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Taxes in the Dominican Republic
Don't believe it whenever someone in the Dominican Republic (probably a real estate agent) tells you that there are no property taxes. Minimal government oversight and regulation extends to the real estate industry, and while many can see some advantages in the short term, it can cause big problems with title transfers and tax liens down the road. Any situation where procedures and regulations are hazy can be taken advantage of by the unscrupulous or the downright dishonest. More likely, though, a title transfer may be hamstrung by a tax lien (and fines) that the seller simply cannot afford. In these cases, it's a true benefit to have a Buyers Representative with you.
A transfer tax totaling about 7% of the purchase price is ALWAYS paid on title transfers and this is very important to bear in mind. Some unscrupulous real estate agents will try to hide this tax in the purchase price. Buyers must be firm in demanding that the true purchase price appear in all of the purchase documents. To begin with, it's fraudulent to do otherwise, but also, capital gains are subject to a 25% tax, and that can put a real damper on selling the property. Otherwise though, real estate ownership is not reported to the government, and unless you are gaining income from renting your property, it is not required.
Homes valued below a fixed amount are exempt from annual property taxes. Above this amount, you will be liable for annual property taxes based on a schedule and the property location published by the Dominican government, and you probably won't hear another word about it until you want to transfer the title again. It's important to learn the local rate, consult with an accountant or tax attorney and stay on top of it.
There are no restrictions on foreigners buying and selling property, however the regulations regarding inheritance of property by a foreigner add an inheritance tax of between 17% and 32%. Other taxes, such as sales taxes are negligible.
The Government of Dominican Republic is debating, as of mid-2007, a bill to offer further incentives to foreign retirees and investors such as are available in Costa Rica and Panama. That bill is reported to offer:
- A program of residence by investment
- Tax payment exemption for household and personal goods
- Partial exoneration on motor vehicle taxes
- Exemption on real state transfer taxes for the first property acquired.
- 50% Exemption on mortgages taxes (only if creditor is a financial institution duly regulated by Monetary and Financial Law)
- 50% exemption on Real Property tax.
- Exemption of taxes which encumber payment of dividends and interests accrued in the country or abroad
- 50% Exemption on capital gain tax
We'll update this page just as soon as the debate on this law is finalized.
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