Taxes In The DR
Real Estate Transfer Tax (Law 33-91)
Once a property has been purchased the following will need to be delivered at the DGII in order to request authorization to pay the transfer tax:
Original of the Sales Contract
Seller property Title Certificate
Seller Personal Identification
Buyer Personal Identification
Transfer Tax Procedure
3.1% of the purchase price of the property (as in the sales contract) or the price resulting from the valuation carried out by the DGII, whichever one is higher.
Property purchased by the purchase of company shares, then there is a 1% tax added.
The DGII has the right to inspect the property before authorizing the payment of the tax.
Tax must be paid within six (6) months of signing the sales contract.
Paid by the buyer (unless otherwise agreed by the parties)
Payable to Local Internal Revenue Office (Dirección General de Impuestos Internos DGII)
Once the tax is paid the following are filed with the title registry office in jurisdiciton where property is located:
Originals of the sales contract
Original property title certificate
Receipt of transfer tax payment – issued by the DGII
Title registrar registers the purchase in its records
Cancels the seller’s title certificate
Issues new title certificate in favor of the buyer.
Issuance of title certificate takes between 30 and 90 days.
Tax on Real Estate Property, Sumptuary Housing and Vacant Urban Lots
Located in urban zones
Value OVER six million five hundred pesos (RD$6,500,000.00 – Approx. US$160,000)
One percent (1%) rate applies to the value which exceeds the RD$6,500,000.00.
Those exempted from this tax payment are:
Housings valued less than six million five hundred pesos (RD$6,500,000.00)
Housings whose owners are sixty five (65) years of age or older, and
These housings have not been transferred in the past fifteen (15) years, and
Owner only possesses such housing as his/her only real estate property
Buildings and lots owned by
Property Owned by Dominican or Off Shore Holding Corporations – Tax on Assets (ISA)
One percent (1%) annually
Applied over the total value of the taxable actives of companies
Natural persons with a sole-owner business or businesses
Includes real estate properties listed in the balance sheet, not adjusted by inflation and after the deductions that may apply.
The ISA must be paid by all natural persons with one-owner business or businesses and by companies, without mattering if they have operations or not.
Income Tax (ISR)
ISR is the annual tax applied to all income, utility or profit obtained by juridical persons (companies) or natural persons in a determined tax period.
Foreigners must pay the tax over their Dominican sourced income, and starting from their third residency year in the country they must pay over their income from foreign sources.
The branches of foreign companies receive the same fiscal treatment as Dominican companies.
The ISR rate applied to juridical persons or companies from the year 2007 on is 25% over the net profits of each fiscal year.
The ISR rate applied to natural persons from the year 2007 on is of 25%, with a tax payment exemption for the first RD$257,280.00 according to the following scale, which is adjustable by inflation annually:
From RD$0.00 to RD$257,280.00 – exempt;
From RD$257,280.01 to RD$385,920.00 – 15%;
From RD$385,920.01 to RD$536,000.00 – 20%; and
From RD$536,000.01 onwards – 25%.
The employer must withhold this tax payment from the salary paid to the employee.
Capital Gains Tax
A real draw for investing in the Dominican Republic is the tax structure. Most foreign investors are unaware of the recent capital gains tax imposed. Because most governments access these taxes when a property changes hands, a completely legal strategy has been put in place to circumvent the capital gains and property title taxes, an approach many wealthy Dominicans have been using for years. The solution is a simple one: the new buyers doesn’t take possession of the property. Control is transfered via stock ownership and/or the directorship of a company that happens to own the property. Thus eliminating a taxable real estate transaction.
The tax is of 25%
Of the difference between the purchase price and sale price of the real estate property.
If profit is obtained by a natural person, it will pass on to be part of his/her taxable income mass over which the income tax will be applied, after discounting the tax payment exemption, which is of RD$257,280.00 and, from there on, progressive rates going from 15% to 25% will be applied.
If profit is generated by a company, this profit is presented separately from the operational results of the said company and the 25% tax will be applied, regardless of the operational result of the company.
Tax on Rent of Real Estate