Banking In The Dominican Republic...
Clients often ask us lots of questions about the Dominican Republic banking system and investments when considering investing or relocating to the country. Below are a list of questions and answers that we hope you will find useful, but of course individual questions from our clients are always welcome, Click Here to contact us directly and we will be happy to answer any questions you may have.
Can Foreigners Open a Bank Account in The Dominican Republic?
YES. Most banks in the Dominican Republic will allow foreigners to open an account with a current and valid passport as ID. Some will also want a banking letter of reference or other documentation, but there is NO restriction of any kind for a foreigner to open a bank account. There are a few banks that may only accept foreigners holding legal residency status for as new accounts, but most of the banks in the country will accept foreigners with just a passport.
How Safe are Dominican Banks?
In our opinion, they are much safer than many of the banks in the U.S. or Europe. There is, of course, a government-run banking depositor insurance fund but unlike the U.S. FDIC bank insurance fund, the Dominican Bank Insurance fund is solvent, and ALL banks pay into it. Also, Dominican banks are required to set aside a reserve with the central bank for liabilities and assets, which are reviewed periodically. That percentage or reserve can range up to 6% for things like unsecured loans or outstanding credit card debt, so they are much more secure than their counterparts in other parts of the world. But that is not the only reason we tend to have more confidence in the Dominican Banking System.
As many of you already know, banks in other parts of the world like (Europe and the U.S.) have become heavily involved with nontraditional banking activities, such as derivatives. Also, the European banks especially were duped into buying U.S. mortgage-backed securities which as we know by now were not exactly AAA rated as was promoted. Dominican Banks are very conservative with their activities and have not gotten involved in such things. Also, banking spreads are quite wide in the Dominican Republic, and that is a good thing.
So, while Dominican Banks might pay out 4% on savings accounts or maybe 7% on time deposits (certificates of deposit) they also charge up to about 18% for things like car loans and mortgages. In short, the Dominican Republic is not a very good place to borrow money; it is a perfect place to deposit or invest. The bottom line here is that banking is profitable, interest rates are the market rate (not contrived zero percent interest as we know is the case elsewhere) and higher borrowing costs deter excessive and untenable debt by the local consumers. Those factors, in our opinion, are even more important than the existence of banking insurance regarding the long-term health of the local banking system.
Is There Online Banking, Internet Banking?
Yes, Yes and Yes. Most of the Dominican Banks now offer online banking or at least the ability to view accounts online. Some of the smaller savings and loan types of institutions may not all have an Internet or online system in place, but all of the larger banks certainly do. However, each bank has their own comfort level regarding what they allow clients to do on their online system. Almost all of them have some form of local bill paying option and the ability to transfer funds between accounts within the bank. Most of the Dominican Banks are very concerned about fraud, and for that reason, they do not allow outbound wire transfers done via their online system they prefer these transactions be made in person.
ATMs, Credit Cards and Money Transfers
ATMs can be found all over the country, inside and outside banks, at gas stations, in supermarkets and shopping malls. Expats must be aware of the transaction limits as well. The maximum is usually 10,000 pesos, which is around $210 USD. Because of the presence of ATM fraud, it is best to withdraw money at the bank, where it's always possible to talk to the staff when some problems occur. ATMs usually accept all sorts of cards, not just Dominican, but also foreign ones. However, charges for using the cards of some overseas banks are around 100 pesos.
Visa and MasterCard are widely accepted in this country, but American Express is not an option in some of the country's major outlets. Even though there's a large number of ATMs in the country, expats rarely use credit cards, but instead deal with cash, considering it much safer.
Transferring money from abroad can take up to 10 business days, and any sum over USD 10,000 can be held by the bank until the recipient proves the source of the funds.
Banks in the Dominican Republic
There are several banks that operate in the Dominican Republic, both retail and commercial. The only foreign retail bank in the country is Scotiabank. Other major retail banks in the Dominican Republic include the following:
The official currency in the Dominican Republic is the peso (RD$). One peso is divided into 100 centavos. The pesos come in $20, $50, $100, $200, $500, $1000 and $2000 notes, while centavos come in $1, $5, $10 and $25 coins. Even though the peso is the official currency in this country, US dollars and Euros are accepted everywhere, because tourism is one of the country's biggest industries. The use of other currencies is sanctioned by the government and the Dominican peso is currently quite stable after a huge value drop in 2004.
