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What are the restrictions on purchasing Dominican Republic real estate by foreign investors?

No restrictions are placed on foreigners investing in Dominican Republic real estate. In fact, the government welcomes it, recognizing that it positively contributes to the local economy. Additionally, there are no restrictions on purchasing ocean front real estate as there are in many other countries in the Caribbean basin, such as Mexico.

How is title held for real estate in the Dominican Republic?

You may hold title in your personal name or in your Dominican Republic company name. There are tax advantages in using a corporation to hold your property title, such as lower closing costs and taxes. Dominican corporations are fairly easy to set up; the process usually takes six weeks and costs typically around $1,200. You’ll pay $250 for an annual report that must be filed each year.

What are the steps in the purchase of Dominican Republic real estate?

1. Buyer and seller sign a “Contract of Sale” before a notario who authenticates it. Notaries in the Dominican Republic are required to have a law degree. The Contract of Sale contains the legal description of the property, the price, and the conditions of sale.

2. Usually the funds for property purchase are deposited by the buyer via electronic bank transfer or check to the trust account of the notario. The funds are then transferred to the seller from the trust account of the notario after the title is cleared.

3. The authenticated Contract is then taken to the nearest Internal Revenue Office for payment of the appropriate taxes.

4. The Contract of Sale and the Certificate of Title of the seller are deposited at the Title Registry Office for the jurisdiction where the property is located, and the sale is recorded.

5. The Title Registry Office issues a new Certificate of Title in the name of the buyer, or the company, and cancels the old Certificate issued previously to the seller.

6. The time span from the filing of the Contract of Sale to the issuing of the new Certificate of Title may vary from a few days to a few months, depending on the Title Registry Office where the sale was recorded.

What closing costs and taxes should be expected in purchasing Dominican Republic real estate?

Expect to pay approximately 7% of the sale price for taxes and closing costs. This amount includes a transfer tax of 4.48%, document taxes, special stamps for registration and legal costs.

Taxes must be paid before filing the purchase at the Title Registry Office. Ask your attorney for advice about forming a corporation, to take advantage of a loophole in the law that allows you to buy real estate through a Dominican Republic corporation you have formed, which lessens the tax burden considerably.

Are there annual property taxes for real estate in the Dominican Republic?

Property taxes depend upon the value of the home you purchase. If you purchase a residential property and it is worth RD$5 Million Pesos or less (about US$150,000), then you pay ZERO annual real estate taxes. If the home is worth more than that amount, you pay 1% (one percent) of the value over and above RD$5 Million Pesos (over and above US$150,000).

Do certain properties enjoy a tax abatement program granted by the government of the Dominican Republic?

Yes, such programs do exist and Palmera de Cabarete Resort & Spa enjoys such a program. Our first time buyers will be exempt from all taxes for the first ten years.

Are there inheritance taxes on property owned in the Dominican Republic?

There are no restrictions on foreign investors inheriting title to property in the Dominican Republic. Inheritance taxes range from 17% to 32% of the appraised value of the estate depending on the relationship between the beneficiary and the deceased. If your beneficiary resides outside the Dominican Republic, inheritance taxes are subject to a 50% surcharge. Your attorney can explain the benefits of corporate ownership and how it offers more favorable tax treatment in the disposition of property through inheritance.

What other considerations should be considered when buying property in the Dominican Republic?

Your best protection is to get a trustworthy, reliable attorney, and title insurance. There are several local attorneys with extensive experience in real estate and Dominican Republic foreign investment, with fine professional reputations that can be hired to assist in your purchase. Ask your Sales Counselor for a list.

In the Dominican Republic, as in many Latin American and European countries, the government provides title insurance, but many buyers seek out a private insurer with a trusted name. The Developers of Palmera de Cabarete Resort & Spa have chosen Stewart Title Insurance Company, one of the oldest and most respected Title Insurance Companies in the world, to insure title on its property.

About the author:

Darren Law is President and Chief Executive Officer of North Island Development LLC, developers of Palmera de Cabarete Resort & Spa in the Dominican Republic, a 138-suite five star beach resort and spa on 19.5 acres in Cabarete, opening in late 2011 on the island’s north shore. Most recently, he was the Managing Director of The Hartling Group, Turks and Caicos’ premier property development and management company, responsible for overseeing new projects and the performance of existing operations for the company’s three hotels – The Regent Palms, The Shore Club on Long Bay Beach and The Sands at Grace Bay Resort. Mr. Law also brings 20 years of professional experience in hotel operations, development, and asset management to the new resort, from companies including Conrad Hotels and Four Seasons Resorts.

Disclaimer: The abovementioned is an overview of current customs and procedures utilized in the purchase of property in the Dominican Republic and are for demonstration purposes only. It should not be relied upon in making purchasing decisions. Please consult the opinion of an attorney familiar with Dominican Republic real estate laws and the ramifications of buying and owning property there.