Should a Foreign SaaS Company Incorporate in the Dominican Republic? A Legal and Tax Perspective

By STERN COMAS 01/09/2026

Introduction

I.                   Introduction

Foreign technology entrepreneurs regularly ask whether a Dominican company is required in order to sell software, digital products or Software-as-a-Service (SaaS) subscriptions to customers located in the Dominican Republic. The answer is more nuanced than many founders expect.

Under Dominican law, a foreign company may, in many circumstances, sell digital products and software subscriptions directly to Dominican customers without immediately incorporating a Dominican subsidiary. However, the legal, tax and commercial implications differ significantly depending on whether the customer is an individual consumer, a Dominican corporation, or a foreign client purchasing services generated from the Dominican Republic.

This distinction becomes particularly important when analyzing:

• corporate structuring;

• intellectual property ownership;

• electronic invoicing requirements;

• withholding taxes on payments abroad;

• transfer pricing;

• VAT (ITBIS) treatment of imported and exported digital services.

The Dominican Republic currently does not require all foreign software providers to establish a local subsidiary merely because Dominican customers can access their platform. Nonetheless, several circumstances may make a Dominican operating company commercially or fiscally desirable.

Stage One: Selling from Abroad Without a Dominican Entity

A foreign SaaS company that is still validating its product may often operate efficiently through its foreign entity alone. This approach is particularly attractive when:

• customers are primarily individuals;

• the platform is sold internationally through Stripe, PayPal or similar payment processors;

• no Dominican payroll exists;

• Dominican tax invoices are not required;

• the business is still seeking product-market fit.

In this phase, incorporating a Dominican SRL may create compliance costs without generating proportional commercial benefits. A Dominican company would immediately become subject to corporate maintenance requirements, tax reporting obligations, accounting obligations and regulatory compliance requirements before there is sufficient local revenue to justify those costs.

When a Dominican Company Becomes Useful

The analysis changes once the target clientele becomes predominantly Dominican corporate customers.

Many Dominican companies require local tax documentation in order to support deductible business expenses.  At that point, the ability to issue Dominican electronic tax invoices (e-CF) frequently becomes a commercial necessity rather than a legal one. Accordingly, many founders choose a phased approach.

Intellectual Property Ownership

As a matter of corporate strategy, intellectual property should ordinarily remain in the entity that developed and owns it. Where a U.S. company developed the software, owns the source code and controls the branding, maintaining ownership in the foreign holding company generally offers substantial advantages. These advantages include:

• centralized ownership of software;

• centralized ownership of trademarks;

• easier international licensing;

• simplified future fundraising structures;

• greater consistency in transfer pricing documentation.

Software Licenses and Dominican Withholding Taxes

One of the most significant developments for technology companies occurred with the enactment of Law No. 30-26. Prior to this reform, many payments abroad were generally analyzed under Article 305 of the Tax Code and potentially subject to the general corporate income tax rate. Law No. 30-26 introduced specific withholding regimes for certain categories of cross-border payments. The newly introduced Article 305-2 establishes that payments abroad for:

• software licenses;

• online advertising services;

• rights to use or store data,

are subject to a fifteen percent (15%) withholding tax on the gross amount paid or credited.

Separately, Article 305-1 establishes a fifteen percent (15%) withholding rate for royalties and rights.

Thus, a future Dominican operating company paying for software licenses and trademark rights to a foreign intellectual property holding company would generally be required to analyze both provisions.