Company registration in Dominica

When choosing a jurisdiction for launching a promising commercial project in a tax-free zone, a business person will have several good options. Opening a company in Dominica is one of the most interesting. This Caribbean island state has created favourable conditions for foreign businesspeople and investors.

It has clear and logical corporate regulations, low taxes, and a citizenship by investment programme. The jurisdiction has no FATF or OECD sanctions, so it is possible to launch complex commercial projects that require time to implement.

Dominica’s banking system is stable and developed, and businesspeople and companies will have no problems opening accounts or accessing financial services. The legislation in force in the jurisdiction is favourable to the launch of projects aimed at asset protection and diversification. The level of confidentiality in Dominica is very high, which is why the island is often chosen as a comfortable place to live, relax and do business by wealthy individuals who do not seek publicity.

Dominica’s business profile:

• official language — English;
• form of government: parliamentary republic;
• location — south of the Caribbean region;
• time zone: GMT UTC-4;
• currency — East Caribbean dollar (XCD);
•  USD/XCD exchange rate: 1:2.7026 (common currency for OECS countries, Anguilla and Montserrat);
• main sectors of the economy — services, active tourism, offshore company registration, financial and banking services;
• GDP —$ 654 million, GDP per capita —$ 9.83 thousand

Advantages of Dominica for doing business

Zero corporate taxation, taking into account transparency and anti-financial crime requirements, is no longer an advantage. Dominica’s offshore jurisdiction offers very attractive conditions for business that do not conflict with KYC and AML regulations. This prioritisation is now more important and valuable than outdated principles and practices of international business based on aggressive tax optimisation schemes.

Why opening a company in Dominica can be profitable and promising:

• stable economic, political and financial situation;
• favourable tax environment;
• minimal company reporting requirements in Dominica;
• good growth dynamics of key economic indicators;
• participation in regional supranational associations CARICOM (Caribbean Community) and OECS (Organisation of Eastern Caribbean States);
• effective protection of assets in Dominica;
• friendly attitude of the regulator;
• nominee directors are permitted in Dominica;
• the national currency is pegged to the US dollar;
• simplified company registration in Dominica with minimal administrative requirements;
• no artificial restrictions on foreign businesspeople and investors (they can own 100% of the business, administrative rules are the same);
• The Dominica CBI programme (citizenship by investment) is in effect;
• There are no currency controls.

Extensive intellectual property protection in Dominica makes it particularly advantageous to implement original ideas and technological developments. This is facilitated by the availability of additional sources of financing. A developed banking sector simplifies and speeds up the opening of personal and corporate accounts. KYC/AML is fully compliant in Dominica, so locally registered companies can operate in a secure legal environment without fear of risk. We would like to note the friendly corporate rules, which greatly simplify the launch and development of a company.

Taxation of individuals

The choice of jurisdiction for long-term residence or obtaining second citizenship is based on an analysis of a number of key factors. The income tax rate in Dominica is one such factor, but not the only one. If the zero tax burden on personal income is not backed up by anything else, then the CBI programme has no future. Personal taxes in Dominica are low, which, considering the other advantages of the jurisdiction, makes it one of the top choices when picking an immigration route.

Income tax

When determining fiscal obligations, it is important to correctly assess the tax residency status of a particular individual. The main qualification requirement is to reside in the jurisdiction for 183 days or more per year. Obtaining citizenship through investment in Dominica does not automatically make you a tax resident of the jurisdiction. However, if you earn income in the country, you will have to pay taxes on it.

The income tax rate in Dominica is progressive:

• 15% — on the first EC$ 20,000;
• 25% — on the amount exceeding EC$ 30,000;
• 35% — on the remaining income.

Dominica’s tax residency status, or lack thereof, is reflected in the determination of the tax base:

• non-residents must include income received within the jurisdiction (e.g., from rental payments or fees for services rendered);
• residents form the base from any income (received both in Dominica and abroad).

Double taxation agreements in Dominica are practically ineffective, as they have only been concluded with 11 jurisdictions belonging to CARICOM, Switzerland and Jamaica.

What to pay special attention to when calculating income tax in Dominica for residents:

• when calculating fiscal obligations, all income must be taken into account, including salaries, business income, dividends and rental payments;
• the sale of real estate and capital gains are not subject to tax;
• tax deductions are available, but they are not applied automatically and can be combined.

Types of deductions when calculating income tax in Dominica:

• up to EC$ 25,000 — mortgage interest payments;
• variable — donations to government-approved funds;
• up to EC$ 5,000 — university education.

Additionally, you can claim a tax deduction for certain expenses necessary for: a) receiving income from renting out personal property; b) for self-employed persons — for tools, rent, and preparation of tax returns.

It may seem that tax resident status is less advantageous because such persons must include all income in their taxable base. However, this is not the case. Residents are entitled to a tax deduction of up to EC$ 30,000.

