Taxes on House Sale

[RDKNIGHT]

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.

Morning Maria I will consult with another lawyer let me ask you this if you bought your place for $200,000 and you sold it for $210,000 person to person no Corporation involved your tax bill would be on the $10,000.

something seems kind of weird because I know if you're an American citizen and you sell a property here and you have capital gains you have to pay taxes to them if it's not your primary resident and if it is your primary residence then there is a threshold of $250,000 where it's tax-free in the United States on the gains if so that means you would be paying taxes to Dominican Republic and the United States on the property that does not seem right.

now what happens if you sell and never plan to return

 

[RDKNIGHT]

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.

Morning Maria I will consult with another 3rd lawyer let me ask you this if you bought your place for $200,000 and you sold it for $210,000 person to person no Corporation involved your tax bill would be on the $10,000.

something seems kind of weird because I know if you're an American citizen and you sell a property here and you have capital gains you have to pay taxes to them if it's not your primary resident and if it is your primary residence then there is a threshold of $250,000 where it's tax-free in the United States on the gains if so that means you would be paying taxes to Dominican Republic and the United States on the property that does not seem right.

now what happens if you sell and never plan to return

I spoke with another 2ndlawyer and he says the same thing as my first lawyer he also said as long as you've been paying the taxes every year when you own the place there is no issue that's how they clear a title and force you to pay

 

[RDKNIGHT]

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.

and I also just found out if you never paid corporate taxes are on the tax payer program they will never know ...so the answer is no .. just asked two returned expats and they told me they didnt not pay tax one its been 5 yrs gone other 3yrs gone never been contacted

 

[RDKNIGHT]

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.

Maria I think you are wrong with this one ... now if you pay corporate tax or pay taxes to the government in the past in the office that most likely you're on the hook but if you have never you're not on the hook

 

[cavok]

and I also just found out if you never paid corporate taxes are on the tax payer program they will never know ...so the answer is no .. just asked two returned expats and they told me they didnt not pay tax one its been 5 yrs gone other 3yrs gone never been contacted

I'm not so sure about that one(?). Did they both own their property in an S.R.l.? A friend of mine owned a condo in an S.R.L. for 5 years and paid corporate taxes every year. When he sold his condo, he was hit with a big tax bill. Why? His Dominican accountant that he paid to do and pay the taxes every year, never paid the taxes. He pocketed the money. My friend couldn't close until the taxes were paid.

 

[MariaRubia]

and I also just found out if you never paid corporate taxes are on the tax payer program they will never know ...so the answer is no .. just asked two returned expats and they told me they didnt not pay tax one its been 5 yrs gone other 3yrs gone never been contacted

I have made the point several times. If you sell person to person, I've been told that the DGII may not come after you for the capital gains taxes. But they may do and it may take them a couple of years to do so, by which time the penalties will be as much as the taxes. You could say that because you have never paid tax to the DGII you aren't known to them. But the DGII will have the details of the sale on their database as it comes from the land registry where the titles are issued. In my case, I was told that it was unlikely I would pay tax. But when I went to the DGII the guy showed me the screen and I could see the sale transaction was linked to my cedula. So in my view it was too risky not to pay. The DGII under Abinader has been getting way more efficient - look at how the tax receipts have gone up and up - just by enforcing the existing rules and making sure everyone pays. And us gringas are soft targets.

It's also important to say that if you are a US citizen (or a UK citizen) you HAVE TO declare all income, worldwide, to the IRS. If you sell a property abroad and bring the money back to the US, you're going to have to account for where it came from. In the UK, the tax you pay to the foreign government gives you a credit against the tax you pay to the UK, so basically there is no tax to pay in the UK if you declare in the DR. It's one thing to say you think you can get away with evading tax in DR, but another to say you're going to evade taxes for the IRS or HMRC which both have strong consecuences.

 

[DrNoob]

I have made the point several times. If you sell person to person, I've been told that the DGII may not come after you for the capital gains taxes. But they may do and it may take them a couple of years to do so, by which time the penalties will be as much as the taxes. You could say that because you have never paid tax to the DGII you aren't known to them. But the DGII will have the details of the sale on their database as it comes from the land registry where the titles are issued. In my case, I was told that it was unlikely I would pay tax. But when I went to the DGII the guy showed me the screen and I could see the sale transaction was linked to my cedula. So in my view it was too risky not to pay. The DGII under Abinader has been getting way more efficient - look at how the tax receipts have gone up and up - just by enforcing the existing rules and making sure everyone pays. And us gringas are soft targets.

