The new tax package announced by President Fernandez this week includes an increase from 1 to 2% in the tax on residential properties. This increase does not apply to properties held under a corporation which will continue to pay a 1% tax on assets as per Law #557-05 enacted last year. The practical consequence of the new measure is to tilt the balance again in favor of holding properties under a corporation instead of in the name of the individual owner.
- Thread starter Fabio J. Guzman
- Start date
Property Tax to be Increased from 1 to 2%
This only applies to properties which are 5 million pesos and up, correct?
This was true back in March 2006.
Steve
We don?t know if the RD$5 million pesos exemption on residential property will be kept since the bill has not been sent to Congress yet. There are rumors to the effect that it will either be lowered to RD$2 to 3 million or be changed to a one-time exemption for all properties owned by an individual, for example, if an individual owns two RD$5 million pesos properties, he?ll only get an exemption for the first one and will have to pay the full 2% on the second.
exemption
Also keep in mind, this tax is based on the "declared" value of the property, NOT what you actually paid for it. If you paid US$150,000.00 for it, your lawyer
might have the declared value set at US$60,000.00. So there is a long way to go before you will pay property tax still. If they change the rules to a one time exemption, put the second property in your wifes name or a numbered company.
It's a bit of a joke, kinda' like the mafiosa police.
Steve
Also keep in mind, this tax is based on the "declared" value of the property, NOT what you actually paid for it. If you paid US$150,000.00 for it, your lawyer
might have the declared value set at US$60,000.00. So there is a long way to go before you will pay property tax still. If they change the rules to a one time exemption, put the second property in your wifes name or a numbered company.
It's a bit of a joke, kinda' like the mafiosa police.
Steve
Also keep in mind, this tax is based on the "declared" value of the property, NOT what you actually paid for it. If you paid US$150,000.00 for it, your lawyer
might have the declared value set at US$60,000.00. So there is a long way to go before you will pay property tax still. If they change the rules to a one time exemption, put the second property in your wifes name or a numbered company.
It's a bit of a joke, kinda' like the mafiosa police.
Steve
You just built in an additional US$90,000 subject to capital gains tax when you sell though. Last I looked was a 25% tax.
Steve,
I am well aware this specific method is used to avoid taxes, and I think DR1 has a great track record of telling it how it is in the DR. However, to see this put down in writing, openly flaunting the ability to 'screw the government' by fraud struck me today as improper.
It's one thing to use a loophole in tax laws, example placing in name of corporation resulting in lower tax rate(which is legal). However it seems quite another to outright lie (aided by an attorney with duplicate documents with different sales price listed) in order to avoid paying taxes. In another country whose legal/enforcement system were more advanced... both would likely end up in jail or heavily fined. The attorney would be disbarred.
Yes, it is 'fun' to work around the system in DR, take the shortcuts, and brag about how smart we are. I'm just not so sure that should be the right of an expat. Take advantage of laws and loopholes, yes. Blatantly disregard them or cheat, then brag about it in a public forum - I'm not so sure.
By cheating the gov't of tax revenue... do we lose our 'right' to complain of poor policing, roads, or other government services?
How do the Dominican people feel about foreigners and expats that come in to exploit the system? I can tell you that for me in the U.S., to see new members of our society 'milking the system' is very upsetting. I look differently on a citizen doing so & someone who has just arrived. You need to earn the right to screw the gov't I guess.
Anyhow, I know where you're coming from. I'm probably guilty of enjoying some of the non-existent enforcement of tax laws... just not sure that makes it right.
Not only is it improper it is also lacking in wisdom. Howmar is absolutely correct about capital gains tax when you sell and...............everyone knows where Costa Azul is. It may not take the DGII too long to be carefully checking Steve's records.........
Quite frankly if we foreigners enjoy the privilege of living here the least we can do is pay the appropriate taxes particularly if we are using properties to gain rental income from (usually) sources outside the DR.
Just look for the house with a trampouline in Costa Azul!
