Dominican corp; to own DR real estate??

#1 02-22-2003, 04:02 PM

I'm in the process of buying land & a house. I intend to have a Dominican corp. formed to take legal title to the land, etc. Has anyone done this? Problems? Traps for the unwary? Costs? In the USA, the articles or organization, by-laws, certificates, etc. are all boiler plate items, availabe from any lawyer cheaply or off the shelf at a legal stationary store. Here? Annaul maintenace? Filing requirements? Suggestions? Thank you.

Ken · #2 02-22-2003, 05:37 PM

You are better off owning a corporation that owns the property than buying the property in your own name. One very big advantage is that in the event of your death, the corporation goes on. In otherwords, there is no inheritance. In the DR this means the government takes 50%. By far the majority of foreigners buying property in the DR do so through a corporation.

The corporation needs to file an annual report with the government. The attorney that helps you form your corporation can assist you with that, also. The fee for the annual report will be US$200-300. Failing to file this report can be very costly.

I would strongly recommend that you have an attorney help you form your corporation. A lot more is involved than just filling out a few forms. If you are in the Sosua area, Fabio Guzman would be a good choice. www.drlawyer.com

The main thing is to get an honest, competent lawyer who will do the job right and not bilk you out of your money without producing the corporation.

Fabio J. Guzman · #3 02-22-2003, 07:39 PM

Advantages of Forming a Company to Acquire Real Estate

1. The buyer may avoid paying transfer taxes (approximately 5% of the purchase price. This assumes that the seller will "contribute" the property in kind to the company and will receive back shares for his contribution. These shares are then sold to the buyer. This mechanism may result in the buyer paying less for the transaction, including the cost of the company, than if he did a standard straight purchase, meaning that in effect he would be getting a company for free.

2. The buyer's personal liabilities, both in the Dominican Republic and in his country of residence, will not affect the property held by the company.

3. It allows for quick resales since it is much easier and less expensive to resell all the shares of stock of the asset-holding corporation than it is to convey real estate.

4. In case of death of the owner, it simplifies greatly the handling of the estate and the transfer of control to the heirs. Under Dominican law, inheritance of real property is governed by local statute which establishes that part of the estate must go to certain heirs by law (for example, a foreigner with a legitimate child must reserve 50% of the estate to that child irrespective of the existence of a will or of the law of his country of residence). This rule does not apply when ownership of real estate is held by a corporation. Also, if the title is in the name of one or several individuals and one of them dies, the procedure to change the title to the heirs is cumbersome and time-consuming.

Disadvantages

Expense to keep the company current (annual filing of tax returns, preparation of annual meeting, registration at Business Registry, etc.)

Tax rate is a flat 25% instead of the graduated income tax (15%-25%) applicable to individuals.

JanH · #4 02-26-2003, 05:02 PM

TiberiusMineola - we just bought a house in Sosua and our attorney, Guido Perdomo, is transferring the company name from the previous owner to us.

My husband is President, I'm V-P, and our son is Secretary. That way, if my husband dies, I alone will get the house - with no transfer taxes and no sharing with my son. He is secretary so he will get the house if my husband and I die simultaneously.

I don't particularly like the annual fees, as Fabio referred to, but from an inheritance standpoint, it is worth it.

Ken · #5 02-26-2003, 08:39 PM

Quote:

Originally posted by JanH
My husband is President, I'm V-P, and our son is Secretary. That way, if my husband dies, I alone will get the house - with no transfer taxes and no sharing with my son. He is secretary so he will get the house if my husband and I die simultaneously.

A small clarification. The company owns the house. If Doug dies, the company goes on, nothing has changed as far as the company is concerned. The VP becomes president and a new person is chosen to fill the empty seat on the board of directors. If both the President and VP should die simultaneously, the Secretary will move up to become President of the corporation and the board will choose 2 new people to fill the vacancies. The company, that is the owner of the house, doesn't die.

What Guido is doing is transfering all the shares in the corporation from the German who has owned them to you and Doug, the purchasers of the corporation.

JanH · #6 02-26-2003, 09:23 PM

Ken - You explained it in much more detail and correctly too - but hoped my general message gave him the idea. Thanks!