It's also important to say that if you are a US citizen (or a UK citizen) you HAVE TO declare all income, worldwide, to the IRS. If you sell a property abroad and bring the money back to the US, you're going to have to account for where it came from. In the UK, the tax you pay to the foreign government gives you a credit against the tax you pay to the UK, so basically there is no tax to pay in the UK if you declare in the DR. It's one thing to say you think you can get away with evading tax in DR, but another to say you're going to evade taxes for the IRS or HMRC which both have strong consecuences.

I agree on avoiding tax trouble but as far as I am aware there is no double taxation treaty/agreement between the DR and the UK.

Source : https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt6100

 

[RDKNIGHT]

I'm not so sure about that one(?). Did they both own their property in an S.R.l.? A friend of mine owned a condo in an S.R.L. for 5 years and paid corporate taxes every year. When he sold his condo, he was hit with a big tax bill. Why? His Dominican accountant that he paid to do and pay the taxes every year, never paid the taxes. He pocketed the money. My friend couldn't close until the taxes were paid.

I typed that wrong I'm saying he never in his life has he paid taxes or corporate taxes so they did not know him then when he sold his house he did not pay anything

 

[RDKNIGHT]

I have made the point several times. If you sell person to person, I've been told that the DGII may not come after you for the capital gains taxes. But they may do and it may take them a couple of years to do so, by which time the penalties will be as much as the taxes. You could say that because you have never paid tax to the DGII you aren't known to them. But the DGII will have the details of the sale on their database as it comes from the land registry where the titles are issued. In my case, I was told that it was unlikely I would pay tax. But when I went to the DGII the guy showed me the screen and I could see the sale transaction was linked to my cedula. So in my view it was too risky not to pay. The DGII under Abinader has been getting way more efficient - look at how the tax receipts have gone up and up - just by enforcing the existing rules and making sure everyone pays. And us gringas are soft targets.

It's also important to say that if you are a US citizen (or a UK citizen) you HAVE TO declare all income, worldwide, to the IRS. If you sell a property abroad and bring the money back to the US, you're going to have to account for where it came from. In the UK, the tax you pay to the foreign government gives you a credit against the tax you pay to the UK, so basically there is no tax to pay in the UK if you declare in the DR. It's one thing to say you think you can get away with evading tax in DR, but another to say you're going to evade taxes for the IRS or HMRC which both have strong consecuences.

in the USA I had my usa accountant look into it he says as long as it was your main residence your tax exempt on the capital gains up to $250,000 easy to prove with your passport.

another way out is when you sell person to person just put your sold it for way less if the person is paying in cash

 

[keepcoming]

Even with tax exempt, you still have to claim the money to the IRS. At least that is my understanding. You may not have to pay taxes, but you still need to claim the money.

 

[cavok]

I typed that wrong I'm saying he never in his life has he paid taxes or corporate taxes so they did not know him then when he sold his house he did not pay anything

I think your friends got lucky(?). My friend wasn't paying corporate tax either because his accountant was pocketing the money, but the DGII showed he owed tax when he sold and he wasn't able to close until he paid. This was over 10 years ago.

 

[RDKNIGHT]

I think your friends got lucky(?). My friend wasn't paying corporate tax either because his accountant was pocketing the money, but the DGII showed he owed tax when he sold and he wasn't able to close until he paid. This was over 10 years ago.

I think we have a misunderstanding going on here yes I agree with you for to clear your title you need to pay your taxes to the date you are selling. what I am talking about is if you bought your place for $100,000 then sold it for $200,000 there was $100,000 profit that is the money I am talking about person to person person sale,

 

[RDKNIGHT]

Even with tax exempt, you still have to claim the money to the IRS. At least that is my understanding. You may not have to pay taxes, but you still need to claim the money.

Agreed .

