Taxes when buying property in DR: investor guide

Complete guide to real estate taxes in the Dominican Republic

One of the most important (and least understood) aspects of investing in DR real estate is the tax structure. The good news: compared to many countries, taxes are quite favorable for investors.

Taxes at the time of purchase

1. Real Estate Transfer Tax (3%)

This is the main tax when buying property. It's calculated on the transaction value or cadastral value, whichever is higher.

• Rate: 3% of property value
• Who pays: The buyer (by convention)
• When: At the time of title transfer registration
• Exemption: Properties under CONFOTUR Law are exempt

Example: Property worth USD 200,000 → tax of USD 6,000

2. Registration and stamp fees

• Internal Revenue stamps: ~0.5% of value
• Title registration: RD$500-1,000 (administrative fee)
• Title certification: ~RD$1,000

3. Legal fees

• Attorney: 1-1.5% of property value
• Notary: Generally included in attorney fees

Annual ownership taxes

Real Estate Property Tax (IPI)

This tax applies to the owner's total real estate holdings.

• Exemption: First RD$9,860,649 (~USD 168,000) are exempt
• Rate: 1% annually on the amount exceeding the exemption
• CONFOTUR exemption: 15 years without IPI on qualified projects
• Legal entities: The minimum exemption does not apply

Example without CONFOTUR:

• Property valued at USD 300,000
• Taxable excess: ~USD 132,000
• Annual IPI: ~USD 1,320

With CONFOTUR: USD 0 for 15 years

Luxury housing tax

If your property value exceeds a certain threshold, an additional progressive tax applies. In practice, this affects very high-value properties.

Rental income taxes

If you rent your property, income is subject to:

• Income tax (ISR): Progressive scale from 15% to 25%
• Withholding tax: 10% if the tenant is a legal entity
• ITBIS (VAT): Does not apply to residential rentals

Deductible expenses

You can deduct from gross rental income:

• Maintenance and repairs
• Insurance
• HOA fees
• Property depreciation (5% annually)
• Management commissions

Capital gains tax

When selling a property, gains are taxed:

• Rate: 27% on net gain
• Calculation: Sale price - (purchase price + improvements + expenses)
• Inflation adjustment: Acquisition cost can be indexed

Tax cost summary

| Concept | Rate | CONFOTUR | |---------|------|----------| | Transfer | 3% | Exempt | | Annual IPI | 1% (on excess) | Exempt 15 years | | Rental ISR | 15-25% | N/A | | Capital gains | 27% | N/A | | Stamps & registration | ~0.5% | N/A | | Attorney | 1-1.5% | N/A |

Estimated total acquisition cost

For a USD 200,000 property:

Without CONFOTUR:

• Transfer: USD 6,000
• Stamps: USD 1,000
• Attorney: USD 2,500
• Total: ~USD 9,500 (4.75%)

With CONFOTUR:

• Transfer: USD 0
• Stamps: USD 1,000
• Attorney: USD 2,500
• Total: ~USD 3,500 (1.75%)

Tips to optimize your tax burden

1. Buy in CONFOTUR projects to save the 3% transfer tax and IPI
2. Record deductible expenses properly if you rent
3. Consider forming an SRL if you have multiple properties
4. Consult a local accountant to plan the optimal structure
5. Stay updated with regulatory changes

Conclusion

DR's tax structure is favorable for investors, especially with the CONFOTUR Law. Acquisition costs are lower than in most Caribbean countries and the annual tax burden is moderate.