I wonder if Steve paid duty on the trampouline or was that the old look up joke in customs. It always amazes me what people post on a public space.
tambo
I wonder if Steve paid duty on the trampouline or was that the old look up joke in customs. It always amazes me what people post on a public space.
tambo
Taxes
I have decided to buy the trampoline in the DR when we come down.
CFA123, Lambada and Tamborista, these previous things I posted were told to me from my agent and lawyer. It was their recommendation to do so, to save money on the land transfer tax. When sold, there will be capital gains tax on the difference between the original price and the selling price, NOT the "declared" value. This is very common and happens every day in the DR.
The fact that there are no property taxes on properties below the RD 5 million dollar amount is silly considering how poor the country is. It's also another reason for someone to choose to buy a vacation property in th DR compared to a place with property taxes. Keep in mind, the people who work for the government have the better jobs than the very poor in the barrio.
I find it hard to believe that the government might not know this happens all the time. Of course they know! They know everything!
CFA123, it's not bragging, it's making others aware just in case they don't know. By the way, I don't live in the DR, just have a vacation property there.
Everything I have posted regarding the OP is bang on! I did my homework.
Steve
I have decided to buy the trampoline in the DR when we come down.
CFA123, Lambada and Tamborista, these previous things I posted were told to me from my agent and lawyer. It was their recommendation to do so, to save money on the land transfer tax. When sold, there will be capital gains tax on the difference between the original price and the selling price, NOT the "declared" value. This is very common and happens every day in the DR.
The fact that there are no property taxes on properties below the RD 5 million dollar amount is silly considering how poor the country is. It's also another reason for someone to choose to buy a vacation property in th DR compared to a place with property taxes. Keep in mind, the people who work for the government have the better jobs than the very poor in the barrio.
I find it hard to believe that the government might not know this happens all the time. Of course they know! They know everything!
CFA123, it's not bragging, it's making others aware just in case they don't know. By the way, I don't live in the DR, just have a vacation property there.
Everything I have posted regarding the OP is bang on! I did my homework.
Steve
Steve,
I wasn't knocking your posting of the info or doubting it's veracity. DR1 is a place for factual accounts of vacationing, living, working in DR. What you mention does appear to be common practice from various discussions I've had.
My question really was, how much are we hurting or helping things in DR when we as expats or tourists make all the gaps in the law that much wider by jumping through after everyone else? And yes, I admit it can be one of the attractions to life in DR. ;-)
I wasn't knocking your posting of the info or doubting it's veracity. DR1 is a place for factual accounts of vacationing, living, working in DR. What you mention does appear to be common practice from various discussions I've had.
My question really was, how much are we hurting or helping things in DR when we as expats or tourists make all the gaps in the law that much wider by jumping through after everyone else? And yes, I admit it can be one of the attractions to life in DR. ;-)
CFA123
It's a tough call. I hear people here on DR1 stating how cheap Dominican labour is and to take advantage of these things whenever you can. Even though real estate has gone up, it's still a good deal, I think.
I have a local that watches over my place and I treat him as a friend. I always paid for his food/drink and his daughters and was happy too and will again.
The tax thing I commented on is just a way to save a bit more from the government. That will leave more in your pocket so you can share it with the less fortunate. I have spent a good chunk of $$ in the DR in the last 6 years and I know some of it trickles down to the needy.
The other point I was making about putting a second or third property in a #'d business name or wifes etc, would just be investment savvy, if they change the rules.
Lastly, I don't think that having the "declared" value being reduced is illegal. It sure doesn't seem like it when you google it and find info on it.
Take care
Steve
In terms of IVSS tax the DGII has declared a value on land depending on area. You don't think reducing this is illegal? Let's see what Mr. Guzman has to say on this.
There you all go again...Waiting for the Guzmans to give free legal advice..Don't hold your breath waiting for a reply..Read the post I started on DR1 10 days ago.Titled Guzman and Ariza are truly the best and read some of the posts..Mr.Guzman is not here to settle your differences of opinions..
Taxes
Zak
I'm not waiting for anything from him, maybe Lambada is though. Maybe you should back up and realize who started this thread.
Steve
Zak
I'm not waiting for anything from him, maybe Lambada is though. Maybe you should back up and realize who started this thread.
