Law 189-11 was created on July 22, 2011, and among its motivations is the interest in establishing policies that facilitate the development of housing projects, mainly low-cost housing, that reduce the significant housing deficit of the Dominican nation.
SANTO DOMINGO.- : Repealing the exemption from Income Tax and dividend payments, established in Law 189-11 for the Development of the Mortgage Market and Trusts in the Dominican Republic, would be a major demotivation and a setback for the sector, stated two experts linked to the real estate industry.
Roberto Carlos Jorge and Alenny Garabito believe that if the proposed tax reform, which circulated on social media over the weekend, were to be implemented, it would create a disadvantageous scenario for the stakeholders involved, and could also lead to a return to previous practices that distort tax collections.
“If the proposed tax reform is implemented, it would be a major demotivation for the sector, including trust companies, especially real estate project developers,” stated Roberto Carlos Jorge, a trust advisor.
Alenny Garabito, of TimeHomes, one of the real estate companies that handles the largest volume of projects under trust agreements, said that many people who own land found trusts to be the solution for selling their property because they avoid enormous tax payments. “But if they now say they are going to eliminate them, what good will they do? What is the purpose of the trust if its very foundation is supposed to facilitate business for the landowner, the buyer, and the developers?”.
Jorge understands that the benefit/cost ratio would be significantly affected, "a factor that is paramount for any business. To be somewhat collaborative, I would be more in favor of slightly reducing the benefit, not eliminating it, because that would jeopardize the progress made to date in increasing construction revenue, as it could lead to a return to past practices that distorted tax collection.".
Law 189-11 for the Development of the Mortgage Market and Trusts in the Dominican Republic was created on July 22, 2011, and among its motivations is the interest in establishing policies that facilitate the development of housing projects, mainly low-cost housing, that reduce the significant housing deficit of the Dominican nation.
“Eliminating the tax exemption would be a major setback because it would make it difficult for buyers to obtain their homes with the discount they envision. Landowners aren't going to be in any way obligated to make long-term agreements with construction engineers because they're holding out due to the tax benefits, but without those benefits, they won't extend the payment period. Similarly, engineers won't have the resources to acquire land, money they used to advance construction,” Garabito stated.
The proposal that circulated
This weekend, a document circulated on social media, containing a supposed tax reform proposal with several points that would impact the real estate sector.
Regarding properties, the project restructures the real estate property tax (IPI) so that properties valued at RD$5 million or less are exempt, while properties valued between RD$5 million and RD$8,138,353.3 will be taxed at a rate of 0.5%. If the value exceeds RD$8,138,353.3, taxpayers will be charged a rate of 1%.
The exemption from income tax and dividend payments established by the Real Estate Trust and Development Law would also be repealed (the ITBIS bonus remains). It stipulates that the valuation of housing prices will be transferred to the DGII (General Directorate of Internal Revenue).
