment incentives. The Fiscal Incentives Act provides a list of incentives including:

  • Tax holiday of up to 20 years for approved hotel and resort developments
  • Exemption from customs duties on material and equipment deemed necessary to establish or update an enterprise
  • Withholding Tax exemptions on dividends, interest payments, and other relevant external payments
  • Exemption from payment of import duty on plant, machinery, equipment, spare parts, raw and packaging materials, and vehicles
  • Exemption from Income tax on any income accrued from a source outside Dominica to a retired person who, prior to retirement, was not resident in Dominica
  • Exemption from provisions of the value added tax for capital investments for the initial investment up to commencement of taxable activities, for direct imports of approved items on the master list consigned to the approved enterprise
  • Other incentives may be granted where appropriate

Corporate Tax Incentives

· Under the Fiscal Incentives Act, four types of enterprise qualify for tax holidays. The length of the tax holiday for the first three depends on the amount of value added in Dominica. The fourth type, known as enclave industry, must produce goods exclusively for export outside the CARICOM region.

Enterprise

Value Added

Maximum Tax Holiday

Group I

50% or more

15 years

Group II

25% to 50 %

12 years

Group III

10% to 25%

10 years

Enclave

Enclave

15 years

Companies which qualify for tax holidays are allowed to import into Dominica duty-free all equipment, machinery, spare parts and raw materials used in production.

Hotels Aids Act and Taxes
 

The Hotel Aids Act provides relief from customs duties on items brought into the country for use in construction, extension and equipping of a hotel of not less than 5 bedrooms. In addition, the Income Tax Act provides special tax relief benefits for hotels. These provide for granting of a tax holiday for up to 20 years for approved hotel and resort developments.

Corporate Income Tax

The standard corporate income tax rate is 30%. There is no capital gains tax. IBCs are exempt from tax. Corporate tax does not apply to exempt companies or to enterprises that have been granted tax concession.

Export Allowance
 

Dominica provides companies with a further tax concession effective at the end of the tax holiday period. In effect, it is a rebate of a portion of the income tax paid based on export profits as a percentage of total profits.

Exemption from Import Duties
 

Full exemption from import duties on parts, raw materials, and production machinery is also available.

Citizenship through Investment

Under the Economic Citizenship Program, foreign individuals can obtain citizenship in accordance with section VII of the Constitution and the 1993 Amendment to the Citizenship Act, which grants the right of citizenship (without voting rights), by investment. The minimum that would entitle an investor to qualify is US$75,000, or US$100,000 for a family. Applicants must also provide a full medical certificate; undergo a background check and provide evidence of the source of funds before proceeding to the final stage of an interview. In order to minimize the risk of unlawful duplication addition, the Government has introduced a Citizen by Investment Certificate.

Right to Private Ownership and Establishment

Foreign investment in Dominica is not subject to any restrictions, and foreign investors are entitled to receive the same treatment as nationals of Dominica. The only restriction is the requirement to obtain an Alien Landholders License for foreign investors seeking to purchase property for residential or commercial purposes (more than one acre for residential purposes, or more than three acres for commercial purposes). The cost of these licenses is 10% of the value of the land or of the interest in the real estate to be purchased. Licenses are granted once properly submitted to Cabinet for consideration.

Protection of Property Rights

Civil law protects physical property and mortgage claims. Dominica is a member of the United Nations World Intellectual Property Organization (WIPO). Article 45 of the Protocol Amending the Treaty that established CARICOM commits all 15 members to implement stronger IP protection and enforcement.

The administration of intellectual property laws in Dominica is under the responsibility of the Attorney General. The registration of patents, trademarks, and service marks is administered by the Companies and Intellectual Property Office.

Transparency of the Regulatory System

The regulatory system in Dominica is governed by public laws on procurement, customs, companies act and regulations, all of which are available on the Commonwealth of Dominica website, http://www.dominica.gov.dm/laws/.

