As its name states, the property transfer tax is the tax the buyer pays to transfer the ownership of the property. In the Dominican Republic, the property transfer tax for individuals is equal to 3% of the assessed value of that property.
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. That value is known as the Avalúo and is registered at the Internal Revenue Office. This value is different from the final purchase price and in many cases, it is lower.
For the buyer purchasing with the help of a mortgage loan from a local bank, the transfer tax will be calculated on the purchase value. This is because the bank, which knows the final purchase price, is obligated to send that information to the Internal Revenue Office which actualizes its records on the value of the property, or Avalúo.
Taxes must be paid before filing the purchase at the Title Registry Office. Taxes and expenses on the conveyance of real estate are approximately 3.5% 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.
Buyers wishing to lessen the impact of transfer taxes have the option of using a loophole in the law which allows the contribution of kind of property into corporations without paying transfer taxes. For this, cooperation from the seller is essential.
Each transaction requires a different approach depending on the property, the situation of the buyer, and the seller. That is why it is important to consult with a local notary/attorney to make sure you choose the best option for your needs.
Note that, the form under which you will purchase a property will have an impact on the day you will want to sell it.
Dominican Tax Website