Hours of operation vary by bank, but in general, banks are open from 9 am to 4 pm and until noon on Saturdays. You may find some banks that open at 8 am, while some close at 5 pm. Very long queues can be expected on work days, especially near the beginning and end of the month. There are also several banks in supermarkets that have the same opening hours as the supermarkets. These are good because they are usually open until 8 pm when the shopping complex closes. Many of them are also open on Sunday.
Are There Any Currency Controls or Transfer Restrictions in The Dominican Republic?
NO, there are no restrictions. Clients can remit any amount they wish to their Dominican Bank Account, they can retrieve or wire any amount of funds out they wish and there are no restrictions to exchange between the various currencies and the Dominican Peso.
Many banks of course may ask for additional documentation about inbound wire transfers, especially if it is a large sum, but that is only for due diligence purposes and has nothing to do with any restrictions.
Where Can You Exchange Money in The Dominican Republic?
Most of the larger banks in the country offer the ability to exchange US Dollars or Euros into Dominican Pesos using your passport or cedula for ID. Many of the smaller savings and loan type institutions will only offer exchange services for US Dollars. In addition, there are many private money exchange services, known as a Casa De Cambio or house of exchange that can exchange foreign currency into Dominican Pesos.
While the banks are usually limited to only exchanging US Dollars or Euros, many of these casas de Cambio establishments will offer exchange for other additional currencies as well although usually more common in the tourist or resort areas (the casa de Cambio in Santo Domino and other non-tourist areas will usually only do USD and Euro exchanges). A casa de Cambio will usually offer a slightly better exchange rate than the banks. As of April 2016, the exchange for US$1 is about 45 Dominican Pesos and for One Euro about 49 Dominican Pesos.
Can I Get Direct Deposit to My Dominican Bank Savings Account?
Yes, all depending if the paying party is willing to process the payment for you. In essence, this would work the very same way as any other direct deposit with the exception being an extra subset of instructions for the recipient correspondent bank to know how to apply and report the credit to your Dominican Republic Bank.
Am I Required to Keep All of My Funds in Dominican Pesos?
No, clients can open either a Dominican Peso Account, a U.S. Dollar Account, A Euro Account, or combination of these. There is no requirement that foreigners or legal residency open or hold any one particular kind of currency account. However, as we mentioned previously, since most of the banks will only issue a Visa Debit Card that is connected to a Peso Savings Account, if you want to have a debit card, then you will need to open a Dominican Peso Savings Account.
Aside from Performing a Wire Transfer in US Dollars or Euros, Can I Get a Bank Check in These Currencies Payable to Myself or A Third Party?
YES. Any bank that offers US Dollar or Euro Accounts can issue a bank check drawn off their foreign bank correspondent account (which means a US bank for US Dollars and a European Bank for Euros). This can be convenient for clients that have a business and would prefer to pay suppliers by check in these respective countries and currencies. The recipient of such checks will have no problem clearing them because they will be issued off the Dominican Bank's local correspondent bank located in that other country or jurisdiction.
Mortgages and loans
Mortgages and loans are available in the Dominican Republic, but expats must be aware that interest rates are very high. When it comes to mortgages, the penalties for late payment are very high. Due to the high level of interest rates for loans, there are also high levels for savings. The Central Bank offers Certificates of Deposits for different periods of time, with interest paid monthly into the retail bank account. The levels of interest depend on the amount that was invested and the duration. Many expats actually live off this income.
Income tax is established by the law 11-92 and governed by the Direccion General de Impuestos Internos, or DGII. All work which is carried out in the Dominican Republic is taxable, while any type of work from outside the country is not taxable. However, once expats have had residency status for more than three years, their income from overseas - both financial and investing - is the subject of taxation. When expats work for a company, their taxes are automatically deducted, while in the case of self-employed people, it's necessary to register with the DGII. Tax is paid monthly, but the DGII usually demands more money at the end of the year, especially from foreigners.
The tax is based on a sliding scale, which rises each year along with inflation. In reality, only 8% of people pay tax in this country, as all the others earn below the minimum level. Those who work on a freelance basis must know that it's a common practice for the client to deduct 10% of the agreed fee for taxation. There is no double taxation agreement with the United Kingdom and the United States, but there is one with Canada.