When purchasing property in Punta Cana, Dominican Republic, it is important to be aware of the taxes and expenses associated with the transfer of ownership. These taxes and expenses are typically around 3.1% of the government-appraised value of the property and include:
3% Transfer Tax (as per Law 288-04)
Additional minor expenses such as the cost of a certified check, stamps and other administrative costs.
It is worth noting that taxes are calculated based on the market value of the property determined by the tax authorities, which is not mandatory the purchase price agreed upon in the sales contract.
When owning property in the Dominican Republic, individuals are subject to an annual property tax, known as "IPI", of 1% on the value of the property as determined by government authorities. However, this tax only applies to values above 8,83 million pesos, which is currently equivalent to US$156,000. This value, which is exempted from paying property tax is not fix and can be adjusted over time, due to inflation and other factors. The property tax is due annually on or before March 11, or can be paid in two equal installments, with 50% due on or before March 11 and the remaining 50% due on or before September 11.
Special tax exemption law for new developments in touristic aras:
The CONFOTUR Law offers benefits for the first-time buyer of a property located in a project developed under this law, which applies to many projects in tourist areas of the Dominican Republic. The benefits include:
Exemption from paying 3% transfer tax of the property's value for the registration and transfer of ownership.
Exemption from 1% annual property tax "IPI". The length of this exemption can vary depending on the specific project and is typically up to 15 years.
These benefits can be a significant advantage for buyers looking to purchase property in tourist areas of the Dominican Republic and can provide financial savings over the years. These exemptions are meant to support the development of tourism-related projects and attract more buyers to invest in the country.
In addition to the above taxes, legal and professional fees are also a factor to consider when purchasing real estate in the Dominican Republic. These fees are typically between 1-1.5% of the purchase price and cover services such as due diligence, title transfer, and other administrative costs. The standard practice is that these fees are paid by the seller or developer, not the purchaser.
Foreigners are allowed to purchase property in the Dominican Republic, with no restrictions. They no longer need to obtain prior Presidential approval as Decree 21-98 of January 8, 1998 abolished this regulation. The only requirement is that the Title Registry Offices keep a record of all purchases made by foreigners for statistical purposes. The same applies to foreign inheritance of real estate in the country, where there are no restrictions and inheritance tax has been recently lowered to 3% of the appraised value of the estate. However, it's worth noting that inheritance of real estate is governed by Dominican law, which includes "forced heirship" where a part of the inheritance must go to certain heirs by law. To avoid such a situation, it is advisable to consult with an estate planner before the transaction.