Visiting Dominican Republic, whether on business or vacation, is always inspiring. Historic cities like Santo Domingo or simpler yet just as interesting locations such us Punta Cana which has been attracting tourists since it first opened its doors to visitors from all over world making tourists return year after year, and there's always something new to discover in this rich and vibrant country.
If you are looking for an escape from the hustle and bustles of everyday life, then consider buying property in Dominican Republic. Not only will this give your family better standard of living but also plenty opportunities that cannot be found anywhere else on earth!
Also attractive are Dominican Republic's very low property taxes, the first US$160,000.00 are tax free and a 1% annual tax is assessed based on the exceeding amount. So if you have a property that is worth US$170,000.00 you will only pay 1% of US$10,000.00, this would be 10 dollars per year. And as if that were not enough, it can be paid in two installments, one in March and the other in September of each year.
How to buy property in Dominican Republic?
The Dominican Republic has a system very similar to North America and unlike some of the other countries, foreigners have the same rights when purchasing property in Dominican Republic as locals do.
Buying property in Dominican Republic is a fairly transparent process. However, as with business transactions anywhere in the world, it is important to do your homework and work with professionals.
Steps Involved in a Real Estate Transaction in Dominican Republic
Step 1: FIND A PROPERY
There are many reasons why people decide to buy property in the Dominican Republic. Some come specifically for this purpose, others vacationing and then making an investment decision on their way back home or before leaving, whatever your situation may be dealing with professionals can simplify what would otherwise be a complicated process.
The buyer tours the area, views real estate and meets other owners. He decides to buy either a condo or villa for his new home!
Step 2: MAKE AN OFFER
The offer you make will be based on your current financial situation and present it to the seller. Also, if a buyer and seller agree to the price, an attorney prepares what is called "Promise of Sale." This document ensures that both parties will be bound by their agreement and sets the general terms of the transaction: price, terms and penalties in case of non-compliance. A deposit (usually 10%) is expected.
Make sure your interests are well protected in the Promise of Sale, is very important you hire an experienced attorney in real estate transactions that can foresee many causes of breaches of contracts and condition payments to the fulfillment of the seller's obligations.
Step 3: DO A FULL PROPERTY VERIFICATION OR DUE DILIGENCE:
A proper due diligence is a must if you don´t want to find out later that the property had a developer or construction lien against it, the land was not authorized to be sold, real estate fraud, or a long-lost relative making a claim on the land. Take the proper steps to prevent this situation from happening to you.
In some cases, real estate agents or sellers will pressure a buyer into an accelerated closing process without doing the proper due diligence. Performing due diligence ensures you do not lose possession or title to your property. Whether you are an investor purchasing real estate, and even more as an expat living in D.R., make sure you retain a reputable real estate lawyer in the Dominican Republic to represent you.
Due Diligence and Research Checklist Essentials:
Check the legal status of the property for any liens or encumbrances.
Check if the property has any taxes due (IPI).
Check if the plot is approved by the government (land demarcation).
Verify at the Title Registry Office all the files regarding the property to verify if there is any dispute over the property.
If the seller is a corporation, review the corporate documentation including the bylaws, the resolution authorizing the sale, and the certificate of good standing.
Verify if the seller is up to date with the taxes in the Internal Revenue Office.
Check if the property has any utility bill or HOA fee pending.
Confirm if the seller is in legal possession of the property
Step 4: Closing
The day of the real estate closing both parties sign a Purchase Agreement (“Contrato de Venta”): this is the final document of the transaction that is signed once the buyer verifies that the property is in good standing and makes the full payment of the property to the seller. With this document the lawyer begins the conveyance process in the Registry of Title.
But first, a 3% transfer taxes must be paid to the Internal Revenue Office. However, if the property you purchase have the benefit of Confotour (Law #158-01) is exempt from the payment of the 3% transfer tax and from the annual property tax for 15 years.
You should expect to pay the following fees when closing on a property in Dominican Republic:
Property Transfer Tax (Conveyance Tax) in Dominican Republic:
Real estate transfer taxes are 3% of the property value. However, if the property applies for the Tourism Incentive Law No. 158-01 (CONFOTOUR) you will not pay any conveyancing taxes.
The benefits of purchasing property with the Confotour Approval are substantial. This is exciting because there are a lot of new developments with this benefit in many great places like Punta Cana, Las Terrenas, Sosua and Samana.
Property Tax in Dominican Republic:
A 1% annual tax is assessed on real estate properties owned by individuals, based on the cumulative value of all the properties as appraised by government authorities. The 1% is calculated only for values exceeding US$160,000.00. Properties are valued without taking into consideration any furniture or equipment to be found in them. So, if you only have one property and it is worth less than US$160,000.00 you won't pay any property tax.
The real estate tax is payable every year on or before March 11, or in two equal installments: 50% on or before March 11, and the remaining 50%, on or before September 11.
Also, if the property you choose applies for the Tourism Incentive Law No. 158-01 (CONFOTOUR) you will not pay the annual real estate tax for 15 years.
Legal & Professional Fees:
A Real Estate Lawyer in Dominican Republic will charge you a percentage of the purchase price for their services. Generally, a reputable attorney will charge you between 1% and 1.5% of the purchase price depending on the property. You can get a lawyer for less, but be careful, sometimes that translates into them not doing the complete property verification or due diligence process, so it depends on your situation and if you are confident and comfortable enough with the solicitor you choose. Also make sure that the property attorney you choose is fluent in English or the language you speak, so there are no misunderstandings.
Dominican Republic Closing Costs: Who Pays?
In Dominican Republic closing costs are traditionally paid by the buyer. However, the real estate agent fees are paid by the seller or developer, not the purchaser.
Real Estate Closing Costs in Dominican Republic will vary depending on the property value and if the property applies for the Tourism Incentive Law No. 158-01 (CONFOTOUR). Therefore, if the property you choose applies for the Confotour incentive, you can expect spending only 1-1.5% of the property purchase price in closing costs. However, if it doesn´t, you can expect spending up to 5% of the purchase price for closing costs. It wouldn't be any more but could be less. This will include attorney fees, transfer tax, notary fees, stamps, checks and any other diverse closing costs associated with the purchase to get the title in your name.
Buying real estate in Dominican Republic can be a challenging endeavor, but with the right real estate attorney by your side, it is a safe and secure investment. For additional information about closing costs, property taxes, and Dominican real estate services, please do not hesitate to reach out to our team of professionals at CanaLaw. We would be happy to provide you with a free Estimated Closing Cost for your property.