DOMINICAN REPUBLIC Law and Practice Contributed by: Fabio Guzmán Ariza, Julio Brea Guzmán, Alfredo Guzmán Saladín and César Calderón, Guzmán Ariza
3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders A foreign lender does not need specific authorisation to do business in the Dominican Republic. To regis - ter a mortgage in its favour, the foreign lender should obtain a local tax number. Once this tax number has been obtained, the lender is no longer subject to the general withholding taxes established for payments sent abroad (28% in general, or 10% for interest paid to foreign financial institutions). The lender will be taxed as a permanent establishment, under the same conditions as a Dominican entity. Regarding required documents and registration taxes, the same rules that apply for local lenders apply to foreign lenders, as follows. Mortgages are created by contract between the owner and the lender, or by a tripartite agreement between the seller, the buyer and the lending institution. The contract is authenticated by a Dominican notary and then registered at the Registry of Title after payment of the 2% mortgage tax. The registration of a security interest is perfected by filing the documentation at the Registry of Title in the jurisdiction where the property is located. The docu - ments required for filing a mortgage are: • a mortgage contract; • an original of the certificate of title of the borrower; • a mortgage tax receipt; and • certification attesting to the payment of property taxes. Mortgages and underlying credits can be transferred without paying additional taxes. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security The Civil Code states that buyers pay all the fees, expenses and taxes required for conveyances unless agreed otherwise by the parties. Each party covers their own attorney’s fees.
while entities must first register at the Chamber of Commerce and obtain a mercantile registry certificate, before applying for their tax number. These are merely formal requirements that can easily be fulfilled. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate In general, Dominican law does not distinguish between commercial and residential properties; the same rules apply for both. However, regarding owner - ship, properties held by commercial entities are taxed differently from those owned by individuals. Financing sources are mixed, depending on the type of investment. For example, major infrastructure financing is obtained through foreign banks and finan - cial institutions, while real estate developments in the tourism sector have been more dependent on local banks, most of which have entire departments cater - ing to the real estate-tourism industry. There are major financial institutions, publicly traded funds and private investors with interests in the coun - try, as it is the largest recipient of foreign direct invest - ment (FDI) in the region. 3.2 Typical Security Created by Commercial Investors Mortgages (financing from third parties) and privileges (seller’s financing) are the customary security inter - ests. Both grant the lender a registered right on the property (collateral) that can be enforced in the event of default through a foreclosure process, not an auto - matic defeasible conveyance in the event of default. In both cases (mortgages and privileges), in the event of default, the enforcement is made through a fore - closure process before the competent civil and com - mercial court of first instance. Dominican trust law offers the possibility of setting up real estate security trusts.
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