Steve
No actually Lambada isn't. :laugh: I know exactly where I stand tax wise and have always made sure I'm squeaky clean on that one, even upsetting the system by paying ahead of time sometimes...........
But if Lambada and Steve have a difference of interpretation over something which links to information Mr. Guzman posted, particularly where it concerns possible legal/illegal outcomes I do feel it would be educational for all of us to seek Mr. Guzman's opinion and clarification. My hunch is that Mr. Guzman does NOT condone the underestimating of property value but until he responds we won't know.
So yes Steve, you and I will wait and see what that clarification is. And I think the only person who can say what Mr. Guzman is here on this board to do, or not to do is Mr. Guzman himself, or Robert. Not anyone else.
Steve and Lambada
As of this post...I am staying out of this and taking a back seat. I didn't mean to speak in anyone's behalf...I too will monitor this post to see if your question gets answered..Lambada I'm on the same page as you are..I pay what is necassary trying to even stay ahead of the due dates..this goes for everything concerning my home in the SW..
Have a good day ..........................................
As of this post...I am staying out of this and taking a back seat. I didn't mean to speak in anyone's behalf...I too will monitor this post to see if your question gets answered..Lambada I'm on the same page as you are..I pay what is necassary trying to even stay ahead of the due dates..this goes for everything concerning my home in the SW..
Have a good day ..........................................
Also keep in mind, this tax is based on the "declared" value of the property, NOT what you actually paid for it. If you paid US$150,000.00 for it, your lawyer
might have the declared value set at US$60,000.00. So there is a long way to go before you will pay property tax still. If they change the rules to a one time exemption, put the second property in your wifes name or a numbered company.
It's a bit of a joke, kinda' like the mafiosa police.
Steve
This is not correct. Transfer taxes are paid based on the market value of the property as determined by the tax authorities, not based on the price of purchase declared by the lawyer/notary in the deed of sale.
For most areas in the country, the price per square meter of land has already been determined for tax purposes and may be found by location (?sector?) on the Internal Revenue website (www.dgii.gov.do/servicios/consultaivss.html). When you go to pay transfer taxes at Internal Revenue, the official there cannot change the value of the property stated in the table. The only way open for cheating is for the official to state that the property is in a different location than it actually is which, of course, leaves a telltale sign of something amiss in the records.
Our recommendation is to pay whatever transfer taxes are due, not only because it?s the right thing to do, but also because it?s the smart thing to do. As has been pointed out before, lowering the price of the property to save on the 4.4% transfer tax, will increase the capital gains (25 or 30%) you will have to pay later when you sell. It may be that the government has not collected capital gains very assiduously in the past, but I can assure you that they will in the future. For those who doubt it, I will just mention a name: ?Verizon.?
In any case, there are ways to avoid the transfer tax through incorporation, as well as remedies to lower the tax appraisal by the government when it is too high.
Taxes
Fabio
Well, I don't know what to say other than I confirmed with my lawyer via email from him on this Nov 20 2006, that I DON'T pay property taxes and if/when it resells, the new owner will declare the property at a lower level just like I did in March 2006, so the capital gains won't be an issue at that time either.
What I did in March and what you state here, directly conflict each other. Remember, this was done on advice from both my lawyer and real estate agent and so far, saved me US$2000.00. After your initial post and following posts, I googled the topic once again and found that it is SO common to do this, that the government is planning on making a minimum tax to stop it from happening. We all know how long that will take to implement, if ever.
Fabio
Well, I don't know what to say other than I confirmed with my lawyer via email from him on this Nov 20 2006, that I DON'T pay property taxes and if/when it resells, the new owner will declare the property at a lower level just like I did in March 2006, so the capital gains won't be an issue at that time either.
What I did in March and what you state here, directly conflict each other. Remember, this was done on advice from both my lawyer and real estate agent and so far, saved me US$2000.00. After your initial post and following posts, I googled the topic once again and found that it is SO common to do this, that the government is planning on making a minimum tax to stop it from happening. We all know how long that will take to implement, if ever.