Tax Collection Efficiency Law 253-12 dated November 9th of 2012, eliminates the broad tax incentives which were previously available to individuals or legal entities that made one or several direct investments with the originally qualified promoters or developers of the tourism activities established in Law 158-01, dated October 9th of 2001, of Incentives for Tourism Development.

The above shall be understood in the sense that such incentives for the development of tourism shall continue to apply to the qualified promoters or developers of tourism activities only, and not to third parties who make side or additional investments or purchases with said developers or promoters.

With regards to the general tax regime and following the entry into force of the above mentioned Law 253-12 and its Regulation No.50-13, certain aspects of the one percent (1%) real estate property tax, applicable to individuals on a yearly basis, were modified as follows:

First, the taxable event shall be considered to take place on January 1st of each year (starting in 2013), regardless of any changes on ownership that may occur during the calendar year. In consequence, both sellers and purchasers of real estate property should take into consideration the tax installments due on March and September 11th when planning their real estate transactions.

In addition, the annual tax exemption amount increased from DR$5,000,000 (approx. USD117,650) to RD$6,500,000 (approx. USD152,950) adjustable by inflation.

Nonetheless, it is important to note that, in the end, the tax reform intended the overall tax exemption decreased. As of now, the exemption applies to the real estate assets owned as a whole, instead of an exemption on a per property basis.

Notwithstanding the above, the real estate property taxes and the real estate property taxes paid may be deducted from the individual’s income tax , pursuant to the provisions of Article 7 of the mentioned Regulation No.50-13.

Furthermore, it is foreseen that in fiscal year 2016, the real estate property tax shall be also applicable to legal entities instead of the 1% annual assets tax, now in force. As per the sunset clause included in Article 48 of Law 253-12, the assets tax rate shall be reduced to 0.5% in the year 2015 and eliminated by 2016, provided certain collection goals are met.

The above measure should imply a strong relief for legal entities incurring in losses or which may be subject to the payment of the minimum 1% assets tax, since they would not be subject to taxes over their non real estate assets.

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ABOUT THE AUTHOR: Dra. Maria Arthur Rodger is a Partner leading the Tax & Private Client areas at Arthur & Castillo Law Firm and Attorneys in the Dominican Republic. She specializes in tax law and real estate advisory (Tax LLMs in Georgetown Law Center in Washington, D.C. & Universitat Pompeu Fabra in Barcelona) with more than 20 years of experience. Dra. Maria Arthur is also a CPA, Certified Bankruptcy Liquidator and Legal Interpreter.

Email: [email protected]

Disclaimer: This publication is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. For specific technical or legal advice on the information provided and related topics, please contact the author.

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