Corporation or Foundation to buy Real Estate in the Dominican Republic or is this only available for Dominican Corporations? Are all entities required to have an RNC number to purchase real estate? Thank you.
- Thread starter jimmythegreek
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Question: Is It Possible For A Foreign
Advantage of being owned by Corporation:
To sell the property you just sell the corporation. Easier than to change title, etc. The title is still in the corporation's name.
You can do two contracts, one is the "transfer" of corporation for the cost of basic capital (you optimize tax form capital gains).
You can have multiple corporations owning different properties (e.g. corporation A owning property A, corporation B owning property B) where you can optimize your property tax exposure if each property is less than 5 million pesos in value but combined they exceed 5 million pesos in value. See below.
Disadvantage:
You pay 1% of assets tax every year, which will be 1% of the property value. You do no pay this if you are a physical person owning the property. This tax is in addition to property tax that must be paid for any property over 5 million pesos (there have been recent changes in the value of property and property accumulation when multiple properties are owned by single owner, before you could own multiple properties of >5 million to be tax exempt, now the properties accumulate).
To sell the property you just sell the corporation. Easier than to change title, etc. The title is still in the corporation's name.
You can do two contracts, one is the "transfer" of corporation for the cost of basic capital (you optimize tax form capital gains).
You can have multiple corporations owning different properties (e.g. corporation A owning property A, corporation B owning property B) where you can optimize your property tax exposure if each property is less than 5 million pesos in value but combined they exceed 5 million pesos in value. See below.
Disadvantage:
You pay 1% of assets tax every year, which will be 1% of the property value. You do no pay this if you are a physical person owning the property. This tax is in addition to property tax that must be paid for any property over 5 million pesos (there have been recent changes in the value of property and property accumulation when multiple properties are owned by single owner, before you could own multiple properties of >5 million to be tax exempt, now the properties accumulate).
Advantage of being owned by Corporation:
To sell the property you just sell the corporation. Easier than to change title, etc. The title is still in the corporation's name.
You can do two contracts, one is the "transfer" of corporation for the cost of basic capital (you optimize tax form capital gains).
You can have multiple corporations owning different properties (e.g. corporation A owning property A, corporation B owning property B) where you can optimize your property tax exposure if each property is less than 5 million pesos in value but combined they exceed 5 million pesos in value. See below.
Disadvantage:
You pay 1% of assets tax every year, which will be 1% of the property value. You do no pay this if you are a physical person owning the property. This tax is in addition to property tax that must be paid for any property over 5 million pesos (there have been recent changes in the value of property and property accumulation when multiple properties are owned by single owner, before you could own multiple properties of >5 million to be tax exempt, now the properties accumulate).
Rubio_higuey: Thanks for the response-I believe it is now RD$6.5 Million for all of the properties combined in one name. This was the change made at the end of the last year during the reform fiscal.
The 1% annual tax on assets for corporations will be eliminated automatically in 2015. The tax rate for FY2014 will be reduced to 0.5%. After 2015, real estate properties held by corporations will pay the same property tax as individuals.
The main advantage of holding a property under a corporate structure is very much the same everywhere: limited liability, meaning that company assets are not liable for the personal obligations of the owner. For example, if you have a car accident or have problems paying your creditors, only property held personally can be affected, not the property held by the company.
Companies are also a useful tool for estate planning, specially for foreigners owning real estate in the Dominican Republic who wish to avoid the application of Dominican “forced heirship” rules. Under Dominican law, inheritance of real property is governed by local statute that establishes that part of the estate must go to certain heirs by law (for example, a foreigner with a one child must reserve 50% of the estate to that child despite the existence of a will or of the law of his country of residence). The company structure simplifies greatly the handling of the estate and the transfer of control to the heirs.
Also, in an estate situation, if the property is owned through a corporation transferring title to the “heirs” is not necessary, since the owner is a company and companies never “die”, only the transfer of shares is required, which is quite easy. In case of individual ownership, title transfer is required, which involves a more complex and costly process, which includes a petition to the Registrar for a new Certificate of Title, among other things.
In addition, holding property under a company also allows for quick resales since reselling all the shares of the asset-holding company is easier, faster and less expensive than it is to convey real estate. The option of purchasing the shares of the corporations is almost always seen as an advantage by the potential purchaser, since payment of the 3.1% transfer tax is avoided.
Finally, if the company is in fact an operating company paying income taxes: (a) the owner may deduct any property taxes (tax on assets) paid from the income tax due, in effect negating property taxes; (b) the owner may also deduct property expenses.
Companies are also a useful tool for estate planning, specially for foreigners owning real estate in the Dominican Republic who wish to avoid the application of Dominican “forced heirship” rules. Under Dominican law, inheritance of real property is governed by local statute that establishes that part of the estate must go to certain heirs by law (for example, a foreigner with a one child must reserve 50% of the estate to that child despite the existence of a will or of the law of his country of residence). The company structure simplifies greatly the handling of the estate and the transfer of control to the heirs.
Also, in an estate situation, if the property is owned through a corporation transferring title to the “heirs” is not necessary, since the owner is a company and companies never “die”, only the transfer of shares is required, which is quite easy. In case of individual ownership, title transfer is required, which involves a more complex and costly process, which includes a petition to the Registrar for a new Certificate of Title, among other things.
In addition, holding property under a company also allows for quick resales since reselling all the shares of the asset-holding company is easier, faster and less expensive than it is to convey real estate. The option of purchasing the shares of the corporations is almost always seen as an advantage by the potential purchaser, since payment of the 3.1% transfer tax is avoided.
Finally, if the company is in fact an operating company paying income taxes: (a) the owner may deduct any property taxes (tax on assets) paid from the income tax due, in effect negating property taxes; (b) the owner may also deduct property expenses.