Real Estate Transactions in the Dominican Republic
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.
Steps Involved in a Real Estate Transaction
• Preliminary Steps: For real estate purchases in the Dominican Republic, after verbal agreement is reached by the buyer and seller on the price, a binding Promise of Sale is prepared by an attorney (solicitor) or notary public which is signed by both parties. (Notaries in the Dominican Republic are required to have a law degree.)
Because of certain peculiarities of Dominican Real Estate Law, it is recommended that the prospective buyer retain a real estate attorney (solicitor) before signing any documents or making a deposit.
• Promise of Sale: This is a formal document, binding on both parties, and signed by them in the presence of a Notary Public. From a practical point of view, it is more important than the Deed of Sale, since it generally contains a complete and detailed description of the entire transaction up to the time when the purchase price has been paid in full and the property is ready to be conveyed to the buyer.
• Deed of Sale (“Contrato de Venta”): This is also a formal document binding on both parties, and signed by them in the presence of a Notary Public. It is used primarily for the purpose of conveying the property from the seller to the buyer.
• Determination and Payment of Transfer and Registry Taxes: The authenticated Deed of Sale is taken to the nearest Internal Revenue Office where a request is made for the appraisal of the property. The Internal Revenue Office checks if the seller is in compliance with his tax obligations and selects an inspector to do the appraisal.
• Filing at the Registry of Title: Once the property has been appraised and taxes paid, the Deed of Sale and the Certificate of Title of the seller are deposited, along with the documentation provided by Internal Revenue, at the Title Registry Office for the jurisdiction where the property is located.
• Certificate of Title: At the Title Registry Office, the sale is recorded and a new Certificate of Title is issued in the name of the buyer. The property belongs to the buyer from the time the sale is recorded at the Registry. The time for the issuance 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.
Taxes, Expenses and Legal Fees 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 3.1% of the government-appraised value of the property, as follows:
- 3% Transfer Tax (Law # 288-04)
- Minor expenses such as cost of certified check required to pay taxes to Internal Revenue, sundry stamps and tips at the Registry.
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.
As for legal fees for real estate transactions, the standard is 1 to 1.5% of the gross purchase price, depending on the complexity of the purchase, with a minimum for properties valued at $150,000 or less, and a discount for properties valued at more than a million dollars.
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. Properties are valued without taking into consideration any furniture or equipment to be found in them.
For built lots, the 1% is calculated only for values exceeding 7,019,383.00 DOP (about $150,000). For unbuilt lots, the 1% tax is calculated on the actual appraised value without the exemption.
The real estate tax is payable every year on or before March 11, or in two equal instalments: 50% on or before March 11, and the remaining 50%, on or before September 11.
The amount of the exemption is adjusted annually for inflation.
The following properties are exempt from paying real estate tax: (a) farm properties; (b) homes whose owner is 65 years old or older, and has no other property in his or her name; and (c) properties owned by companies, which pay a separate tax on their company assets.
Purchase of Real Estate by Foreigners
There are no restrictions on foreigners purchasing real property in the Dominican Republic. Formerly, Decree 2543 of March 22, 1945 and its amendments required that foreigners obtain prior Presidential approval except in certain cases. Decree 21-98 of January 8, 1998 abolished this regulation and established as the only requirement that the Title Registry Offices keep a record, for statistical purposes, of all purchases made by foreigners.