CONFOTUR Law: how does it work?January 30, 2019 12:44 pm
Imagine you already saw and decided the property you want to buy. What comes next? There are property, municipal, income and transfer taxes you have to pay, tons of paperwork to do, and the list keeps growing. Fortunately, we made a list according to the articles in the Law ― we’re lawyers and we have to quote the Law! ― that specify the incentives and benefits that entails when the property you want to buy (or bought!) is under the CONFOTUR Law.
According to Article 2, all benefits granted by this legislation may be given to all natural or legal persons domiciled in the country that undertake, promote or invest capital in tourism related infrastructure, such as Real Estate.
On the other hand, the Article 4 says that those who benefit from these incentives and benefits are exempt from the payment of taxes in one hundred percent (100%) of the property tax and transfer tax.
When you want to purchase a property you must pay a transfer tax for the conveyance of the title certificate to your name. For this, a single payment transfer tax of 3% of the value of the purchase price must be done to Internal Revenue (DGII). Note that if you are looking into pre-construction properties, the conveyance process is slightly different: the title certificates aren’t ready until the construction is completed. You can read more about that in our article of Legal Steps for purchasing Real Estate in Punta Cana here. No worries: you are still free from this tax if you are purchasing pre-construction!
With CONFOTUR, the developments that meet the criteria are under this Law’s umbrella and so free from this tax. So, If the property you want to purchase costs US$100,000.00 for example, you would have to pay a single payment of 3% of the property value (US$3,000). But if the development is protected by CONFOTUR then this tax won’t be applicable for you. You are already saving yourself of 3% of the purchase value (for closing purposes) in your investment in Punta Cana. Find out more about our CONFOTUR properties here!
Another tax payment that is exempted by CONFOTUR is Property Tax. This Tax represents 1% of the exceeding value of RD$ 7,438,197.00 (about US$148,000.00), of the complete patrimony of each taxpayer and it’s paid on a yearly basis. Properties and developments under CONFOTUR are exempt of this 1% property tax for up to 10-15 years.
The CONFOTUR Law also offers other exemptions for significant chain-branded hotels in the area, as well as the medium-big Real Estate developers and investors. These exemptions are key in the process of making Punta Cana accessible, because thanks to CONFOTUR the hoteliers and real estate developers have a great monetary advantage in the process of building in Punta Cana, which later then, the customers and small investors benefit from. These benefits are listed below:
100% of the income tax object of the incentives.
- 100% of the national and municipal taxes for the constitution of companies, for capital increase of already constituted companies, national taxes and Municipalities by transfer on real estate rights, by sales, swaps, contributions in nature and any other form of transfer on rights real estate, of the Tax on Sumptuary and Solar Unbuilt Housing (IVSS).
This also includes as the fees for the preparation of the plans, of the studies, consultancies and supervision and the construction of the works to be executed in the tourism project in question, the latter being an exemption applicable to contractors responsible for the execution of the works.
- 100% of import taxes and other taxes such as fees, duties, surcharges, including the Tax on Transfers of Industrialized Goods and Services (ITBIS), which are applicable on machinery, equipment, materials and movable property that are necessary for the construction and for the first equipment and commissioning of the tourist facility from which about.
CONFOTUR Law is really very broad and seeks to populate the least served tourist areas of the Dominican Republic and to promote the protection of the environment in these areas. Once a project is approved by CONFOTUR and granted the above-described benefits, investors are able to deduct their investments from their net taxable income.
So, next time you’re considering buying a second-home in the DR, and in the Punta Cana and Bávaro area, ask you us if the property is under the CONFOTUR Law. At Cana Blue, we have legal expertise in the subject and we work to make the process of buying real estate easy!