Corporation and Inheritance taxes

Sluggo

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May 4, 2018
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I recently signed papers to purchase a condo.  I am being advised to put the property in a corporation, as this will have advantages when selling the property under Law 158-01 (Confotur).  I was told if I wanted to sell the property, I could just sell the corporation and the new owner would not have to pay the 3% transfer tax and would retain the exemption of paying property taxes for the 15 year period.  I am single and only have 1 heir.  My question is if I die, would my heir have to pay inheritance taxes when she inherits the corporation or can I just sign over the corporation before I die and avoid the taxes.

The next question is can I put this property in a US corporation that is duly registered in the DR and still receive the benefits of Law 158-01.  This might make my tax reporting requirements easier in the US as well as the transfer of the corporation upon my death.

I am willing to pay for sound legal advise that makes everything easier during the remainder of my life and for my heir.

Sluggo
 

Fabio J. Guzman

DR1 Expert
Jan 1, 2002
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A corporation, local or foreign, is the usual set-up in your situation.

If you transfer the shares in your corporation to your daughter before you die for the appropriate consideration. she won't have to pay inheritance taxes. In any case, you should always consult a estate attorney before deciding on a course of action.
 

Fabio J. Guzman

DR1 Expert
Jan 1, 2002
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A corporation, local or foreign, is the usual set-up in your situation.

If you transfer the shares in your corporation to your daughter before you die for the appropriate consideration. she won't have to pay inheritance taxes. In any case, you should always consult a estate attorney before deciding on a course of action.
 

aarhus

Long live King Frederik X
Jun 10, 2008
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A corporation, local or foreign, is the usual set-up in your situation.

If you transfer the shares in your corporation to your daughter before you die for the appropriate consideration. she won't have to pay inheritance taxes. In any case, you should always consult a estate attorney before deciding on a course of action.



But what about the 1% annual asset tax on a corporation ?
 

chico bill

Dogs Better than People
May 6, 2016
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A corporation, local or foreign, is the usual set-up in your situation.

If you transfer the shares in your corporation to your daughter before you die for the appropriate consideration. she won't have to pay inheritance taxes. In any case, you should always consult a estate attorney before deciding on a course of action.

Can you explain the advantages and disadvantages of buying & selling property registered to a corporation vs individual as well as the cost of annual filings for corporations even if the only asset is property and no DR income is generated
 

Fabio J. Guzman

DR1 Expert
Jan 1, 2002
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How to structure real estate ownership in the Dominican Republic is an issue that needs to be examined case by case. The solution depends on the particular situation of the owner and the risks he or she is willing to take.

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 likewise a useful tool for estate planning. If the buyer has, for example, an US trust, he can have the trust be the owner of a local company holding the property. 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 the company, which doesn’t die when its shareholders do. 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 paid from the income tax due, in effect negating property taxes; (b) the owner may also deduct property expenses.

The disadvantages to owning property under a corporation are two: (a) the continuing expense of running the company and paying maintenance fees; and (b) companies pay an annual 1% tax on assets, while individually-owned property only pays the 1% tax on any value greater than 6+ million pesos, although, as mentioned above, if the company pays income tax, it may not have to pay the 1% tax on assets.
 

Fabio J. Guzman

DR1 Expert
Jan 1, 2002
2,359
252
83
www.drlawyer.com
How to structure real estate ownership in the Dominican Republic is an issue that needs to be examined case by case. The solution depends on the particular situation of the owner and the risks he or she is willing to take.

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 likewise a useful tool for estate planning. If the buyer has, for example, an US trust, he can have the trust be the owner of a local company holding the property. 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 the company, which doesn’t die when its shareholders do. 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 paid from the income tax due, in effect negating property taxes; (b) the owner may also deduct property expenses.

The disadvantages to owning property under a corporation are two: (a) the continuing expense of running the company and paying maintenance fees; and (b) companies pay an annual 1% tax on assets, while individually-owned property only pays the 1% tax on any value greater than 6+ million pesos, although, as mentioned above, if the company pays income tax, it may not have to pay the 1% tax on assets.
 

Sluggo

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May 4, 2018
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Mr. Guzman,

Thank you for your replies on this matter. In my search for as much information as possible, I came across this information put out on a web site:

"Properties held in the name of a corporation or other entities do not at present pay a property tax per se; however, a 1 per cent tax is levied on company assets, including real estate. Beginning in 2017, however, property held by entities will also pay a 1 per cent property tax, and the tax on assets will be abolished."

My question is: Have the taxes on assets been abolished? And if so, Would you also not have to pay property tax under Law 158-01 Confotour?

Sluggo
 

Sluggo

New member
May 4, 2018
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If the property is in a corporation, will the 1% tax on assets be on the value (sale price) of the property every year?
 

Sluggo

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May 4, 2018
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Also, does the 1% tax on assets apply to a US Corporation duly registered in the DR, or just on DR corporations?