What are the internal taxes paid in the Dominican Republic?

If you are thinking of living in one of the most beautiful places in the Caribbean, the first thing to do is to be well informed about taxes. What are the internal taxes to be paid in the Dominican Republic?

Whether you are a real estate investor and want to make your way in the world of Real Estate in the Dominican Republic, or you simply want to buy a property and move to live in Punta Cana to enjoy its quality of life and its beaches, in this post we will show you what you know about this matter.

What are the internal taxes in the Dominican Republic?

Internal taxes in the Dominican Republic are those taxes corresponding to the Dominican tax system. These taxes are collected by the Dirección General de Impuestos Internos (DGII).

Those who invest in this country and come from abroad must pay taxes on the real estate operations they carry out. However, thanks to the Confotur Law, you can access great tax advantages as an investor.

To invest in real estate in the Dominican Republic you don't need to live here, but it can be a good option if you would like to settle in this beautiful Caribbean country.

Here are the most important taxes you should know if you are going to live in the Dominican Republic.

Income Taxes (ISR)

Income Tax (ISR) is the tax levied on individuals. It is a progressive tax, which is levied on individuals according to their income level, in accordance with certain brackets corresponding to the current year.

Foreigners who are not residents in the country are only subject to ISR when the income has been obtained within the Dominican Republic.

On the other hand, if they are tax residents in the country and have income from the Dominican Republic itself, this income would be subject to ISR.

It should be noted that even if the income is earned outside the country, some types of income may be taxed. In the case of annuitants, however, they would be exempt from taxation on income from foreign sources.

In addition, income derived from investments in tourism projects that benefit from the Confotur Law will be exempt from the payment of this tax for a period of 15 years.

Asset Tax

Asset Tax in the Dominican Republic is paid on property, such as homes or vehicles.

This tax is only paid when the aggregate of the properties represents 1% per year. Once again, it is worth remembering that those who have invested in tourism projects subject to the Confotur Law will also be exempt from this tax for 15 years.

3. ITBIS (Tax on the Transfer of Industrialized Goods and Services)

ITBIS is a tax similar to VAT that is levied on value added. The acronym ITBIS stands for Tax on the Transfer of Industrialized Goods and Services.

The general rate is currently 18%, while certain products are exempt from this tax.

It should be noted that homes in the Dominican Republic are not subject to ITBIS, although the buyer of a property will have to pay the Real Estate Transfer Tax to register the home, which represents a 3% of the value of the property, although again if the project is subject to Confotur, it would be exempt.

4. ISC (Selective Consumption Tax)

This is a consumption tax levied on certain goods, such as alcohol, tobacco and fuel, telecommunications and insurance services, as well as the issuance of checks and electronic transfers.

The rates are as follows:

● Alcoholic beverages: 10%

● Tobacco: 20%

● Telecommunication services: 10%

● Insurance: 16%

● Issuance of checks and wire transfers: 0.0015 on the value of each check paid or wire transfer.

If you are going to reside in the Dominican Republic and buy these products or services, you will be paying taxes, although if you receive income from abroad in US dollars or any other hard currency, the cost is not at all high.

Do I have to pay taxes if I want to reside in the Dominican Republic? Some exemptions

There are different exemptions that can benefit you if you want to establish your tax residence in the Dominican Republic.

For example, if you are a rentista above a certain threshold, you are not required to pay ISR or income tax. Find out what you have to do to obtain a rentista visa in Dominican Republic.

On the other hand, pensioners or retirees can also obtain the ISR exemption if they receive a monthly pension of $1500 USD, as explained above.

Foreign investors would only have to pay taxes on Dominican source income, while income generated abroad would be exempt from income tax if you decide to establish your residence in the Dominican Republic.

Would you like to learn about real estate investment projects that benefit from the Confotur Law and buy your apartment in Dominican Republic? Write to us.

Investing in apartments for rent, what are the advantages?

There are different investment strategies depending on the purpose of the real estate purchase.

One of the possible strategies is investing in apartments for rentThis means that you want to turn your homes into a real estate asset that generates recurring income and profitability.

There are many ways to carry out this type of real estate investments in Dominican Republic. We are going to show you the different options you can choose from and the benefits they offer. investing in apartments for rent.

Ways to invest in apartments for rent

There are different Real Estate strategies that have as their main objective rent the properties to third parties.

These are some of the most important ones.

Buy apartments for tourist rental

Consists of buy an apartment to rent it to tourists visiting the Dominican Republic and wishing to book a stay in your rental house.

Generally, this type of acquisition has some advantages that make it very attractive to the investor:

They are apartments focused on tourismThey therefore target a type of end customer with high purchasing power. They are willing to pay more per night.

Tourist rentals can less trouble in the long runThe people come, enjoy their stay in your apartment and leave, leaving you with a high profitability.

In order to qualify for this type of tourist rentals, investors look not so much at the space of the apartment itself, but at the facilities and location in which it is located. It is much better to invest in a condominium in Punta Cana with a private beach, gym, swimming pool, coworking area and close to the most fashionable golf course than in a house located away from the tourist areas.

Investing in apartments for long-term rentals

Investment in apartments for long-term rental consists of acquiring homes with the objective of renting them for long terms, from 6 months to 1 year, with a view to keeping tenants for as long as possible.

This type of investment is oriented to the rental of apartments to local peoplewhether they are nationals of the Dominican Republic or foreigners living and working in the country.

The profitability is usually much lower, since the priority is to allow the person to stay as long as possible and prices tend to be lower.

Most of the local people have a lower average wage than most U.S. tourists or other neighboring countries, so profitability tends to be lower and there is no guarantee that the tenant will renew the contract.

Those who opt for this type of real estate investments in Dominican Republic tend to look for low-priced apartments or houses that can be renovated and generate higher profitability, or that are close to business areas, with a view to renting to people with high purchasing power.

The biggest problem with this investment strategy is that, in a tourism-oriented market such as the Dominican Republic, it involves blocking an asset with a long-term leaseAlthough it offers you stability, it cannot benefit from market price increases during the tourist season.

Benefits of buying apartments for rent in Dominican Republic

Acquiring an apartment for renting involves large amounts of money. advantages for investors for various reasons.

You get liquidity from the very first moment

When you buy an apartment, it is all about expenses at first. Unless you want to use it to live in it, the best option is usually to rent it to obtain an income that will allow you to cover the monthly mortgage or the administrative costs of the acquisition.

Even if you are thinking of waiting for it to appreciate in value to sell it, in the first years it is always best to rent it to cover part of the cost you have incurred. Pay close attention to the occupancy rate of your tourist apartmentIt is essential to maximize your liquidity.

You have a buoyant rental market

The Dominican Republic is attracting more and more digital nomads, tourists, investors and professionals who are looking for the best quality of life.

In such an environment, the apartment rentals is always in fashion, as they are people who tend to move around a lot and are not going to stay too long on the island, or in some cases, they are going to look for other tourist destinations.

In this sense, taking advantage of this continuous tourist movement is a great opportunity for those who choose to buy apartments for short-term tourist rental.

Lower acquisition costs

The relationship between housing costs and the price of apartment rentals in the Dominican Republic is beneficial for the real estate investor. In this sense, if a foreign investor with high purchasing power comes, he will obtain many more advantages when buying an apartment in the Dominican Republic than in the United States, where prices are higher.

Ideally, you should obtain financing that will allow you to obtain a cash flow positive, but even if this is not possible, you can still profit from the long-term appreciation of the property.