Countries › Dominican Republic › Guide › 16. What is normal abroad but not here › Legal reserve and limits on dividends

Legal reserve and limits on dividends

Last verified: 2026-10-30 · Status: Stable

Abroad profit is often free to distribute once solvency is met; here an S.A. or S.R.L. must first set aside at least 5% of net profit until the reserve reaches 10% of capital. Dividends come only from accumulated profits shown in audited statements in the annual report, and equity must stay above capital plus undistributable reserves. Interim dividends need two years of profits, and the company can claw back an irregular dividend from a holder who knew.

USD figures use the Banco Central de la República Dominicana reference selling rate of RD$60.9007 per US dollar for 29 October 2026, the latest row in its published rate file on the verification date, rounded to the cent.

Key facts

Minimum yearly allocation to the legal reserve	5 % of net profitLey 479-08 art. 47, as of 2026-10-30 · in force
Legal reserve target	10 % of capitalLey 479-08 art. 47, as of 2026-10-30 · in force
Prior years of profit needed for interim dividends	2 yearsLey 479-08 art. 44 paragraph I, as of 2026-10-30 · in force

The rule

1. S.A. and S.R.L. companies must set aside a reserve of at least 5% of realized net profits for the year until it reaches 10% of share capital.
Cost to do it: At least 5% of net profit each year until the reserve equals 10% of capital.
Example: Profit RD$2,000,000, capital RD$10,000,000: at least RD$100,000 a year to the reserve, up to RD$1,000,000. / Profit US$32,840.35, capital US$164,201.73: at least US$1,642.02 a year, up to US$16,420.17.Ley 479-08 de Sociedades Comerciales, art. 47, 2008-12-11 official text · verified 2026-10-30

2. After approving the accounts, the meeting decides on dividends, which must come from profits accumulated at year end and shown in the audited financial statements included in the annual management report.Ley 479-08 as amended by Ley 31-11, art. 44, 2011-02-08 official text · verified 2026-10-30

3. Companies with profits in the last two financial years may pay advances on dividends if they have profits in the current year and expect them for the full year.Ley 479-08 as amended by Ley 31-11, art. 44 paragraph I, 2011-02-08 official text · verified 2026-10-30

4. Except on a capital reduction, nothing can be distributed if equity is, or would become, lower than subscribed and paid capital plus reserves that cannot be distributed.Ley 479-08 as amended by Ley 31-11, art. 44 paragraph II, 2011-02-08 official text · verified 2026-10-30

5. A revaluation gain is part of equity and cannot be distributed until the revalued asset is sold or disposed of.Ley 479-08 de Sociedades Comerciales, art. 45 paragraph, 2008-12-11 official text · verified 2026-10-30

6. Dividends follow each holder's share of capital. A clause giving one holder all profits, or exempting a holder from losses, is deemed not written.Ley 479-08 de Sociedades Comerciales, art. 46, 2008-12-11 official text · verified 2026-10-30

7. A company can demand dividends back only if the payment broke the law and the recipients knew or could not have been unaware of the irregularity.Ley 479-08 de Sociedades Comerciales, art. 48, 2008-12-11 official text · verified 2026-10-30

Worked example

A company with capital of RD$10,000,000 (US$164,201.73) earns RD$2,000,000 (US$32,840.35). It sets aside at least RD$100,000 (US$1,642.02) and can distribute up to RD$1,900,000 (US$31,198.33) if the equity test is met, before dividend tax. At that pace the reserve reaches RD$1,000,000 (US$16,420.17) in 10 years.

Step by step

Close the year and approve the audited statements.
Book the reserve first.
Run the equity test in art. 44 paragraph II.
Hold the meeting within 120 days of year end and resolve the dividend.
Withhold and pay the dividend tax, then pay the holders.

Common traps

Art. 44 speaks of audited statements even for companies outside the audit test in art. 33. Have the accounts audited before any dividend.
Art. 47 names the S.A. and S.R.L. For an S.A.S. check the bylaws and the general rules with counsel.
A low capital company reaches the reserve cap quickly; a high capital company keeps allocating for years.
A dividend paid in breach of these tests can be reclaimed from a holder who knew, under art. 48.

Sources

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