Dominican Republic Adopts Significant Incentives For Use And Development Of Renewable Energy Sources

Law 57-07 provides significant incentives for the use and development of renewable sources of energy in a wide variety of projects. The renewable energy sources subject to this law include bio-fuel, bio-diesel, ethanol, and wind, solar, and other renewable energies.

Law 57-07 on Renewable Sources of Energy Incentives and its Special Regimes seeks to encourage and regulate the development of, and investments in, projects that benefit from renewable sources of energy and provides incentives for such activity.

Tax Exemption

There are numerous provisions in this law. Among the key provisions is one that provides 100 percent exemption of import tax on equipment, machinery, and accessories imported into the Dominican Republic for the production of renewable sources of energy. This incentive also includes the importation of equipment devoted to the transforming, transmission, or interconnection of electric energy to the National Interconnected Power System (“SENI”). Moreover, this equipment also is exempt from payment of VAT (ITBIS) and from all other taxes that would otherwise be levied on such sales. The items eligible for the tax exemption include:

• individual photovoltaic panels and solar cells to assemble the panels in the country;
• long duration stationary accumulators;
• invertors and converters needed for the functioning of the renewable sources of energy;
• fuel batteries and equipment and devices designed to generate hydrogen; • hydrogen generating equipment and its purifiers, rectifiers and meters for production coming from water, alcohol, or bio-mass;
• hydraulic turbines and regulators;
• turbines, wind motors, or wind generators;
• solar water heaters;
• certain steam turbines; and
• fuel alcohol production equipment.

Income Tax Exemption

In addition, the new law provides a 10 year exemption for income tax with respect to income derived from the generation and sale of power, hot water, steam, motor power, bio fuels, or synthetic fuel generated from renewable sources of energy. There is also an exemption from income tax with respect to the sale and installation of equipment, parts, and systems produced in the country with a minimum added value of 35 percent for installations that have been approved by the National Energy Commission (“CNE”).

Tax Incentive for Self-Producers

This law also provides, in connection with the renewable energy technology associated to each project, a credit of up to 75 percent of the cost of the investment made on equipment that can be deducted from the income tax payable by owners or tenants of family houses, commercial houses, or industrial properties that change or enlarge to renewable sources of energy systems for the provision of private power, where such projects have been approved by the government.

For Further Information

To obtain a copy of the law, or for further information, please contact Luis R. Pellerano, a partner of Pellerano & Herrera, at l.pellerano@phlaw.com.