Investors Guide to Costa Rica

The Purchasing Process

As there are no restrictions on foreign purchases in the Dominican Republic, the purchasing process is considered to be very straight forward. The rights of residents and non residents are the same when it comes to purchasing real estate, and the processes are very similar to other investment markets.

Using a solicitor specialising in the local market is essential for ensuring a safe and secure transaction. The lawyer will understand the market in detail and be able to best advise on the legal issues of the property to be purchased.

Often an initial 10% deposit is required to take the property off the market, while the financing is obtained and the lawyer carries out the legal due diligence checks. Depending upon the developer of the project, the deposit may be a set fee, rather than a percentage of the purchase price, such as in other markets.

Payments on the property are normally made into the representing lawyer’s secure escrow account. This provides additional security of buyer’s funds. The staged payments to be made throughout the purchasing process will be outlined in the private purchase contract, along with the obligations of both parties during the construction.

The final payment of the property will be required upon completion, at the moment when the keys to the property are exchanged.

Fees & Taxes

Buying property in the Dominican Republic offers great returns, yet the taxes can be high and the associated buying costs are average. One of the benefits of the taxation system is that the property tax is calculated at the recorded cadastral value of the home. Often in the Dominican Republic the recorded value of the property is well below the actual purchasing price, enabling good savings on taxes.

Many cheaper properties are exempt from property taxes, as the charge is only applicable to properties valued at over approximately US$140,000. After the exemption, the rate applied is 1% of the recorded value.

Expenses can be deducted from the property to lower the total income tax, which is set at 25% for non residents, and also includes capital gains taxes. The total cost of the associated buying costs in the Dominican Republic is around 7.3%.

• Transfer tax is set at 3%
• Property registry tax is 2%
• Stamp Duty is 1.3%
• Legal fees are around 1%

Financing the Property

There are several mortgage and loan options available from international providers for purchasing property in the Dominican Republic. Arranging a loan from a local bank for the purchase of property may require residency from the applicant, yet the growth and demand of the market has enabled various other options for investor buyers keen to enter the market.

Loans can be arranged for both residential and investment properties, often with no maximum amount, enabling great opportunities for investors. Loans can also be arranged in various currencies, allowing for increased flexibility to overseas investors. As an example of the terms for mortgages in the Dominican Republic, the following information can be used as a guide:

• Typical rate 4.65%
• Minimum loan amount US$100,000
• Maximum age at maturity 65 years
• Term of an average loan 15 years

More about overseas property finance

Visitors Guide to Dominican Republic
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