 

[cavok]

I think we have a misunderstanding going on here yes I agree with you for to clear your title you need to pay your taxes to the date you are selling. what I am talking about is if you bought your place for $100,000 then sold it for $200,000 there was $100,000 profit that is the money I am talking about person to person person sale,

Ok. That is money that would be subject to capital gains. Capital gains tax is not paid at closing. It doesn't make any difference whether or not you are paying corporate or property taxes, there is no way the DR can collect capital gains taxes from you if you go back to the US.

 

[franco1111]

Morning Maria I will consult with another lawyer let me ask you this if you bought your place for $200,000 and you sold it for $210,000 person to person no Corporation involved your tax bill would be on the $10,000.

something seems kind of weird because I know if you're an American citizen and you sell a property here and you have capital gains you have to pay taxes to them if it's not your primary resident and if it is your primary residence then there is a threshold of $250,000 where it's tax-free in the United States on the gains if so that means you would be paying taxes to Dominican Republic and the United States on the property that does not seem right.

now what happens if you sell and never plan to return

With the caveat that you must own the primary residence in the US for at least two years. To get the capital gains exception. If not owned for at least two years, you have to pay a 10 percent capital gains tax. just did it on a sale this year. An expensive reminder of this twist.

 

[j_d66]

With the caveat that you must own the primary residence in the US for at least two years. To get the capital gains exception. If not owned for at least two years, you have to pay a 10 percent capital gains tax. just did it on a sale this year. An expensive reminder of this twist.

Your tax preparer is probably not giving you a correct explanation. There is no 10% capital gains tax rate for US income tax. If held less than 1 year it would be short term and would be taxed at ordinary rates which are graduated depending on overall taxable income so it could end up at the lowest ordinary rate which happens to be 10% assuming there are no other short or long term gain/losses offsetting it. If it is long term capital gain it will generally be taxed at 0% to the extent in the 12% and under bracket or 15% or 20% if taxable income is above that. It can get complicated depending on the individual tax situation and the type of asset that it is.

 

[Fabio J. Guzman]

First, the capital gains tax is real, as established in Article 289 of the Tax Code. Prices are adjusted for inflation, and taxes are levied in Dominican pesos, not in any other currency. For example, if the purchase and sale were made in US dollars, the amounts in dollars should be converted to Dominican pesos at the time of purchase and sale, and the calculation should be made on that basis. The text of Article 289, in Spanish, is the following:

Artículo 289. Ganancias de Capital.

Para determinar la ganancia de capital sujeta a impuesto, se deducirá del precio o valor de enajenación del respectivo bien, el costo de adquisición o producción ajustado por inflación, conforme a lo previsto en el Artículo 327 de este Título, y su Reglamento. Tratándose de bienes depreciables, el costo de adquisición o producción a considerar será el del valor residual de los mismos y sobre éste se realizará el referido ajuste.

Párrafo I. (Modificado por la Ley No.495-06, del 28 de diciembre del 2006, de Rectificación Fiscal). Se considerarán enajenados a los fines impositivos, los bienes o derechos situados, colocados o utilizados en República Dominicana, siempre que hayan sido transferidas las acciones de la sociedad comercial que las posea y ésta última esté constituida fuera de la República Dominicana. A los fines de determinar la ganancia de capital y el impuesto aplicable a la misma, la Dirección General de Impuestos Internos estimará el valor de la enajenación tomando en consideración el valor de venta de las acciones de la sociedad poseedora del bien o derecho y el valor proporcional de éstos, referido al valor global del patrimonio de la sociedad poseedora, cuyas acciones han sido objeto de transferencia. Se entenderá por enajenación, toda transmisión entre vivos de la propiedad de un bien, sea ésta a título gratuito o a título oneroso.

Párrafo II. Tratándose de bienes adquiridos por herencia o legado, el costo fiscal de adquisición será el correspondiente al costo de adquisición para el causante modificado por los distintos ajustes por inflación a que se refiere el Artículo 327 de este Código.
...

 

[RDKNIGHT]

With the caveat that you must own the primary residence in the US for at least two years. To get the capital gains exception. If not owned for at least two years, you have to pay a 10 percent capital gains tax. just did it on a sale this year. An expensive reminder of this twist.

thats covered