Advantages of Forming a Company to Acquire Real Estate
1. The buyer may avoid paying transfer taxes (approximately 5% of the purchase price. This assumes that the seller will "contribute" the property in kind to the company and will receive back shares for his contribution. These shares are then sold to the buyer. This mechanism may result in the buyer paying less for the transaction, including the cost of the company, than if he did a standard straight purchase, meaning that in effect he would be getting a company for free.
2. The buyer's personal liabilities, both in the Dominican Republic and in his country of residence, will not affect the property held by the company.
3. It allows for quick resales since it is much easier and less expensive to resell all the shares of stock of the asset-holding corporation than it is to convey real estate.
4. In case of death of the owner, it simplifies greatly the handling of the estate and the transfer of control to the heirs. Under Dominican law, inheritance of real property is governed by local statute which establishes that part of the estate must go to certain heirs by law (for example, a foreigner with a legitimate child must reserve 50% of the estate to that child irrespective of the existence of a will or of the law of his country of residence). This rule does not apply when ownership of real estate is held by a corporation. Also, if the title is in the name of one or several individuals and one of them dies, the procedure to change the title to the heirs is cumbersome and time-consuming.
Disadvantages
Expense to keep the company current (annual filing of tax returns, preparation of annual meeting, registration at Business Registry, etc.)
Tax rate is a flat 25% instead of the graduated income tax (15%-25%) applicable to individuals.