Taxes on House Sale

Pikobello

Well-known member
Nov 12, 2020
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Santo Domingo
I moved this to Legal for a definitive answer. I know DR has had several amnesty programs in the past, where one could pay a much lower rate to bring your property to current appraised value, so there must be some sort of capital gains tax applicable.
So how DGII calculate the capital gains? Is it the difference between the IPI and the selling price?
 

RDKNIGHT

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Mar 13, 2017
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from what a lawyer told my friend 29% only applies to corporations if it's personal house sale there is no capital gains tax .. my boy has sold his house and left paid no tax ......
 

DrNoob

Active member
Aug 10, 2024
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Cabarete, DR
So a good way to avoid this is to buy one property ?

Whenever I talk about taxes, a friend of mine laughs and says "you take these things too seriously, this is the DR".
I looked at starting a small business but looked at the taxes on businesses/profit and decided to give up.
 

MariaRubia

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Jun 25, 2019
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I sold a property personally to another person last year and there is definitely capital gains tax to pay. I have had weeks and weeks of meetings and tax advice from KPMG, Deloittes and now another firm, so I am very clued up on this subject.

Key points:

1) For a sale made in 2024 calendar year, you need to declare and pay the tax in 2025 by April. The date of the sale is when you received the cash.

2) If you don't pay the tax, there is an automatic 10% penalty, and then a 4% per month penalty added, and this goes on indefinitely. So in time it could easily amount to hundreds of thousands of dollars. Unless you are leaving DR and never ever intending to come back, this should be a concern.

3) The tax is 25% of the gain for a person-to-person sale. The gain is adjusted by inflation and they take the IPI value as the lower figure, and the sale price as the upper figure. There is an allowance applied for inflation and there is also a law that gives you another exemption which knocks a bit more off the gain.

4) If you have Residencia por Inversion (the investor residency) you get a 50% reduction on the tax bill.

The process is that you will need an accountant to do the calculations. They then go to DGII and file the calculations, their petition has to quote the relevant laws and be set out in a particular way. DGII looks at the calculations and has several meetings with the accountant when they argue about the numbers and finally an agreement is reached. You then get the authority to pay DGII.

As soon as the accountant has filed at DGII the clock stops ticking in terms of penalties and interest if you are filing late. So for example if you sold in 2023 and are filing late, your penalties will stack up until the day the accountant went to DGII.

I have an excellent lawyer / accountant I am now using, having eliminated several who are useless. These guys speak fluent English and are very very quick and efficient. DM me and I will happily make an introduction.
 
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RDKNIGHT

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Mar 13, 2017
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I sold a property personally to another person last year and there is definitely capital gains tax to pay. I have had weeks and weeks of meetings and tax advice from KPMG, Deloittes and now another firm, so I am very clued up on this subject.

Key points:

1) For a sale made in 2024 calendar year, you need to declare and pay the tax in 2025 by April. The date of the sale is when you received the cash.

2) If you don't pay the tax, there is an automatic 10% penalty, and then a 4% per month penalty added, and this goes on indefinitely. So in time it could easily amount to hundreds of thousands of dollars. Unless you are leaving DR and never ever intending to come back, this should be a concern.

3) The tax is 25% of the gain for a person-to-person sale. The gain is adjusted by inflation and they take the IPI value as the lower figure, and the sale price as the upper figure. There is an allowance applied for inflation and there is also a law that gives you another exemption which knocks a bit more off the gain.

4) If you have Residencia por Inversion (the investor residency) you get a 50% reduction on the tax bill.

The process is that you will need an accountant to do the calculations. They then go to DGII and file the calculations, their petition has to quote the relevant laws and be set out in a particular way. DGII looks at the calculations and has several meetings with the accountant when they argue about the numbers and finally an agreement is reached. You then get the authority to pay DGII.

As soon as the accountant has filed at DGII the clock stops ticking in terms of penalties and interest if you are filing late. So for example if you sold in 2023 and are filing late, your penalties will stack up until the day the accountant went to DGII.

