Real Estate Investment
Dominican Real Estate Investment Facts
Other Investement opportunities
TAXES in the Dominican Republic
Real Estate Investment opportunities - Dominican Republic
The Dominican Republic located on the island of Hispaniola, which is
centered directly between Jamaica and Puerto Rico, is a part of the
Caribbean that until recently was virtually ignored by tourists.
However, thanks to major cruise lines encountering the hidden paradise and making it part of their itineraries, specially american people are
starting to discover everything the Dominican Republic 
has to offer,
including the white, sandy beaches, impressive mountain ranges streaked
with spectacular rivers and waterfalls, and saltwater lakes scattered
throughout the region teaming with exotic wildlife. As a result, the
number of tourists who visit the Dominican Republic over the past five years has
increased more than 50%, a statistic known to
investors.
Investors have been eyeing the Dominican Republic as a potential place for investment for the past few years. Recently, the government realized how important foreign investment was to the development and growth of their country and decided to change the laws to attract foreign investment. As a result, property taxes and other fees associated with buying real estate are some of the lowest in the world, and the process of foreigners purchasing real estate in the Dominican Republic is a simple and hassle free process.
We, John Kornbluth Real Estate, are offering on our websites many properties available
for you to find your new home or homesite or condominium. Once you
have narrowed your choices to a few, our real estate agents are
available to assist you with the inspection of the properties and can
oversee any construction. Within weeks, it is possible to choose a
property and eventually rent it to your first guests without even
leaving your town.
Prices are not discouraging investors either.
If anything they are encouraging people to invest more before property
in the Dominican Republic starts to appreciate out of there reach. A
beach front villa with modern conveniences, three bedrooms and two
bathrooms can be bought for aprox. 300,000 Us$. A condo with three
bedrooms and two bathrooms in, Sosua, can be bought for $125,000. Year
round, properties such as these are rented on a weekly basis to several
months at a time in the Dominican Republic starting from around $ 1000 -
$ 2000 a week, making it possible to have at least a 15% return on
investment within the first twelve months of owning the
property.
You can even declare in your tax report in the United states
your monthly payments for maintenance fees. Don't waste any time! The
recent integration of these laws, ease of which a foreigner can purchase
real estate, the significantly undervalued property and the high
predicted return on investment, make it so that there has never been nor
will there ever be a better time to invest in the Dominican
Republic.
Other Dominican Investment opportunities
The Dominican Republic offers investment opportunities in a wide range of sectors where there is still great development potential. Free zones and tourism are currently two of the most promising sectors for foreign investors, but traditional areas like agriculture and mining are also developing. Other sectors like construction, electricity and telecommunications have turned into expanding economic areas, while financial and insurance services are also becoming interesting as the local market diversifies.
Free zones are an option that the Dominican Republic supports and promotes with three main purposes:
- Creation of jobs.
- Generation of foreign currency.
- Transfer of technology.
The free zone system of the Dominican Republic is one of the most advanced worldwide. The country has been developing its free zone network since 1969, when less than a dozen industrial zones existed throughout the world. It ranks currently as fourth in terms of quantity of free zones, having 52 free zones with approximately 539 companies. The first free zones were government sponsored, but today there are many private companies, some are State owned and view are mixed. During the year 2003, 11 new free zone companies were established, representing a 2.2% growth, thus reversing the negative trend of the previous year. Thisattracted by the benefits resulting from the Textile Parity Law passed by the United States, which allows a greater variety of textile products to be exported duty-free to the US. In order to increase the competitiveness of the sector against the adverse international environment of that year, several measures were adopted by presidential decree on behalf of free zone companies, such as the granting of more flexibility
to working schedules, elimination of certain technical hindrances to customs clearance of imports, and the construction of new industrial parks in less economically developed regions, and the establishment of additional incentives to companies that set their operations in those areas. The jobs in the free zones correspond to 84.7% workers, 10% technicians and 5.3% management personnel. 52.6% women and 47.4% men occupy free zone employment. Free zone companies can sell all their production in the local market, after payment of all applicable custom duties, as long as the following conditions are met:
- The goods or services are not produced or imported in the country, and
- The goods or services have local components accounting for 25% of their value.
