Government and institution measures in response to COVID-19.
Government and institution measures in response to COVID-19.
Tax measures – Direct and Indirect
(e.g. payment deferrals, rate reductions…)
Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.
(e.g. state compensation schemes, training…)
- The ESAF has been created by the Government of the Dominican Republic, to cover part of the salary in companies with economic difficulties. This program consists in the contribution of DOP$8,500.00 per month to formal employees. Certain conditions will apply, specially in regards with the suspension of labor contracts and a coverage from the employer in certain cases of different tranches of the minimum salary per sector.
- New social aid plan called "Pa Tí“, will be applied for independent workers, consisting in a contribution of DOP$5,000.00 per month. Those with loans in the formal sector have been identified as potential beneficiaries.
- Resolution No. 62-20 was issued, where the Congress authorizes the President to declare a state of national emergency for up to 25 days and allows the President to: (i) restrict freedom of transit and freedom of association and assembly; (ii) adopt measures to guarantee medical services and provisions; and (iii) adopt measures to support the economic sector, as a way to protect employment and the income of workers.
- Resolution No. 07/2020 was issued by the Ministry of Labor, and mentions witch companies are allowed to stay open: “… [those] that are engaged in basic activities for the population: supermarkets, grocery stores, gas stations, pharmacies and commercial establishments dedicated to the sale of raw or cooked food, industrial sector companies, free zones and agricultural companies among others”. For the purposes of this Newsletter, we will consider these as Category 1 companies. The businesses mentioned, may operate during the 15-y period of the quarantine. This resolution states that, although Category 1 companies may remain open, they must promote telework, increase safety and hygiene measures, implement flexible work shifts (making an effort to not substantially affect their production or their employees’ salaries) and, in general term, apply all necessary measures to avoid large crowds at the work place.
- The Ministry of Labor urged employers to grant paid vacations to all workers who qualify for them. In the same sense, the workers who have not acquired the right to vacations, will be advanced a week of vacations, as well as an additional week of salary in charge of the company.
- The Treasury of the Social Security informed that during the state of emergency and up to 30 days after the lifting of such, both public and private employers may make their payments free of surcharges.
Economic stimulus measures
(e.g. loans, moratorium on debt repayments…)
- Authorize financial institutions to freeze the ratings and provisions of the debtors at the level such where at the time of the approval of the Resolution.
- Authorize that credit restructuring that implies a modification in the payment conditions, interest rate, terms and installments, among others, may maintain the same risk rating of the debtor when it is restructured. In other words, this means that the debtor's credit rating would not be reduced due to problems caused by payment arrears as a result of the current situation.
- Authorize to consider as not overdue installments related to disbursed lines of credit for a period of 60 days. This measure includes a waiver of the loan principal payment in that period, benefiting the debtor's cash flow.
- Extend for 90 days the period granted to the debtor for the updating of guarantees corresponding to the appraisals. This measure will provide greater flexibility to the debtor who will have more time to comply with the requirement to update their guarantee.
Interest rate measures:
- Reduce the Monetary Policy Rate (MPR) by 100 basis points, from 4.50% to 3.50% per year, with the aim of encouraging a general decrease in interest rates in the financial system through the monetary policy transmission mechanism.
- Likewise, and with the purpose of providing liquidity at a low cost to financial institutions, a decrease of 150 basic points in the interest rate of the permanent liquidity expansion facility (overnight repurchase agreement) was approved, passing from 6.00% to 4.50% annually.
- Additionally, it was decided to reduce the interest rate on short-term interest-bearing deposits at the Central Bank (Overnight), from 3.00% to 2.50% per year. This measure contributes to reducing the interbank interest rate and, therefore, reduces the cost of funding for financial institutions.
Liquidity provision measures to the financial system:
- USD$665 millions of legal reserve resources, as well as USD$924 millions through repurchase agreement has been provided, to grant liquidity for the financial intermediation entities; for a total amount of USD$1,588.7 millions.
- Providing foreign currency liquidity (US Dollars) to the market for more than USD$622.4 million, and to temporarily relax the coverage requirements of the legal reserve in foreign currency of multiple banks.
- Loans for households Mipymes, the trade sector, productive sectors, tourism and the export sector, with a maximum interest rate of 8.0% per year and will not be considered in the calculation of the solvency index. For a period of one year financial entities will access the resources at a rate of 3.50%.
- A loan of DOP$60 billion was approved under the facility of a Rapid Financing Instrument to provide budget support.
- Authorized the creation of a guarantee fund in order to finance micro and small businesses. To comply with the obligations derived from the execution of the guarantees issued by such fund, the issuance of domestic titles of public debt for DOP$5,000,000,000 was also authorized by Congress.
- Authorized to carry out public credit for an amount of DOP$150,908,648,808.
- Authorized the execution of a long-term credit operation with local commercial banks and financial intermediaries, for an amount of DOP$1,500,000,000, to complete tourist projects in relation with the Infrastructure Executing Committee for Tourist Zones.
- An agreement was made with the Central Bank, the Superintendence of Banks and the Association of Commercial Banks of the Dominican Republic, the constitution of a Guarantee and Financing Fund to benefit micro and small businesses. This fund, which will have the technical support of multilateral organizations, will guarantee a portfolio of up to DOP$125,100,000,000.00, made up of loans currently in force and new loans aimed at micro and small enterprises.
- The Government would be giving guarantees for up to 50% of the chosen portfolio, while the bank would be assuming the remaining 50%. This will benefit more than 210,000 micro and small enterprises that had commercial loans rated A and B as of February 29, 2020 and that belong to the commerce, construction, tourism, education, manufacturing, transportation, storage and agricultural sectors, among others.
- Alternative evaluations for liquidity access are being carried out through other banks and/or multilateral organizations (e.g. International Monetary Fund, the Federal Reserve of the United States).
General Measures by Private Banks (varies per bank):
- 0% of default interest in the payment of consumer and commercial loans during the emergency period.
- 0% commission for late payment of personal and commercial loans requested.
- Elimination of the minimum monthly payment on the balance of credit card debt.
- Extension for credit card payment after its deadline.
Other measures and sources
- The suspension and generation of late charges in public telecommunications and energy supply services were prohibited by Resolution No. PRE 02-2020 and SIE-016-2020-MEMI, respectively.
- As per the speech given on May 17, 2020 by the President, the reopening of the country's economy will be through 4 conditioned phases. Phase II is currently underway.
- The state of emergency was not extended, therefore ended on July 5th. Some measures still apply (e.g. social distancing, use of faces masks, etc.).
- The tourism sector was opened on July 1, in accordance with the protocol approved by the Government.
- Work and social assistance programs were extended to August, 2020.
Tax: Marco Banuelos – email@example.com / Carlo Mercedes – firstname.lastname@example.org