The Revised Treaty of Chaguaramas provides the competition policy applicable to CARICOM States. Member States are required to establish and maintain a national competition authority for facilitating the implementation of the rules of competition. At the CARICOM level, a regional Competition Commission is established to apply the rules of competition in respect of anti-competitive cross-border business conduct. The CARICOM competition policy addresses anti-competitive business conduct, such as agreements between enterprises, decisions by associations of enterprises, and concerted practices by enterprises that have as their object or effect the prevention, restriction or distortion of competition within the Community; and actions by which an enterprise abuses its dominant position within the Community. No legislation is yet in operation to regulate competition generally. However, sectoral regulation of competition in the telecommunications field is provided for under the Telecommunications Act.

Efficient Capital Markets and Portfolio Investment

Dominica is a member of the OECS, and as such, it is also a member of the Eastern Caribbean Securities Exchange (ECSE). The ECSE is a regional securities market established by the Eastern Caribbean Central Bank and licensed under the Securities Act of 2001- a uniform regional body of legislation governing securities market activities to facilitate the buying and selling of financial products for the eight member territories. Dominica is a member of this stock exchange, and is open to portfolio investment.

Competition from State Owned Enterprises

A comprehensive government restructuring of the economy, including elimination of price controls and privatization of the state banana company, is ongoing in Dominica.

There are a very limited number of statutory corporations (state-owned enterprises) in Dominica. Those that exist do not generally post a threat to investors, as they directly support the government in achieving its objectives.

Corporate Social Responsibility

Investors in Dominica are required to recognize the economic and social objects as well as the policies and priorities of the government. They are also equally responsible for maintaining workers rights and safeguarding the environment. The Labor Commissioner settles disputes over safety conditions. Workers have the right to report unsafe work environments without jeopardy to continued employment; inspectors then investigate such claims, and workers may leave such locations without jeopardy to their continued employment.

Political Violence

Dominica does not have a history of political violence.

Corruption

Dominica does not have a major problem with corruption, although there have been some widely publicized allegations against government officials. None of those allegations have been substantiated in the courts.

The country is also party to the Inter-American Convention against Corruption.

Currency and Monetary Regulation

Dominica's currency is the Eastern Caribbean Dollar (EC$), a regional currency shared among members of the Eastern Caribbean Currency Union (ECCU). The Eastern Caribbean Central Bank (ECCB) issues the EC$, manages monetary policy, and regulates and supervises commercial banking activities in its member countries. The ECCB has kept the EC$ pegged at EC$2.7=U.S. $1.
 

OPIC and other Investment Insurance Programs

In 1999, the U.S. Government's Overseas Private Investment Corporation (OPIC) signed with Citibank to establish a USD $200 million Investment Facility for the Caribbean and Central America, as one means of encouraging investment and stimulating economic development. The Caribbean Development Bank, which is based in Barbados, administers this program. OPIC provides financing and political risk insurance to viable private sector projects, helps U.S. businesses invest overseas, and fosters economic development in new and emerging markets.

Additionally, in 2004, OPIC approved an additional investment guaranty of up to $100 million to Citibank to establish a lending facility that will enable Citibank to expand its activity in Central America and the Caribbean, including lending to small businesses. Under this facility, Citibank and OPIC share credit risk in loans, and OPIC provides clearances on workers’ rights and environmental issues for each downstream loan.

Labor

Dominica’s minimum wage was last raised in June 2008. It varies according to the category of worker, with the lowest minimum wage set at about US$1.50 an hour and the maximum set at around US$2.06 an hour. The standard workweek is 40 hours for five days of work. The law provides overtime pay for work in excess of the standard workweek.

Dominica has a labor force of about 25,000 persons, with a literacy rate of 94%. The country’s technical and training needs are met largely by the local state college, which offer courses in skilled labor, including, plumbing, electrical engineering, air conditioning and refrigeration, masonry, carpentry, mechanical engineering, motor mechanics, typing and basic hotel skills. There is also a pool of professionals to draw from, in fields such as law, medicine, business information technology and accounting. Many of the professionals in Dominica trained in the Caribbean, the United States, Canada or the United Kingdom where, many of them gained work experience before returning to Dominica.

Foreign Trade Zones/Free Ports

There are no foreign trade zones or free ports in Dominica.

Foreign Direct Investment Statistics

According to the last available data, US$48 million (31 December 2007 est.) was the estimated amount of all inward flowing foreign direct investment.

Bilateral Investment Agreement, Economic Agreements and Trade Agreements

Dominica has no bilateral investment treaty with the United States. Dominica has a bilateral investment treaty with the United Kingdom and with Germany.