When the products or services are manufactured or imported in the country thefree zone company can only sell up to 20% of its production in the Dominican market.
The tourist industry started to expand in the 70's, after the Government had declared that the development of this sector was of national interest. At the beginning clearly guided by government initiatives, the tourist sector saw private participation gradually increasing, especially in the 80's, when sources of financing became available under programs like the Lome Convention. Today tourism is one of the backbones of the Dominican economy, contributing significantly to the creation of jobs and foreign currency. The tourism earnings represent 69% of exports of goods and services, excluding free zones. In the year 2001, for the first time in the last two decades, tourism experienced a reduction of 4.4%, caused chiefly by external factors such as the deceleration of world economy, euro depreciation and September 11 events. This influenced the flow of visitors to the country, which fell by 6.8%. The occupation rate in hotels dropped 3.9%, while the increase in accommodation capacity fell from 4.6% in 2000 to 3.9%. Tourism infrastructure in the Dominican Republic belongs in a 54.7% to national capital and in a 45.3% to foreign capital. The strategic activities undertaken by the Ministry of Tourism and the private sector since the beginning of 2002 allowed the country to have greater impact on tourism generating markets, which resulted in an increase of tourist arrivals at the end of the year. The process of recovery of the tourism industry is still going on. Despite negative factors, such as hurricanes, the increase of oil prices, dollar depreciation in relation to the euro, and others, the Dominican Republic has maintained its position as the most visited destination in the Caribbean. The country has the largest tourist accommodation capacity in the region, having around 60,000 hotel rooms. Currently the main sources of tourism for the country are Europe and North America. The increase in the number of visitors to the country was due to several reasons, such as the variety of the tourist offer and the quality of services. To this we may add logistic aspects such as the start of operations of new airlines, thus increasing the availability of seats.
During the last years the telecommunications sector has been one of the most dynamic of the national economy, mainly as a result of the positive effects of the competitive conditions currently prevailing in the market. After the year 2001, the sector experienced a record growth of 24.2%, mainly due to the increase in cellular phones, which raised their market participation from 32.8% in 2000 to 55.9%, chiefly as a result of the introduction of many innovative services and promotional offers caused by the increase of competition in the market. Telephone lines increased 6.8%, wireless local loop 41.10%, cellular phones 80% and Internet accounts 21.5%. In the year 2002, telecommunications showed a 17.4% increase, with a 17.5% increase in the volume of installed telephones. The mobile service continued showing more dynamism than residential and business lines. During the year 2003 it shows a 15.2% growth due to the increase of mobile phone connections. The sector kept this level of growth, reaching in the year 2004 a 18.3% rate, which makes it the most dynamic of the Dominican economy. In 2005,Verizon had a total of 1,234,016 lines (468,664 mobile, 754,360 wire lines and 10,992 public phones); Tricom had a total of 464,024 lines (161,411 local wire and 302,613 mobile), Centennial Dominicana had 68,000 mobile lines; France Telecom Dominicana has 215,000 users; Turitel had 768 lines; and Economitel was in process of implementation. As a result of the strong growth of this sector, it was necessary to obtain a new area code for the Dominican Republic. In addition to the 809 area code, the country has also the 829 as a second area code.The implementation process and the required adjustments have already started.
Some Informations that any investor should know about:
TAXES in the Dominican Republic
Individuals receiving income from different sources shall file an income tax return of their income by March 31 each year. Such income tax report shall include all income accruing during the preceding calendar year.
The following shall be exempted from income tax payment:
Income of up to RD$276,422.00 (amount to be adjusted for inflation annually)
The salaried employees with income not greater than the exemption aforementioned.
Any dividends paid by a stockholding company to its shareholders either in shares or cash whenever such retention is dully executed in accordance to Article 308 of the Tax Code shall have been made.
Interest paid to individuals or corporations by financial entities regulated by the Superintendence of Banks and the Superintendence of Securities.