Example of tax liability calculation (taxable base — income on the island in the amount of EC$ 160,000):

Taxation of legal entities

Offshore companies are a convenient, reliable and still effective tool for doing international business. The fact that corporate tax in Dominica is levied at a rate of 25% does not mean that it is unprofitable to register companies here. This is slightly higher than the European Union average (21.2%) or the global average (23.51%). However, considering the overall tax burden, Dominica’s offshore jurisdiction is very attractive for registering new cross-border businesses that are reliable, promising and legally protected.

Corporate tax in Dominica

The CIT (Corporate Income Tax) rate is fixed and the same for residents and non-residents — 25%. The difference is that residents include all income in the tax base, while non-residents include only the part that was received in Dominica itself. In addition, companies must pay 7% of their income to state funds (social security, wages). The financial (reporting) year does not coincide with the calendar year and ends on 30 June. Corporate tax in Dominica can be paid in three quarterly instalments — 25%, 35% and 40%.

Additional information on business taxation:

• withholding tax in Dominica is 15% on dividends, interest and royalties; this amount is not taken into account when calculating corporate tax;
• there is no capital gains tax in Dominica;

Value added tax

The standard VAT rate in Dominica is 15%, with reduced rates of 10% (hotel business, diving) and 0% (export goods and services, medical goods, basic foodstuffs). The sale of real estate, any financial services and rental income are not subject to VAT. Value added tax payments are made every month. The eligibility criteria for VAT payer status in Dominica depend on gross revenue.

Goods are excluded from the calculation base if they are not subject to value added tax at all, but those subject to a 0% rate are included:

• any goods and services — EC$ 250,000;
• diving, hotel business — EC$ 62,500

Choosing a legal form for your business

Dominica offers business people and investors several standard business formats. The choice mainly depends on the legal entity’s business interests, ownership and management structure, development plans, scaling requirements, dependence on additional sources of financing, and initial budget for incorporation. Registering a company in Dominica with the wrong format creates potential risks and significantly increases costs.

The most popular business formats when opening a company in Dominica:

• Offshore company (IBC, International Business Company). The classic option for conducting cross-border business. Requires 1 shareholder and 1 director (any nationality and place of actual residence, natural or legal person), authorised capital — from$ 100, secretary not required.
• Private limited liability company (LLC). Requirements are similar to those for an IBC, but corporate directors are not permitted. Shares may be issued without par (nominal) value, and there are no share capital requirements. Reporting is mandatory, but an external auditor is not required. A secretary is required (individual or legal entity, no residency requirements).
• Public Limited Company (PLC). At least three directors of any nationality. There are no minimum requirements for share value or capital. A secretary is required. An external auditor and an audit committee are mandatory.
• Branch/subsidiary of a foreign company (foreign company). May be wholly owned by foreigners. At least one local representative with full power of attorney is required.

Characteristics of companies that are the same for all business forms:

• Approximate time for opening a corporate account — 4 weeks;
• 100% foreign ownership is permitted;
• remote registration is possible;
• limited legal liability;
• no resident director or resident shareholder required;
• minimum 1 shareholder, corporate shareholders are permitted;
• tax registration certificate and tax identification number are required;
• business is regulated by CIPO (Companies and Intellectual Property Office);
• the company may lease office space.

Distinguishing features of companies:

Company formation in Dominica

The rules for registering and operating legal entities are contained in several regulatory acts. The main one is the Companies Act, Act No. 21 of 1994. Requirements for the name of a legal entity are specified in a separate document — the Registration of Business Names Act (1991). The legislation is based on British common law and has been optimised to reflect modern trends, so problems are very rare when opening a company in Dominica. Most often, they are due to insufficient preparation and/or disregard of the registrar’s requirements.

Recommended sequence of steps:

• preparatory stage: choosing a company name (it is better to have 2-3 backup options) and a suitable legal form, determining the structure of the legal entity;
• appointment of a registered agent;
• preparation of a package of documents (at a minimum, the charter and the memorandum of association) and a standard application;
• preparing and/or verifying the availability of information on directors, shareholders and beneficiaries;
• payment of registration fees and duties;
• direct registration of the company with the CIPO;
• obtaining a certificate of registration of the company in Dominica;
• registration with the tax authorities (if necessary, as a VAT payer);
• registration with the state insurance system;
• obtaining additional permits and licences;
• opening a corporate bank account.

Financial regulations in Dominica allow financial and credit institutions to cooperate with non-resident legal entities. Therefore, IBC can open a corporate account at any suitable bank. The procedure requires special attention, as KYC/AML regulations are strictly enforced in Dominica. To reduce the risk of rejection, we recommend using the pre-approval service (submitting preliminary applications to several banks at once).

Citizenship through the CBI programme in Dominica

The opportunity to obtain a second passport for investment is one of the key advantages of this jurisdiction. Residency by investment in Dominica simplifies business operations and provides a high standard of living comparable to that of developed countries in Europe, Asia and the Middle East.

