TOPICS ON THIS PAGE:
1. Real Estate Purchases by Foreigners
2. Residency
3.
Tax Code (Income tax)
4.
Tax Code (Property Tax)
1) REAL ESTATE PURCHASES BY FOREIGNERS (Current as at
October 2000)
Q:
Are there restrictions on the purchase of real estate by foreigners.
A: No. Foreigners and
Dominicans alike are subject to the same
process.
Q:
What should I know about getting a title?
A: The Land Registration Law
(No. 1542 of 7 November 1947) establishes a system for registration of real
estate, whereby the offices of the Registry of Titles issue a Title Certificate
(TITULO) in favor of each legally
registered landowner. According to the law, the Title Certificate is a document
justifying the right of ownership, and is irrevocable, perpetual, absolute, firm and unassailable and enjoys
the full guaranty of the State.
The
purchase of rural or urban real estate must be registered with the Registry of
Titles corresponding to that jurisdiction. *It is important that the purchaser,
before effecting the operation, requests a copy of the property title and takes
all necessary measures in order to guarantee that the ownership rights are
intact and that obtaining a new title certificate at the close of the sale is
possible. *(This is your D.R. lawyers function)
Q:
What taxes will I pay on a real estate purchase?
A: The transfer of real estate
is subject to the following taxes:
A tax of 2% of the
value of the transfer.
A tax of 4% of the total value of the sale plus 12%
of the
amount corresponding
to the 4%.
In
addition, the Tax on Luxury Dwellings and Empty Urban Lots ("IVSS
Tax") is payable annually on the
holding of luxury dwellings and empty urban lots whose market value exceeds
RD$1,500,000. (approx. US$90,000.) The
calculation of this tax is worked out as follows: 0.5% of the bona fide value
of the property for those properties that have been rented or leased by their
owners; and 0.25% of the bona fide value of the property for those found to be
occupied by their owners or collateral parties, forefathers or descendants up
to the second degree of kinship.
Q:
What is meant by "bona fide value"?
A: This is a critical point.
In its interpretative note No. 2-98 published on 8 January 1998, the Dominican
Tax Authority (Dirección General de Impuestos Internos - DGII) advised that the
difference between the bona fide value of a transferred property and the price
stipulated in the transfer document will be deemed as a donation and
consequently will be subject to the payment of the taxes established by Law No.
2569 on Successions and Donations.
According to the same note:
The
minimum admissible value will be 70% of the market value of said properties as
determined by DGII.
The
taxpayer can pay the taxes corresponding to the minimum admissible value of the
transferred property without having to draw up a new contract. All that is required
is a signed statement agreeing to the minimum value as set out above.
When
the transferred property corresponds to a capital asset, the value of said
property can be adjusted for inflation and depreciation according to the
methods established by the Tax Code.
Q:
Are there any restrictions on foreigners receiving inheritances or donations of
real estate?
A: No, but succession taxes
can present certain difficulties and must be carefully examined by experts in
the field.
(Generally having the property in a corporation name can
eliminate most problems. Consult with your D.R. lawyer before purchasing.)
Q:
Are there any restrictions on foreigners leasing or renting properties in the
DR?
A: No.
Q:
Are there zoning restrictions to worry about in the DR?
A: It depends on the
municipality. Law No. 3455 of 1952 on Municipal Organization grants
municipalities the authority to issue zoning ordinances. Another law, Law No.
6232 of 1963 on Urban Planning, authorizes the director of Urban Planning of
each municipality to set the limits and
establish the conditions for the different municipal zones under his or
her responsibility.
2) Obtaining RESIDENCY STATUS in the Dominican Republic: An Overview
Current
as at April 2002
Introduction
Foreigners
wishing to live or work permanently in the Dominican Republic are required to
obtain residency status. Obtaining permanent residency in the Dominican
Republic is a three-step process:
Residency Visa
The required documents for a residency visa application
are:
The foreign national may submit his or her application to
the Ministry of Foreign Affairs while visiting the country on a tourist card,
tourist visa or business visa. During recent years, the issuance of residency
visas has been subject to unusual delays and changes in internal regulations.
Provisional Residency
The required documents for a provisional residency
application are:
Once
the application is approved, the applicant receives a Provisional Residency
Card and an Identity Card ("Cédula de Identidad").
Under the last Balaguer administrations (1990-1996) and
during the last two years of the Fernández administration (1999-2000), the
Immigration Department waived the requirement of a residency visa to apply for
residency. The Immigration Department, as a dependency of the Ministry of the
Interior ("Secretaría de Estado de Interior y Policía"), has been
known to have differences of opinion on this issue with the Ministry of Foreign
Affairs. The matter is at present under review.
