DR Taxation of Property Transactions

The purchase or sale of real estate property in the Dominican Republic should be made through a written contract in which the parties reflect their agreement about the identity of the property being sold, the sales price and the terms and conditions of the sale.

It is recommended that the seller and the buyer obtain advisory from an attorney in the Dominican Republic, who may assist them in performing a due diligence over the real estate property, review or draft the purchase agreement, and potentially advise them as to the most efficient vehicle to carry out the sale or acquisition.

To facilitate the purchase or negotiation process, a power of attorney may be granted in order to perform all procedures inherent to the due diligence process and the later property transfer request before the Title Registry. The power of attorney and the real estate sales contract must be legalized by a notary public in the Dominican Republic, unless the same have been signed outside the Dominican Republic, in which case the legalization process is via Apostille or before the nearest Dominican Consulate, as applicable.

Tax on the Transfer of Real Estate Property

The transfer of real estate property in the Dominican Republic is subject to the payment of a 3% transfer tax over the real estate property value. Said transfer tax is payable by the buyer (unless the parties agree otherwise) to the Tax Authorities in a period not exceeding 6 months after the sale has been perfected, in order to avoid surcharges and interest payments.

It is important to note that the Dominican Law is unclear with regards to the taxable basis concept or “value of the property” over which the 3% real estate transfer tax should be applied; since it does not specify whether it refers to market value, fiscal cost, or adjusted tax basis. Nonetheless, in practice, the Tax Authorities in most cases choose the higher value between the one stated in the contract and the one indicated in their registers.

There are other taxes which may apply to DR property transactions depending on the details of the transaction such as Capital Gains Tax, Tax on Real Estate Ownership, Tax on Real Estate Property (Individuals), Tax over the Assets (legal entities) and there are also certain exemptions which may apply under the DR Tax Code and other special laws which may be worth observing when entering into a DR property transaction and as part of a DR and international estate planning.

 

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