Key advantages of the investment citizenship programme:

• the opportunity to live, work and do business;
• unrestricted freedom of travel with visa-free access to 111 countries;
• low income tax in Dominica;
• extended opportunities for asset protection and diversification, capital management;
• effective intellectual property protection in Dominica is conducive to technology start-ups;
• corporate tax incentives;
• Dominica’s currency (East Caribbean dollar) is pegged to the US dollar, ensuring its stability;
• all conditions for living, leisure and doing business;
• offshore services in Dominica allow for the successful launch and development of investment projects of any complexity;
• Mild and comfortable climate;
• Dominica’s economic stability virtually eliminates risks associated with threats to personal assets;
• relatively low financial solvency requirements.

There are two ways to obtain citizenship by investment in Dominica. The first is to invest in the Economic Diversification Fund (EDF). This route is traditionally chosen by investors and business people, as it helps to strengthen their business by creating a positive reputation.

The second is more traditional. Citizenship by investment in Dominica can be obtained through the purchase of real estate, which remains in the applicant’s ownership. Given that the jurisdiction’s tourism sector is on the rise, you will be able to rent out your property and receive regular payments. An alternative option is to resell the property after a few years, which is likely to generate a substantial income, as real estate is steadily increasing in value, especially in prestigious areas.

The financial requirements for each option are$ 200,000. A direct comparison with similar offers from other Caribbean countries is not entirely accurate, but Dominica’s CBI programme appears to be a mature and interesting option. You can indicate financially dependent family members in your application, but this will result in a slight increase in costs. Real estate investments must be maintained for at least 3 (5) years.

Additional information on the Dominica investment citizenship programme:

• The investment target (real estate and projects financed by the EDF) must be approved by the government.
• in addition to the main investment amount, candidates must be prepared for additional expenses (the amount of which depends on the number of dependents);
• Participation in the Dominica CBI programme is only possible through a certified agent;
• A background check is mandatory.

Basic eligibility requirements for the main applicant:

• age 18 or older;
• no criminal record;
• written commitment not to change your name for 5 years (except in the case of marriage).

Reasons for refusal (any one of the following is sufficient):

• the applicant is under investigation;
• any criminal record (except for minor offences);
• previous refusal of citizenship by any other country;
• refusal of entry to any country with which Dominica has a visa-free regime;
• the applicant poses a potential threat to national security;
• false information was provided when submitting the application.

Applications for participation in the Dominica CBI programme from citizens of countries subject to international sanctions may be accepted. However, they will be subject to more rigorous and lengthy checks, which leads to an increased risk of rejection.

Basic costs:

• minimum initial contribution —$ 200 thousand;
• application processing (main applicant only) —$ 75,000;
• processing of a comprehensive application (main applicant and 3 dependents) —$ 100 thousand;
• additional dependents under 18 years of age —$ 25,000; over 18 years of age —$ 40,000;
• document processing —$ 1,000;
• Comprehensive check of the main applicant —$ 7,500, interview —$ 1,000

Recommended steps for participating in the citizenship by investment programme in Dominica:

• choosing the route for obtaining second citizenship;
• select an authorised agent;
• submitting an application;
• pay government fees and duties;
• obtaining preliminary approval;
• fulfilment of investment conditions;
• obtaining Dominica citizenship and passport.

Choosing between CBI programmes, even within the Caribbean, is tricky. It’s hard to pick a clear winner, especially if you’re looking for a good balance of features and know exactly what you want. Dominica is an interesting option that doesn’t compromise and ticks all the boxes, especially considering the low entry threshold and minimal admin hassle.

Conclusion

Starting a company in Dominica is a big step that you need to be ready for. You’ll need to assess the business prospects, decide on the legal structure, and sort out all the accounting and tax stuff. If you don’t skip the prep work, your project will be a success. A big plus is Dominica’s banking system. After registration, a legal entity can open a corporate account and start real business, with minimal risk of account blocking or freezing.

Dominica is an offshore jurisdiction with modern laws optimised for the realities of the digital economy. All measures are taken to encourage the inflow of foreign investment, and businesspeople from other countries have the same rights as residents. The level of anonymity in Dominica is very high, and information about shareholders, directors and beneficiaries is not publicly available.

The jurisdiction complies with all recommendations of international financial regulators, so it is not included in the FATF or OECD black or grey lists. Dominica’s political stability makes it possible to launch long-term investment projects for which predictability and security are critical.

Need additional information or a rough budget estimate? Please contact our specialists. We successfully implement standard and customised projects of any complexity, based on company registration in Dominica. All-inclusive cooperation is possible. We provide clients with a full package of accounting documents.

IBCs in Dominica after 1 January 2022

Most publicly available corporate sources have not paid attention to a special document — Act No. 6 of 2021, adopted on 28 June 2021 and effective as of 1 January 2022. The document repeals previous regulations allowing the registration of international business companies in the IBC format in Dominica. Legal entities with this legal form already operating in the jurisdiction must cease their activities or re-register.

However, this does not mean that cross-border business in Dominica will become unprofitable or unpromising after 1 January 2022. The abolition of IBCs has only confirmed that the fight against aggressive tax planning and the trend towards transparency are realities that must be reckoned with. All of Dominica’s advantages remain, and the business environment in this island jurisdiction makes it a good starting point for commercial projects of any complexity.