DGII IPI or IVSS clarification plz.

[NotLurking]

I'm confused as to how the property tax will be calculated. According to an article by Listin Diario and available on the DGII site here, all real properties valued under RD$5 million are exempt from any tax burden but properties valued at or above RD$5 million are levied 1% of???

1. total property value?
2. property value minus the exemption amount of RD$5 millions for properties that exceed the exemption amount?

Perhaps the question should be: Does the exemption amount apply equally to all properties or do properties that exceed the exemption amount are exempt from the exemption (no pun intended)?

One more thing, I understand that Catastro will be in charge of property appraisal but how and when? The first payment is due by March 11, 2009. I really would like to wrap my head around this and SOON 'cause the penalties are stiff. I don't want to miss the payment deadline.

Should this be in the legal forum?

NotLurking

[Fabio J. Guzman]

Real estate in the Dominican Republic is subject to an annual property tax (“IPI”) of 1% of appraised market value in excess of RD$5,000,000 pesos, payable every year on or before March 11. For example, a home or building appraised at RD$8,000,000 pesos will pay RD$30,000 pesos annually (RD$8,000,000 - RD$5,000,000 x 1%). It is possible to make two payments instead of one. In that case, 50% should be paid before March 11 and the balance before September 11.

The following properties are exempt from this tax:

(1) Properties valued at RD$5,000,000 or below.
(2) Unbuilt lots or farms outside city limits.
(3) Property whose owner is 65 years old or older, who has owned it for more than 15 years and has no other property in his or her name.

The IPI is based on the appraised value of the building AND the lot. It does not include furniture and equipment (for example, a generator).

The old age exemption is subject to these 3 conditions:

(a) Owner must be 65 or older,
(b) Home has belonged to owner for at least 15 years,
(c) Owner does not own any other real estate.

[NotLurking]

Thank you very much Mr Guzman that was very clear and concise.

NotLurking

[tflea]

What if one's property doesn't get appraised, is that something that
has to be requested or is it better to 'let sleeping dogs lie' ? I don't want to to draw attention to it unnecessarily - and if property does get appraised and one doesn't agree
with the amount is it possible to appeal?

[Lambada]

They came to the house automatically after I notified them that we had gone from unbuilt lot to residence 9 years ago. 'Automatically' equalled 'it took them about 3 weeks'. Whatever you do intend doing, be aware that the projected increase in valuation has been put off for now, but probably not for long. I posted my last week's experience here:
IVSS/IPI Tax - how long the 'reprieve'?

You can't pay cash btw - needs to be an Administration Cheque from your bank.

You can try flying under the radar on this one but when they catch up with you there are stiff penalties, so my advice would be, be upfront about it.

[wendyj]

What about if the house is owned by a company?
How is the tax worked out then, is it on the value of the property or the value of the company?????????
Very confused

[Alfredo Guzman]

Originally Posted by wendyj

What about if the house is owned by a company?
How is the tax worked out then, is it on the value of the property or the value of the company?????????
Very confused

Real Estate Tax only applies to individuals, not corporations.

Corporations, are required to pay tax on their real estate properties through the Corporate Assets Tax:

Taken from Guzman Ariza's Overview on Dominican Tax Law

Businesses and corporations must pay a 1% annual tax on assets (Arts. 401 and 404) in two installments due on April 30 and October 30 (Art. 405). For the purposes of this tax, all assets are taken into account, minus depreciation and amortization, except: a) stock holdings in other corporations, b) real estate in rural areas, c) real estate used for agriculture or animal husbandry, d) tax advances and e) provisions for bad debts (Art. 402).

The tax on assets operates as a kind of minimum income tax. If the income tax paid by the business or corporation is equal or higher than the amount of the tax on assets, then the business will have no obligation to pay the tax on assets (Art. 407). If the income tax paid is less than the amount of tax on assets due, the business must pay the difference.

New capital-intensive businesses may obtain a temporary exemption from this tax if certain conditions are met.

[wendyj]

Originally Posted by Alfredo Guzman

Real Estate Tax only applies to individuals, not corporations.

Corporations, are required to pay tax on their real estate properties through the Corporate Assets Tax:

Taken from Guzman Ariza's Overview on Dominican Tax Law

Businesses and corporations must pay a 1% annual tax on assets (Arts. 401 and 404) in two installments due on April 30 and October 30 (Art. 405). For the purposes of this tax, all assets are taken into account, minus depreciation and amortization, except: a) stock holdings in other corporations, b) real estate in rural areas, c) real estate used for agriculture or animal husbandry, d) tax advances and e) provisions for bad debts (Art. 402).

The tax on assets operates as a kind of minimum income tax. If the income tax paid by the business or corporation is equal or higher than the amount of the tax on assets, then the business will have no obligation to pay the tax on assets (Art. 407). If the income tax paid is less than the amount of tax on assets due, the business must pay the difference.

New capital-intensive businesses may obtain a temporary exemption from this tax if certain conditions are met.

Ok Alfredo, thank you, I have read that information.
Forgive me for being thick!!!!!!!!!
But is the asset the property or the value of the company.
Some people seem to have companies worth $75,000DR and some $4000.0000 DR, so I am confused, as the company just owns the property which may be worth well under the 5 mil threashold, if that makes sense!!!!!!!!!!!!

Probably not!!!!!!!!!!!!!! sorry still confused

[Alfredo Guzman]

But is the asset the property or the value of the company. Some people seem to have companies worth $75,000DR and some $4000.0000 DR, so I am confused, as the company just owns the property which may be worth well under the 5 mil threashold,

First of all, the 5 million threshold only applies for the IPI tax, not the Corporate Assets Tax.

The base for the asset tax is the total value of the company's assets: try to visualize a balance sheet, which you'll need to have prepared every year for income tax purposes, add up the value of all the company's assets, with the exceptions mentioned on my previous post, and you'll have the assets tax base.

If the company doesn't have any assets other than its capital (Capital Suscrito y Pagado), then this is used as the base to pay the asset tax. So, for a company with an paid-up capital of RD$100,000.00 and no assets, you would end up paying 100k*0.01= RD$1k.

[wendyj]

Originally Posted by Alfredo Guzman

First of all, the 5 million threshold only applies for the IPI tax, not the Corporate Assets Tax.

The base for the asset tax is the total value of the company's assets: try to visualize a balance sheet, which you'll need to have prepared every year for income tax purposes, add up the value of all the company's assets, with the exceptions mentioned on my previous post, and you'll have the assets tax base.

If the company doesn't have any assets other than its capital (Capital Autorizado), then this is used as the base to pay the asset tax. So, for a company with an authorized capital of RD$100,000.00 and no assets, you would end up paying 100k*0.01= RD$1k.

OK,
I Thank You, Alfredo.
So if the company was formed as say a 4 million peso company, you pay tax on that?
Not on the house?