Taxes to Corporations
Corporations domiciled in the Dominican Republic shall pay thirty per cent (30%) on their taxable income for the fiscal year 2007.
According to these articles the following shall be deemed as corporations:
a) Capital associations;
b) Public sector enterprises on their income of a business nature and other entities;
c) Non divided estates;
d) Partnerships
e) Factual associations
f) Irregular associations
g) Any other manner of organization not expressly provided herein the purpose where of were to make a profit or gain that were not expressly declared to be exempted from this tax.
Such tax as is assessed to the above cited corporations shall be reduced annually down to 25% of net income upon applying the following schedule:
29% For the 2007 fiscal year
27% For the 2008 fiscal year
25% For the 2009 fiscal year
Fiscal Losses
In the event of any losses sustained in its fiscal exercise by a corporation, same shall be deducted from any gains obtained during the fiscal periods immediately following any such losses, provided however these shall not extend over five years, according to the following rule:
In no case shall losses proceeding from other entities where a tax payer shall have carried out any process of reorganization be deducted from any current or future period., nor shall any as resulted from any non deductible expenses.
Losses may only be deducted up to 20% of their total amount during the first three periods, at the rate of 20% in each period in an independent manner (non cumulative). No losses shall be deducted during the fourth and the fifth period except under the following conditions:
Fourth Period: Up to 20% of any such losses, without in any case exceeding 80% of Net Assessable Income or Taxable Income for that same period.
Fifth Period: Up to 20% of any such losses, while in no case exceeding 70% of Net Assessable Income or Taxable Income for that same period.
Any corporations filing losses during their first fiscal period, may have any such losses offset up to 100% during the second fiscal period; if this were not possible, it may be done upon complying with the same requirements as provided in the above paragraphs.
Tax on the Transfer of Manufactured Goods and Services (ITBIS)
During the first 20 days of each month any individuals or corporations who transferred manufactured goods or services or were importers of manufactured goods shall file and pay the tax on the Transfer of Manufactured Goods and Services (ITBIS) by cashier’s check issued to the Internal Tax Collector. Such payment shall cover the balance in favor of the General Internal Tax Revenue Office (DGII) resulting from any excess of ITBIS billed to customers in rendering goods and services to which this tax were assessed over any ITBIS advanced to suppliers in the acquisition of goods and services so as to produce income to which this tax were assessed or such values as were paid to Customs in introducing to the country any goods assessed therewith that were used in producing such goods and services as such a tax were in turn assessed. A 10% surcharge shall be applied in case of any delay or noncompliance in paying this tax during the first month and 4% for each additional month, besides 2.58% interest for each month or fraction of a month.These considerations shall not be deductible from net assessable taxes or taxable income when filing tax returns. If payment of any such tax became due on a holiday, same may be paid on the following business day with no surcharge or interest payment whatsoever. The aforementioned statement must be executed even in those cases that results a balance in favor of the tax payer, or in other words, that the same has advanced more ITBIS to its suppliers than the one invoiced to its clients.
Real Property Tax
A 1% tax is assessed on any real property designed for private dwelling or for business or manufacturing operations the value whereof including the land lot it is built on exceeded RD$5,000,000.00.This is subject to annual adjustment for inflation. A 1% tax of their actual value shall be assessed on non constructed urban lots without the RD$5,000,000.00 exemption, which will therefore only apply to built lots.The only exception shall be the case when owner(s) have reached the age of 65 years, provided said property had not changed owners in the last 15 years and its owner were to own but that one single real property. This tax shall be filed during the first 60 days of each month and shall be paid in equal installments – 50% on March 11 each year and the remainder 50% on September ll of the same year.
More Investment related important information:
Real Estate Dominican Republic Investment Info
- Economy realated facts for the Dominican Republic
- Real Estate & Investment Laws/ incl. Law for Dominican employees
- Investment opportunities Dominican Republic
Copyright 2007 John J. Kornbluth & Asoc. Sosua - Cabarete, Dominican Republic
