DOMINICAN REPUBLIC Law and Practice Contributed by: Alfredo Guzmán Saladín, Fabio Guzmán Ariza and Julio Brea Guzmán, Guzmán Ariza
2.9 Condemnation, Expropriation or Compulsory Purchase The Constitution and Law 344 of 1943 establish the legal regime for the government’s compul - sory purchase or condemnation of real estate. The Dominican Constitution states: “No person shall be deprived of his or her property, except on justified grounds of public utility or social interest, for which a person shall be paid a fair value before expropriation, as determined by the mutual consent of the parties or by the judgment of a court of competent jurisdiction, pursuant to the law. In case of the declaration of a State of Emergency or Defence, compensation may not be paid before the expropriation.” Law 344 establishes the specific procedure that the government must follow in any case of expropriation. Because the provisions of this law are of public order, allocations cannot be modi - fied by contractual arrangements between the parties. 2.10 Taxes Applicable to a Transaction A conveyance tax must be paid before register - ing the purchase of real estate. The conveyance tax amounts to 3% of the price of sale or the market value of the property as determined by the tax authorities, whichever is higher. A 1% annual tax is assessed on real estate prop - erty owned by individuals, based on the cumula - tive value of the properties owned by the same individual, as appraised by the government authorities. Properties are valued without taking into account any furniture or equipment to be found in them. For built lots, the 1% is calcu - lated only for values exceeding approximately USD150,000. For unbuilt lots, the 1% tax is cal - culated on the actual appraised value without the USD150,000 exemption. Individuals pay this tax every year on or before 11 March, or in two
equal instalments: 50% on or before 11 March, and the remaining 50% on or before 11 Sep - tember. This threshold is adjusted annually for inflation. The following properties are exempt from the property tax: • built properties valued at USD150,000 or less; • farms; and • houses inhabited by owners who are at least 65 years old and have no other property in their name. Properties held in the name of a corporation or other entity are not, at present, subject to a prop - erty tax per se; however, a 1% tax is levied on company assets, including real estate. There are also different tax treatments with regard to leasing to individuals or to corporate entities. Leases to entities are subject to value- added tax and leases by individual landlords are subject to a 10% withholding tax that is credited towards the landlord’s annual income tax. 2.11 Legal Restrictions on Foreign Investors There are no restrictions on foreign individuals or entities owning or leasing real estate in the Dominican Republic. The process for purchasing or leasing real estate for foreigners is the same as for Dominicans; there are no national defence or security limitations. Foreign individuals and entities, and Dominicans, must register locally with the tax authorities before registering pur - chases of real estate. Individuals must submit their application directly at the Internal Revenue office, while entities must first register at the Chamber of Commerce and obtain a mercantile registry certificate, before applying for their tax
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