Dominican Republic Property Taxes 2025: Complete Guide for Foreign Owners

Why DR Property Taxes Are Attractive

The Dominican Republic's property tax regime is remarkably favorable compared to the U.S., Canada, and other Caribbean nations:

• Low annual tax: Just 1% on property value exceeding ~$170,000 USD
• Generous exemption: First ~$170,000 of property value is tax-free
• No property tax on land: Undeveloped land has zero annual tax
• Territorial taxation: Foreign income not taxed in DR
• Reasonable transfer taxes: 3% at purchase

Compare this to Florida property taxes of 1-2% on the entire value, with no exemption for foreign owners.

Annual Property Tax (IPI)

The Impuesto al Patrimonio Inmobiliario (IPI) is the Dominican Republic's annual property tax:

How It Works

• Rate: 1% annually
• Exemption threshold: RD$9,860,649 (approximately US$170,000 in 2025)
• Calculation: 1% of assessed value ABOVE the exemption threshold
• Payment: Due annually, can be paid in two installments

Example Calculations

Property valued at US$200,000:

• Taxable amount: $200,000 - $170,000 = $30,000
• Annual IPI: $30,000 × 1% = $300/year

Property valued at US$500,000:

• Taxable amount: $500,000 - $170,000 = $330,000
• Annual IPI: $330,000 × 1% = $3,300/year

Property valued at US$150,000:

• Below exemption threshold
• Annual IPI: $0

Important Notes

• Assessed value is often lower than market value—work with local professionals
• Exemption threshold is combined across all properties you own in DR
• Failure to pay results in penalties and potential liens

Property Transfer Tax

Paid at the time of purchase when transferring property ownership:

• Rate: 3% of the property value
• Basis: Higher of sale price or government assessed value
• Who pays: Typically the buyer (negotiable)
• When due: At closing, before title registration

Example

For a property purchased at US$300,000:

• Transfer tax: $300,000 × 3% = $9,000

Capital Gains Tax

When you sell property in the Dominican Republic:

• Rate: 27% on the capital gain
• Calculation: Sale price minus (purchase price + improvements + selling costs)
• Inflation adjustment: Purchase price can be adjusted for inflation
• Withholding: Buyer typically withholds tax from payment

Tax Planning Strategies

• Document improvements: Keep receipts for all property upgrades to increase cost basis
• Inflation adjustment: Use legal inflation adjustments to reduce taxable gain
• Corporate ownership: Some investors use Dominican corporations for tax efficiency
• Hold period: Longer holds with improvements reduce effective tax rate

Example

Purchase: $200,000 | Sale: $300,000 | Improvements: $30,000

• Capital gain: $300,000 - $200,000 - $30,000 = $70,000
• Tax (27%): $70,000 × 27% = $18,900

Rental Income Tax

If you earn rental income from your Dominican property:

Personal Ownership

• Rental income added to your worldwide income (if DR resident)
• Progressive rates from 15% to 25%
• Can deduct operating expenses

Corporate Ownership

• Flat 27% corporate tax rate
• May offer better structure for high-income properties
• Additional costs for corporate maintenance

ITBIS (VAT) on Short-Term Rentals

• 18% ITBIS applies to short-term rentals (like hotels)
• Enforcement varies—consult with local accountant
• Can sometimes be structured as long-term rentals

Other Taxes and Fees

At Purchase

• Legal fees: 1-1.5% of purchase price
• Title registration: ~0.5%
• Notary fees: Variable
• Total closing costs: Approximately 5% of purchase price

Ongoing

• HOA fees: $200-$600/month for condos (not a tax, but a significant cost)
• Municipal fees: Minimal in most areas

At Sale

• Real estate commission: 5-6% (typically paid by seller)
• Legal fees: 1% for seller's attorney
• Capital gains: 27% as calculated above

Tax Comparison: DR vs. Other Destinations

For a US$400,000 property with $40,000 annual rental income:

Dominican Republic

• Annual property tax: ~$2,300
• Rental income tax: ~$10,000 (25%)
• Total annual taxes: ~$12,300

Florida, USA

• Annual property tax: ~$6,000-8,000
• Rental income tax: ~$8,000-12,000 (federal + state)
• Total annual taxes: ~$14,000-20,000

Bahamas

• Annual property tax: ~$4,000
• No income tax on rentals
• Total: ~$4,000 (but much higher property prices)

Tax Planning Strategies

• Structure matters: Personal vs. corporate ownership has different implications
• Document everything: Keep receipts for all improvements and expenses
• Use qualified professionals: Work with Dominican accountants who understand foreign owner situations
• Consider your home country: U.S. citizens must report worldwide income regardless of where earned
• Timing of sales: Plan property sales for optimal tax treatment
• Depreciation: Can reduce rental income tax burden

Get Expert Tax Guidance

While Dominican Republic property taxes are straightforward, optimizing your structure requires local expertise. Sadeghi Group connects buyers with qualified accountants and tax professionals.