Permanent Residency
The required documents for a permanent residency
application are:
After
approval of the petition, the applicant receives a Permanent Resident Card
valid for a two-year period, renewable for additional two year periods.
Guzman Ariza &
Asociados
Calle Duarte #2,
Third Floor
Sosua, Dominican Republic
Tel: (809) 571-2880, Fax: (809) 571-2928
>>>E-mail: info@drlawyer.com
Note: This website is designed for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. You should not act upon this information without seeking professional counsel.
Copyright ©1998-2002 Fabio J. Guzmán (Guzmán Ariza & Asociados). All rights reserved
3) TAX
CODE (Income Tax) Jan 2001
(
Note: As there are ongoing changes in 2001 relating to taxes, mainly for
business, if you require a "to the day" current interpretation please refer to your lawyer directly)
Q:
Who must pay income tax in the DR?
A: The Tax Code (Law 11 of 16
May 1992) applies a fixed tax rate for individuals as well as for corporations,
for all income received from Dominican sources and from foreign sources
(financial income) as of the third year of residency in the Dominican Republic.
For the purposes of the Code, corporations are deemed as domiciled in the
Dominican Republic for tax purposes when they are constituted pursuant to
Dominican laws, when they have their main seat of business in the country or
have an effective address in the country. As for individuals, they are
considered residents when they remain in the country for more than one hundred and
eighty-two (182) days, continuously or discontinuously, in the fiscal period,
which for individuals is from 1 January until 31 December of each year.
Q:
Can I appeal tax rulings?
A: The Tax Code allows
taxpayers two administrative and one jurisdictional appeal when
they
deem the authorities tax assessment as incorrect. These are as follows:
In
the administrative field:
An Appeal for Reconsideration before the
Tax Administration, and
A Hierarchy Appeal before the Ministry of
Finance.
In
the jurisdictional field: the taxpayer shall be able to file a Contentious Tax Appeal
before the Contentious Tax Court against a
Resolution of the Ministry of Finance. For
these purposes, the tax in dispute must be
paid, in application of the principle solve et
repete. Recently, said court declared this
principle to be unconstitutional.
The Supreme Court of Justice has not yet pronounced itself on
this issue.
Q:
Are capital gains and dividends taxed in the DR?
A: Capital gains are taxed as any
other income.
Interest
payments to financial institutions outside the Dominican Republic are subject
to a 5% withholding (Article 306 of the Tax Code) Interest payments to
creditors abroad who are not financial institutions are still subject to a 25% withholding
(Art. 305 of the Tax Code)
Q:
What are the income rates and exemptions?
A:
Personal:
The annual personal exemption is adjusted according to inflation. It currently
is: (As of Dec. 2000)
Up
to RD$120,000. - exempt
RD$120,000
- RD$200,000. - 15%
RD$200,001
- RD$300,000 - 20%
Above
RD$300,001 - 25%
The
tax period for individuals is the calendar year.
Corporate: A single rate of 25% is set
for net taxable income. The net taxable income is
determined
after deducting from the global income those deductions, credits and advance
payments admitted by law.
Q:
Does the DR allow credits for foreign tax paid?
A: The Tax Code allows
taxpayers resident or domiciled in the Dominican Republic to
credit
against the tax applied to its taxable income the income tax effectively paid
abroad on income from foreign sources.
Q:
Does the DR have a value-added tax (VAT)?
A: Yes, it is known as the Tax
on the Transfer of Industrial Goods and Services (ITBIS), and it applies to the
transfer and import of industrialized goods and certain services. The rate of
the tax is 12% and for imports this is charged on the CIF value of the goods.
Exemption of the payment of ITBIS is allowed for those persons effecting purely
commercial activities, with an average monthly income equal to or less than
RD$50,000.00. Goods and services transferred from the national territory to a
Free Zone company will be treated as if they had been exported, and therefore a
0% rate will apply.
4) TAX CODE (Property Tax) NEW August 2002
Property
Taxes on "sumptuous" homes and un-built City Lots ("IVSS"
taxes) are due yearly before March 11th.
The
law considers "sumptuous" any
home worth more than RD$3,000,000 pesos (approx. US$168,000.)
The
tax rate will be 1% on the appraised value over the RD$3 million pesos.
(Previously
the rate was: 0.25% of appraised value for homes and 0.50% for un-built city
lots.)
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