When it comes to Punta Cana, you can easily visualize the alluring picturesque scenery and boundless opulence of posh hotels, villas, beach-front residential properties and so on. Moreover, with the rising tourism and social media posts, it becomes even more tempting for you to give it a thought.
Punta Cana, located in the east cost of Dominican Republic, is one of the most attractive destinations for real estate investments for foreigners in the UK, USA and Canada. The government’s tourist’s centric laws and regulations have made it even easier for foreigners to buy residential properties in the Punta Cana, who enjoys the same property rights as that of the citizens.
However, Dominican Republics’ property taxes are complex and nuanced, which might seem challenging for first time home buyers to navigate. It is important to educate yourself with property tax laws so as to avoid regulatory compliance hassles and leverage the rights and benefits. The following section will explore the property tax of DC to provide you with realistic insights and guidance.
Real Estate Tax in Punta Cana
Punta Cana in particular and Dominican Republic in general are very welcoming to tourists and actively promote real estate investment from foreigners. They have implemented several tax laws and rules that are favorable for foreign investors and for those who want to settle in the country for long term.
The property tax in the Punta Cana, Dominican Republic is known as “Impuesto Sobre Bienes Inmuebles” (ISBI). This tax is calculated on the basis of property value and paid annually. Based on your property’s value you need to 1% of that value annually. However, this tax is levied on properties that typically have a value above RD$ 10.19 M. Properties below this rate is typically tax free.
However, it is important to understand how your property value is calculated, to make informed decision. The valuation is typically based on the construction and the plot of land that you own. That is the initial cost of your property. Make sure that while paying property tax no other assets such as furniture, gadgets and so on.
The can be paid in two installment or one-time. However, before or on March 11 and September 11 are generally considered as the appropriate time for tax payment.
Other of DR Property Taxes
There are few other situations when property owners need to pay taxes. These are:
Capital Gain Tax
Capital gain tax is the tax paid for the profit you draw by selling the property. If you decide to sell the property then you are bound to pay 25-27% of your profit. This tax is typically calculated on the difference between cost price and the selling price of the property.
Income Tax
Income tax on properties indicates the tax you paid from any income you draw from the property. Some of the lucrative income that one can draw from property is rental income, tourist’s guest house, renting for commercial purposes and so on. 27% tax is levied on the amount you earn from rental business. However, the cost of maintenance and utility costs are excluded from your income before calculating the tax.
Transfer Tax
Over the property tax you need to pay an additional 3% tax upon transfer of title. Tax authorities typically determine the rate based on the either the actual price you paid for the property or the current market value of the property. Generally, the higher value is considered for calculating tax.
Closing Cost
Closing cost is paid by the buyers when you decide to sell the property to someone. The closing cost is typically 5% of the value of the home. However, there are some tax exception and if you or your property qualifies for that exemption, then your buyers can avoid paying this tax.
Tax Exemptions
There are many situations under which your property tax gets exempted. First of all, senior citizens over the age of 65 are provided with the benefits of tax exemption if they own a single property as their residence. This opportunity is provided especially to encourage retirees to move and settle in the DC. This sort of benefits has invited thousands of retirees to choose Punta Cana as their primary residence after retirement.
On the other hand, to promote tourism the government of DC has implemented Confotur or touristic development incentives law that exempt property tax for properties bought for industrial development, rural development and agricultural growth. However, this exemption is only levied if the properties are owned by multiple owners for collective purpose. If an individual own multiple such properties then they need to pay tax calculated on the combined property values.
Buying property in Punta Cana, Dominican Republic is the best decision for many, especially, for the lucrative real estate investment return. Additionally, increased tourism for its comfortable and high-standard of living, serene ambience, jaw-dropping landscape and beaches and luxurious villas and amenities, offers a lucrative business for real estate property owners. However, it is important to have clear ideas on property taxes. This blog has aimed to provide a realistic idea on property tax of DR for you to make a safe investment. Hope this proves insightful for you.
