DOMINICAN REPUBLIC Law and Practice Contributed by: Fabio Guzmán Ariza, Julio Brea Guzmán, Alfredo Guzmán Saladín and César Calderón, Guzmán Ariza
8. Tax 8.1 VAT and Sales Tax There is no VAT or equivalent tax liability applicable to
provisions, penalties agreed in the event of delays, performance bonds and insurance cover, among other things. In addition, the Dominican Civil Code establishes a warranty covering structural and hidden damages in a property that is enforceable against architects and contractors for a period of up to ten years. In practice, this timeframe is usually limited by the parties. 7.6 Liens or Encumbrances in the Event of Non-Payment According to Article 2103 of the Dominican Civil Code, architects and builders are able to register court- ordered liens in the event of non-payment after the construction in question has been delivered to the owner. Additionally, under Dominican law, contrac - tors and/or designers are not permitted to register any liens or encumbrances in property from non-payment, but can sue the owner for breach of contract, and if the debt is recognised by the court, then they may proceed to register the lien or encumbrance in the property. For an owner to remove the lien or encum - brance, they must provide evidence of successful completion of the obligation to the land registry. 7.7 Requirements Before Use or Inhabitation In the Dominican Republic, a site certificate issued by the parties or by an independent engineer is usually required, certifying that the project has been finished and is ready to be delivered and inhabited.
the sale or purchase of real estate. 8.2 Mitigation of Tax Liability
Other than the exemptions mentioned above and the option of purchasing the shares of the holding com - pany, there is no way of avoiding the payment of the 3% title transfer tax. Large institutional holders are advised to seek the advice of expert real estate law and tax professionals to mitigate other tax liabilities. 8.3 Municipal Taxes There are no municipal occupation taxes. All planning and land use matters are, however, handled by the municipalities, and a land use tax is levied on devel - opers or owners planning new construction projects. 8.4 Income Tax Withholding for Foreign Investors The basic tax withholdings in the Dominican Republic are as follows: • withholding for interest paid abroad – 10%; • withholding for payments abroad – 27%; and There are no tax benefits from owning real estate in the Dominican Republic. Corporations may be com - pensated on the property’s depreciation in accord - ance with the Dominican Tax Code and exemptions may apply depending on the type of real estate, the activities developed at the property, and its location, among other things. • dividends – 10%. 8.5 Tax Benefits
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