Caribbean Community (CARICOM)

The Treaty of Chaguaramas established CARICOM in 1973. Its purpose is to promote economic integration among its fifteen (15) Member States. Investors operating in Dominica are given preferential access to the entire CARICOM market. The Revised Treaty of Chaguaramas goes further to establish the CARICOM Single Market and Economy (CSME), by permitting the free movement of goods, capital and labor within CARICOM States.

Organisation of Eastern Caribbean States (OECS)

The Treaty of Basseterre establishes the Organisation of Eastern Caribbean States (OECS). The OECS consists of nine Member States of Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts & Nevis, St. Lucia and St. Vincent & the Grenadines with associate members being Anguilla and the British Virgin Islands. The purpose of the Treaty is to promote harmonization among Member States in areas concerning foreign policy, defense and security, and economic affairs.

Economic Partnership Agreement (EPA)

The Economic Partnership Agreement (EPA) was concluded between the CARIFORUM States and the European Community and its Member States. The EPA is designed to replace the now expired transitional trade regime of the Cotonou Agreement. The overarching objectives of the EPA are to alleviate poverty in CARIFORUM, to promote regional integration and economic cooperation and to foster the gradual integration of the CARIFORUM states into the world economy by improving their trade capacity and creating an investment-conducive environment. The Agreement promotes trade related developments in areas such as competition, intellectual property, and public procurement, the environment and protection of personal data.

Caribbean Basin Initiative (CBI)

The objective of the Caribbean Basin Initiative is to promote economic development through private sector initiative in Central America and the Caribbean islands by expanding foreign and domestic investment in non-traditional sectors, diversifying CBI country economies and expanding their exports. It permits duty free entry of products manufactured or assembled in Dominica into markets of the USA.

Caribbean / Canada Trade Agreement (CARIBCAN)

CARIBCAN is an economic and trade development assistance program for Commonwealth Caribbean countries in which Canada provides duty free access to its national market for the majority of products which originate in Commonwealth Caribbean countries.

Dominica is a member of the WTO, and has a multilateral economic association agreement with the European Union.

Major U.S. Investors

Clear Harbor, Ross University School of Medicine, Coca Cola, Colgate-Palmolive, are some major US investors operating in Dominica. Franchises include Subway, Pizza hit, Kentucky Fried Chicken, Western union and Federal Express.

For further information, please contact the Economic/Commercial Section at the U.S. Embassy.

Gregory Floyd
Commercial Officer
US Embassy, Bridgetown, Barbados
Tel: 246-277-4274

Andrea Hillyer
Political, Economic and Commercial Officer
US Embassy, Bridgetown, Barbados
Tel: 246-277-4273

Jonelle M. Watson
Commercial Assistant
US Embassy Bridgetown, Barbados
Tel: 246-277-4052
watsonjm@state.gov

Contacts for Investment Related Inquires

The following are contacts for investment related inquiries:

Invest Dominica Authority
1st Floor Financial Centre
Roseau
Commonwealth of Dominica
Tel: +1 (767) 448-2045
Fax: +1 (767) 448-5840
Email: info@investdominica.dm
Skype: investdominica

Dominica Association of Industry & Commerce
PO Box 85
14 Church Street
Roseau
Commonwealth of Dominica
Tel: 767-449-1962
E-mail: daic@cwdom.dm


Dominica Export Import Agency (DEXIA)
P. O. Box 173,
Bayfront,
Roseau, DOMINICA,
Eastern Caribbean.
Tel: 767-448-2780/3494/5
Fax: 767-448-6308
email: info@dexia.dm
www.dexia.dm

Dominica Hotel & Tourism Association
17 Castle Street
PO Box 384
Roseau,
Dominica
Tel 1-767-440-3430
Fax 1-767-440-3433
Email: dhta@cwdom.dm
www.facebook.com/DHTADominica

Web Resources

United States

Foreign Commercial Service, U.S. Department of Commerce:

http://www.buyusa.gov/caribbean/en/; and

http://www.export.gov/index.asp

Foreign Agricultural Service, U.S. Department of Agriculture:

http://www.fas.usda.gov/; and

http://www.export.gov/fas/fas.asp



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