I have an excellent lawyer / accountant I am now using, having eliminated several who are useless. These guys speak fluent English and are very very quick and efficient. DM me and I will happily make an introduction.
OK .. now if you find a buyer in the states and transfer all the monies in the states than say you sold your place for what you paid for it . that would be a wash on your tax bill correct?... and for the usa income as long as the place you sold was your primary house your tax free up to 250k on your gains
 

RDKNIGHT

Bronze
Mar 13, 2017
3,122
1,731
113
I sold a property personally to another person last year and there is definitely capital gains tax to pay. I have had weeks and weeks of meetings and tax advice from KPMG, Deloittes and now another firm, so I am very clued up on this subject.

Key points:

1) For a sale made in 2024 calendar year, you need to declare and pay the tax in 2025 by April. The date of the sale is when you received the cash.

2) If you don't pay the tax, there is an automatic 10% penalty, and then a 4% per month penalty added, and this goes on indefinitely. So in time it could easily amount to hundreds of thousands of dollars. Unless you are leaving DR and never ever intending to come back, this should be a concern.

3) The tax is 25% of the gain for a person-to-person sale. The gain is adjusted by inflation and they take the IPI value as the lower figure, and the sale price as the upper figure. There is an allowance applied for inflation and there is also a law that gives you another exemption which knocks a bit more off the gain.

4) If you have Residencia por Inversion (the investor residency) you get a 50% reduction on the tax bill.

The process is that you will need an accountant to do the calculations. They then go to DGII and file the calculations, their petition has to quote the relevant laws and be set out in a particular way. DGII looks at the calculations and has several meetings with the accountant when they argue about the numbers and finally an agreement is reached. You then get the authority to pay DGII.

As soon as the accountant has filed at DGII the clock stops ticking in terms of penalties and interest if you are filing late. So for example if you sold in 2023 and are filing late, your penalties will stack up until the day the accountant went to DGII.

I have an excellent lawyer / accountant I am now using, having eliminated several who are useless. These guys speak fluent English and are very very quick and efficient. DM me and I will happily make an introductionare .
lunch with my lawyer yesterday and he's still swears only the corporations pay the tax not the person also my friend sold his place and he did not pay any tax where he did have a problem is when he put the money into the United States Bank anything after 10,000 puts a red flag then he showed his contract that he sold the place down here and the red flag was removed
 

RDKNIGHT

Bronze
Mar 13, 2017
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lunch with my lawyer yesterday and he's still swears only the corporations pay the tax not the person also my friend sold his place and he did not pay any tax where he did have a problem is when he put the money into the United States Bank anything after 10,000 puts a red flag then he showed his contract that he sold the place down here and the red flag was removed
:rolleyes:
 

cavok

Silver
Jun 16, 2014
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Cabarete
For most US expats, the houses or condos they owned here were for vacation. They'll still have to pay capital gains in the US.
 

Pikobello

Well-known member
Nov 12, 2020
299
274
63
Santo Domingo
3) The tax is 25% of the gain for a person-to-person sale. The gain is adjusted by inflation and they take the IPI value as the lower figure, and the sale price as the upper figure. There is an allowance applied for inflation and there is also a law that gives you another exemption which knocks a bit more off the gain.
So let me do the math: We bought a lot in 2010 for 500K pesos and in the coming years we build a house on it. The actual IPI still listend this amount of value, so if we want so sell the house now for saying 10 million pesos, so we have to pay 25% tax for capital gains for the amount of 9,5 million pesos?
 

DrNoob

Active member
Aug 10, 2024
208
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43
Cabarete, DR
So let me do the math: We bought a lot in 2010 for 500K pesos and in the coming years we build a house on it. The actual IPI still listend this amount of value, so if we want so sell the house now for saying 10 million pesos, so we have to pay 25% tax for capital gains for the amount of 9,5 million pesos?
You have to adjust for inflation (I suppose based on rates published by the tax department) which should knock a decent bit off the tax.
 

MariaRubia

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Jun 25, 2019
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lunch with my lawyer yesterday and he's still swears only the corporations pay the tax not the person also my friend sold his place and he did not pay any tax where he did have a problem is when he put the money into the United States Bank anything after 10,000 puts a red flag then he showed his contract that he sold the place down here and the red flag was removed

Clearly your lawyer is wrong. Just google it. From Deloitte's website:

Capital gains: Capital gains derived from the disposal of capital assets located in the Dominican Republic, whether the sale is of an occasional nature or otherwise, generally are subject to a 25% tax. Gains must be reported in the individual income tax return for the period in which the disposal took place.

