Property Transfer Tax - Loophole

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pedrodominicus

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Dec 2, 2003
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Just been reading through Fabio Guzman?s excellent overviews at the top of this thread, very informative, great reference documents. I?m particularly interested in the ?Overview Of Dominican Real Estate Law? and the reference to a loophole in the law relating to Taxes and Expenses on Property Transfers. The document reads:

?Buyers wishing to lessen the impact of transfer taxes have the option of using a loophole in the law which allows the contribution in kind of property into corporations without paying transfer taxes.?

Can anyone explain what this actually mean and who can take advantage? I?m particularly interested because my accountant is bugging me to transfer the title to my business, from my name, to my company (CxA) name. At 3% Transfer Tax and 1.3% Stamp Tax I?ll end up paying around RD$400,000.00 in taxes, simply to change the name on the title.:surprised Could this loophole be apply to my situation? Any advise appreciated. Thanks.
 
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planner

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Sep 23, 2002
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I recently assisted a friend to do exactly this. He paid no transfer tax. He did pay a filing fee and a fee to his lawyer but it is minimal.
 
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Fabio J. Guzman

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Jan 1, 2002
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You would contribute (put in) your property into a corporation and obtain shares of the corporation for the property. Total fees would be incorporation taxes + legal fees, which are usually a lot less than the 4.4% required to transfer by a direct sale.

I would advise you (and everybody else with untransferred property) to act before April 2007 when the new real estate law comes into effect. If I am not mistaken, there will be an additional 1% tax on all transfers.
 
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bhale

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Mar 1, 2004
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Does the corporation have to be a DR corp or can it be a US corp? What are the costs to set up a DR corp, and do I have to have residency in the DR to have a DR corp? I want to buy property in the DR and would like to save as much money as possible.
 
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zak023

Done and dusted!
Feb 8, 2006
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Panama Corp S.A.

I have this type of corp and since my home is just being finished..When I go to get it titled is this type of corporation OK to put it in? The attorney who set it up last year said he thinks so..But I would like a positive answer since this is the DR..
 
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Fabio J. Guzman

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Jan 1, 2002
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Contributions in kind without paying transfer taxes are only possible with Dominican corporations. The cost of DR corporations varies according to the capitalization but in general are much more expensive than a US corporation. You don't have to be a DR resident to be a shareholder of a DR corporation.
 
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bhale

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Mar 1, 2004
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My plans are to start a photography business in the Sosua area sometime in the first quarter of 2007. I also plan on buying a condo or house. I would like to start a DR corp for the business, and transfer the property into DR corp also. Mr. Guzman, do you have an idea what this would cost? Are you in the POP area?
 
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