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Investment Property in the Dominican Republic
When it comes to investment in the property market in the Dominican Republic, there has been a great deal of activity in that segment of the marketplace that is involved with property that effects or impacts travel and tourisms. In this regard, foreign nationals have been active in this market; indeed, foreign nationals have been active in this segment of the property market in the Dominican Republic for years.
With tourism being the number one industry in the Dominican Republic, investment in the tourism trade through the property market is proving to be profitable for many people, including an ever growing number of foreign nationals.
Most property analysts are predicting that this trend towards foreign investment in real estate associated with the tourism and travel industry will continue unabated well into the next decade.
Residential Property in the Dominican Republic
Many foreign nationals have taken to purchasing single family dwellings for three primary purposes:
First there are people who are snatching up these properties in the Dominican Republic to be used for holiday or vacation purposes, as a second home. With the surprisingly low cost of living in the Dominican Republic, many people are finding this lovely island nation and ideal place to travel for holidays and vacations. Overall, it is not particularly expensive (relatively speaking) to maintain a second home in the Dominican Republic.
The second reason why many foreign nationals are buying single family homes in the Dominican Republic is for investment. They are either remodeling and reselling for a nice profit or that they are leasing or renting to people who are visiting the Dominican Republic for extended holidays or for an extended business trip.
Finally, many people from different countries around the world are electing to retire in the Dominican Republic.
Specific Steps to Buying a Property in the Dominican Republic
Purchasing property in the Dominican Republic is a relatively easy process. There are no particular prohibitions that block or otherwise prevent a foreign national from purchasing property in the Dominican Republic. Indeed, many foreign nationals invest in and own property in the Dominican Republic and have done so for many years.
The buying and selling of property in DR is subject to the Land Registry Law of the country. Pursuant to the law of the Dominican Republic, the first step in purchasing property is the execution of a contract for sale between the buyer and seller.
In the Dominican Republic, it is a must that the contract for sale be signed in front of a notary public. The notary public must have a law degree. The contract for sale sets forth the general terms and conditions of the sale -- a description of the property being sold, the agreed upon sales price and other matters relating to the transaction. The buyer normally posts a deposit for the property that can be upwards to 10% of the total purchase price of the property in question.
Once the contract for sale is signed and notarised, the document is then taken to the Internal Revenue Office. At this juncture, a determination is made as to what taxes will be due and owing because of the sale. The appropriate taxes need to be paid in advance of the final conveyance of the property from the seller to the buyer.
After the financing completely is arranged and all of the conditions set forth in the contract for sale have been realised, the contract for sale and a certificate of title (designating the buyer as the owner of the property) is then filed with the Title Registrar's Office.
In some areas in the Dominican Republic there can be a delay of upwards to a month before the Title Registrar's Office is able to issue a new title to the property. In other areas in the country, the office can issue the title as quickly as one day.
Make sure previous taxes are paid in full. The Dominican Republic does not have a government agency that sends real estate tax reminders to owners. If the government finds that there are back taxes on a property, it will simply collect the tax from the current owner, so be sure all taxes are paid before you buy real estate.
Taxes and Expenses on Property Transfers
Taxes must be paid before filing the purchase at the Title Registry Office. Taxes and expenses on the conveyance of real estate are approximately 4.4% of the government-appraised value of the property, soon to be raised :
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3% Transfer Tax (Law # 288-04)
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Document Stamp RD$ 90
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Annual taxes on the property: 1% of the amount exceeding RD$5,000,000,00 pesos (+/- US $150,000,00). For example, if your property is worth US $250,000,00, you would pay 1% of US $100,000,00 = US $1,000,00
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Taxes on the gain is around 25%
Taxes are paid based on the market value of the property as determined by the tax authorities, not on the price of purchase stated in the deed of sale.
Buyers wishing to lessen the impact of transfer taxes have the option of using a loophole in the law which allows the contribution in kind of property into corporations without paying transfer taxes. For this, cooperation from the seller is essential.
Real estate transactions in the Dominican Republic are governed by Property Registry Law No. 108-05 and its regulations, in force since April 4, 2007. Ownership of property is documented by “Certificates of Title” issued by Title Registry Offices. |