Property Tax to be Increased from 1 to 2%

[Fabio J. Guzman]

The new tax package announced by President Fernandez this week includes an increase from 1 to 2% in the tax on residential properties. This increase does not apply to properties held under a corporation which will continue to pay a 1% tax on assets as per Law #557-05 enacted last year. The practical consequence of the new measure is to tilt the balance again in favor of holding properties under a corporation instead of in the name of the individual owner.

[Steve Costa Azul]

Originally Posted by Fabio J. Guzman

The new tax package announced by President Fernandez this week includes an increase from 1 to 2% in the tax on residential properties. This increase does not apply to properties held under a corporation which will continue to pay a 1% tax on assets as per Law #557-05 enacted last year. The practical consequence of the new measure is to tilt the balance again in favor of holding properties under a corporation instead of in the name of the individual owner.

This only applies to properties which are 5 million pesos and up, correct?
This was true back in March 2006.
Steve

[Fabio J. Guzman]

We don’t know if the RD$5 million pesos exemption on residential property will be kept since the bill has not been sent to Congress yet. There are rumors to the effect that it will either be lowered to RD$2 to 3 million or be changed to a one-time exemption for all properties owned by an individual, for example, if an individual owns two RD$5 million pesos properties, he’ll only get an exemption for the first one and will have to pay the full 2% on the second.

[Steve Costa Azul]

Originally Posted by Fabio J. Guzman

We don’t know if the RD$5 million pesos exemption on residential property will be kept since the bill has not been sent to Congress yet. There are rumors to the effect that it will either be lowered to RD$2 to 3 million or be changed to a one-time exemption for all properties owned by an individual, for example, if an individual owns two RD$5 million pesos properties, he’ll only get an exemption for the first one and will have to pay the full 2% on the second.

Also keep in mind, this tax is based on the "declared" value of the property, NOT what you actually paid for it. If you paid US$150,000.00 for it, your lawyer
might have the declared value set at US$60,000.00. So there is a long way to go before you will pay property tax still. If they change the rules to a one time exemption, put the second property in your wifes name or a numbered company.
It's a bit of a joke, kinda' like the mafiosa police.
Steve

[HOWMAR]

Originally Posted by Steve Costa Azul

Also keep in mind, this tax is based on the "declared" value of the property, NOT what you actually paid for it. If you paid US$150,000.00 for it, your lawyer
might have the declared value set at US$60,000.00. So there is a long way to go before you will pay property tax still. If they change the rules to a one time exemption, put the second property in your wifes name or a numbered company.
It's a bit of a joke, kinda' like the mafiosa police.
Steve

You just built in an additional US$90,000 subject to capital gains tax when you sell though. Last I looked was a 25% tax.

[CFA123]

Originally Posted by Steve Costa Azul

Also keep in mind, this tax is based on the "declared" value of the property, NOT what you actually paid for it. If you paid US$150,000.00 for it, your lawyer might have the declared value set at US$60,000.00.

Steve,
I am well aware this specific method is used to avoid taxes, and I think DR1 has a great track record of telling it how it is in the DR. However, to see this put down in writing, openly flaunting the ability to 'screw the government' by fraud struck me today as improper.

It's one thing to use a loophole in tax laws, example placing in name of corporation resulting in lower tax rate(which is legal). However it seems quite another to outright lie (aided by an attorney with duplicate documents with different sales price listed) in order to avoid paying taxes. In another country whose legal/enforcement system were more advanced... both would likely end up in jail or heavily fined. The attorney would be disbarred.

Yes, it is 'fun' to work around the system in DR, take the shortcuts, and brag about how smart we are. I'm just not so sure that should be the right of an expat. Take advantage of laws and loopholes, yes. Blatantly disregard them or cheat, then brag about it in a public forum - I'm not so sure.

By cheating the gov't of tax revenue... do we lose our 'right' to complain of poor policing, roads, or other government services?

How do the Dominican people feel about foreigners and expats that come in to exploit the system? I can tell you that for me in the U.S., to see new members of our society 'milking the system' is very upsetting. I look differently on a citizen doing so & someone who has just arrived. You need to earn the right to screw the gov't I guess.

Anyhow, I know where you're coming from. I'm probably guilty of enjoying some of the non-existent enforcement of tax laws... just not sure that makes it right.

[CFA123]

Steve,
To clarify. My post above is not a personal attack. Just pondering how all of us should behave in our adopted home.

[Lambada]

Originally Posted by CFA123

Steve,
I am well aware this specific method is used to avoid taxes, and I think DR1 has a great track record of telling it how it is in the DR. However, to see this put down in writing, openly flaunting the ability to 'screw the government' by fraud struck me today as improper.

Not only is it improper it is also lacking in wisdom. Howmar is absolutely correct about capital gains tax when you sell and...............everyone knows where Costa Azul is. It may not take the DGII too long to be carefully checking Steve's records.........

Quite frankly if we foreigners enjoy the privilege of living here the least we can do is pay the appropriate taxes particularly if we are using properties to gain rental income from (usually) sources outside the DR.

[Tamborista]

Just look for the house with a trampouline in Costa Azul!
I wonder if Steve paid duty on the trampouline or was that the old look up joke in customs. It always amazes me what people post on a public space.

tambo

[Steve Costa Azul]

Originally Posted by Tamborista

Just look for the house with a trampouline in Costa Azul!
I wonder if Steve paid duty on the trampouline or was that the old look up joke in customs. It always amazes me what people post on a public space.

tambo

I have decided to buy the trampoline in the DR when we come down.
CFA123, Lambada and Tamborista, these previous things I posted were told to me from my agent and lawyer. It was their recommendation to do so, to save money on the land transfer tax. When sold, there will be capital gains tax on the difference between the original price and the selling price, NOT the "declared" value. This is very common and happens every day in the DR.
The fact that there are no property taxes on properties below the RD 5 million dollar amount is silly considering how poor the country is. It's also another reason for someone to choose to buy a vacation property in th DR compared to a place with property taxes. Keep in mind, the people who work for the government have the better jobs than the very poor in the barrio.
I find it hard to believe that the government might not know this happens all the time. Of course they know! They know everything!
CFA123, it's not bragging, it's making others aware just in case they don't know. By the way, I don't live in the DR, just have a vacation property there.
Everything I have posted regarding the OP is bang on! I did my homework.
Steve