From what I have been told, and please trust me I have spent months on this speaking to various experts, it is normal for individuals not to pay tax on the sale of properties if they are sold to other individuals. Just as many Dominicans earn more than the threshold for paying income tax but don't declare this and don't pay income tax. HOWEVER, the law says you should pay 25% of the gain. And if you don't pay it, and the DGII come after you, the penalties will be 4% of the amount owed, per month, so in 24 months the tax bill will double.

If you pay IPI they will have you on the database, so when the property is sold, they will know you no longer own it. Maybe they won't come after you right now, but if they do so in, say, 4 or 5 years, you're going to have a huge tax bill to deal with.
 

MariaRubia

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Jun 25, 2019
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So let me do the math: We bought a lot in 2010 for 500K pesos and in the coming years we build a house on it. The actual IPI still listend this amount of value, so if we want so sell the house now for saying 10 million pesos, so we have to pay 25% tax for capital gains for the amount of 9,5 million pesos?

No. You have to include improvements.

Yes, you have to adjust for inflation. If you're selling as an individual to an individual, you are not allowed to claim for improvements nor legal costs of buying or selling or agent commissions. If you're selling as a corporate, or to a corporate, then you may be able to claim for improvements.

Remember, if you have the Residencia por Inversion, these taxes are reduced by 50%, so if you can qualify by earning more than US$ 2000 in rent per month, or have a US pension coming in to DR, or are investing, then it's well worth getting this visa.

Can I just stress that there are some excellent English-speaking law-firms and tax specialists in the capital, and it's really important to get professional advice. Again I have names and numbers and can recommend if you need me to, just DM me.
 
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cavok

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Jun 16, 2014
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Yes, you have to adjust for inflation. If you're selling as an individual to an individual, you are not allowed to claim for improvements nor legal costs of buying or selling or agent commissions. If you're selling as a corporate, or to a corporate, then you may be able to claim for improvements.
That's not what my accountant told me. In fact, he said if you by a condo or house and renovate it, the cost of renovations can be added to the cost basis.
 
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MariaRubia

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That's not what my accountant told me. In fact, he said if you by a condo or house and renovate it, the cost of renovations can be added to the cost basis.

Well the lady who is working for me now was previously very senior in Deloittes and she has said you can't claim for renovations if it's a person-to-person sale. KPMG also said the same thing to me.

If you renovate it through a company, or if you buy it through a company, or if you sell it to a company, then things may be different.

In any case, when you sell your accountant has to go to DGII and present their calculations. DGII then decides what can be admitted and not admitted, and even if they did allow refurb expenses, any costs would have to have invoices in your personal name with a comprobante fiscal. So if you used a builder who didn't give you an invoice with ITBIS, or if you bought something and didn't get a receipt with your name on it, they wouldn't accept it in any case.
 

cavok

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Jun 16, 2014
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Well the lady who is working for me now was previously very senior in Deloittes and she has said you can't claim for renovations if it's a person-to-person sale. KPMG also said the same thing to me.

If you renovate it through a company, or if you buy it through a company, or if you sell it to a company, then things may be different.

In any case, when you sell your accountant has to go to DGII and present their calculations. DGII then decides what can be admitted and not admitted, and even if they did allow refurb expenses, any costs would have to have invoices in your personal name with a comprobante fiscal. So if you used a builder who didn't give you an invoice with ITBIS, or if you bought something and didn't get a receipt with your name on it, they wouldn't accept it in any case.
That's the same thing my accountant told me - you need to have the receipts to adjust your cost basis.

I find it very hard to believe that, if you bought a lot, built a house on it, then sold it, that you would effectively be paying capital gains on the house. That makes zero sense.
 

MariaRubia

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Jun 25, 2019
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That's the same thing my accountant told me - you need to have the receipts to adjust your cost basis.

I find it very hard to believe that, if you bought a lot, built a house on it, then sold it, that you would effectively be paying capital gains on the house. That makes zero sense.

Lots of things don't make sense in Dominican Republic, especially when it comes to taxation. It doesn't make sense that the penalties for non-payment could come to more than the value of the house, but that's how it is.
 

cavok

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Jun 16, 2014
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Lots of things don't make sense in Dominican Republic, especially when it comes to taxation. It doesn't make sense that the penalties for non-payment could come to more than the value of the house, but that's how it is.
I'll wait for Fabio Guzman's opinion. I have never heard of treating a capital improvement as a capital gain.