8th March 2022

Investing in tax-free real estate with Confotur Law

Investing in tax-free real estate with Confotur Law
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Living in a tropical country with many beaches is a dream dear to many of us. The Dominican Republic meets many of our requirements when in comes to finding an ideal place to visit or move to. Our favorite region of the island is the peninsula of Samana and more particularly the coastal town of Las Terrenas.

More than its virgin beaches, coconut trees and fresh fish, the DR provides us with strong indicators and incentives to invest and permanently live here. More on where to live in the Dominican Republic.

In fact, the foreign population that's making the Dominican Republic their home is growing year after year. And there are many reasons why investing in the Dominican Republic makes a lot of sense but in this post, we will discuss one in particular.

 

CONFOTUR SCOPE

The Tourism Incentive Law 158-01 is a law that was created in October 2001. It was born from a search for incentives for real estate investments and large infrastructure projects related to tourism in the DR, specifically in the defined touristic poles of the island. Map below. The law is also known as CONFOTUR (for its initials in Spanish).

The Confotur law seeks to populate the least served tourist areas of the Dominican Republic and to promote the protection of the environment in these areas.

In reality, the law benefits the people willing to promote or invest capital in tourism-related infrastructures, such as real estate. The benefits extend to individual real estate end customers. In other words, local and foreign property buyers can enjoy the benefits of the law in the approved projects.

Confotur Areas

In red are the DR's different touristic zones falling under Law 158-01.

 

CONFOTUR BENEFITS TO DEVELOPERS

As mentioned, the Confotur Law offers financial exemptions for developers such as large hotels, medium-big Real Estate developers, and investors looking to build residential and touristic projects. The project must meet a strict series of criteria listed in the Law and reviewed by a specific government organization.

If they do meet these criteria, they are entitled to the following exemptions under article 4 of the law:

  • Exempt from 100% of the National and Municipal taxes for the constitution of companies, for a 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 the fees for the preparation of the plans, 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.

 

  • Exempt from 100% of import taxes and other taxes such as fees, duties, and 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.

 

  • Once a project is approved by Confotur Law and granted all the above-listed benefits, investors are able to deduct their investments from their net taxable income.

CONFOTUR BENEFITS FOR END BUYERS

On top of these considerable advantages for the developers, the projects benefiting from the law Confotur give the end buyers access to a series of tax exemptions. An individual buying properties and developments under Confotur will be exempt from:

  • The 3% Transfer Tax for transferring the title certificate to a buyer's name at Internal Revenue (DGII). This elimination of 3% of the value of the property purchased from the DGII by way of transfer of the property title certificate to the new name definitely represents savings.

 

  • The Annual Property Tax represents 1% of the exceeding value of RD$ 7,438,197 or about US$148,000 of the property (Updated in June 2019). This means that a property worth US$200,000 will be taxed its surplus amount of US$52,000 at 1%, so US$520 annually. This tax is paid in two half-yearly installments, with the deadline for payment of the first installment on March 11 and the second on September 11 of each year.

 

  • The tax in case of the capital increase, sale (for example in case of resale of the property), contributions in kind.

 

  • The tax on declared rental revenues represents 27%.

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You can discover all the listings enjoying tax-free in Las Terrenas.

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tax free investment
 

IPI - Annual Property Tax

This annual tax applied on the total amount of the real estate value of a property registered by natural persons or trusts.

Note: It is useful to know that the period of exemption is usually of 15 years from the moment the project was granted Confotur, not from when it was actually completed. Also, if you purchase your unit through the creation of a company such as an SRL (LLC), when you sell your unit/company you transfer the benefits of the law to the future buyer.

Also, is very important that you know that every project has a different date when the Confotur benefits had started, for this reason, it’s necessary to always verify this information with the developers or your real estate agency.

Finally, Confotur is not renewable, however, it still represents a great great advantage thanks to its long duration and the facilities that the country has been developing for the application and approval of new projects.

In summary, in order to develop certain areas of its island, the DR’s Confotur law offers great monetary opportunities to real estate developers which later on, the customers and small investors will also benefit from.

Remember our little paradise of the coastal town called Las Terrenas that we mentioned in the beginning? Luckily, it is in a red zone which means buyers can enjoy the many benefits of the Confotur law and save big while making a great investment. You can discover all the listings with confotur in Las Terrenas.

Now that you are more familiar with you the confotur law, you can enjoy other tips found in this article the buying process in the DR.

Curious about Las Terrenas?. Discover our portfolio of curated listings for sale.