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A free zone (also called a free trade zone, export processing zone, or special economic zone) is a designated geographic area where companies receive special economic incentives — typically income tax exemption, duty-free import of inputs, and export tariff elimination — in exchange for operating as export-oriented businesses within the zone.
How Free Zones Work
Companies operating within a free zone exist in a legally distinct customs territory from the surrounding country. Goods imported into the free zone for use in production are not subject to normal import duties. The goods produced within the free zone — when exported to foreign markets — are not subject to export tariffs. The company operating within the zone receives income tax exemptions on profits generated from its free zone activities. In exchange, the company commits to export its production (rather than selling domestically) and to create employment within the zone.
Free Zone vs. Special Economic Zone
Free zones and special economic zones (SEZs) are often used interchangeably, but SEZs may include a broader range of activities — including domestic market sales, services, and residential development — while free zones are typically more narrowly focused on manufacturing for export. The Dominican Republic’s Law 8-90 framework is a free zone framework specifically designed for export manufacturing.
Why Governments Create Free Zones
Governments establish free zones to attract foreign direct investment, create employment, generate export earnings, and transfer technology and manufacturing expertise. The DR’s free zone sector generates US$8.43 billion in annual exports and employs 190,000+ workers — a substantial portion of the DR’s formal employment base — demonstrating why the government maintains the Law 8-90 incentive framework.
How Free Zones Enable the Caribbean Corridor
The Dominican Republic’s free zone framework under Law 8-90 is the legal and fiscal foundation of the Caribbean Corridor. It enables foreign manufacturers to establish export-oriented production in the DR with full tax elimination and duty-free import of inputs — combined with CAFTA-DR duty-free U.S. export access — creating a complete market entry cost structure unavailable in non-free-zone jurisdictions. Contact EGS to explore free zone operations for your mandate.
Continue Your Research
Complete Guide: Manufacturing in the Dominican Republic – Everything foreign manufacturers need to know about production in DR free zones.
How to Set Up Your DR Free Zone Company – Step-by-step company formation, licensing, and compliance.
RELATED: SECTOR RESOURCES
How DR free zone manufacturing enables duty-free U.S. market entry.
CAFTA-DR Manufacturing GuideSector-specific rules of origin and duty-free eligibility.
DR Free Zone Tax IncentivesLaw 8-90 full exemption structure for qualifying manufacturers.
Apply to EGSAssess your corridor mandate with EGS.
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