Taxes and exemptions in the Dominican Republic: A guide for retirees and foreign investors
Introduction
The Dominican Republic is a preferred destination for foreign investors and retirees, attracted by its tropical climate, affordable cost of living and attractive tax benefits. The Dominican government has set up an advantageous tax framework to encourage foreigners to settle here, considerably reducing the tax burden for expatriates and investors.
In this article, we will detail taxation in the Dominican Republic, highlighting:
✔ General taxes applicable
✔ Specific exemptions for retirees and investors
1. Understanding taxation in the Dominican Republic
The Dominican Republic applies a tax system based on territoriality, which means that only income generated in the country is subject to local taxation. This means that foreigners are not taxed on their foreign-source income, making the country a particularly attractive destination for expatriates and international investors.
1.1 Property tax (IPI)
📌 How does the IPI work?
- Real estate worth more than DOP10,190,833 (~US$170,000) is subject to an annual tax of 1%.
- The first 10,190,833 DOPs are exempt.
📌 Specific exemptions
- Projects benefiting from the CONFOTUR Law are exempt from IPI for 10 to 15 years.
- Retirees residing in the Dominican Republic can benefit from partial or total tax exemption.
1.2 Property transfer tax
When buying a property, a transfer tax of 3% of the purchase price is applied.
📌 Possible exemption
✔ Properties benefiting from the CONFOTUR Law are exempt from this tax.
1.3 Value-added tax (VAT or ITBIS)
The standard rate of VAT in the Dominican Republic is 18%.
📌 VAT-exempt products and services
✔ Medicines
✔ Education
✔ Residential rents
✔ Financial services
2. Tax exemptions for retirees and foreign investors
The Dominican government is introducing major tax incentives to attract retirees and foreign investors.
2.1 Tax exemptions for pensioners
Law 171-07 provides tax exemptions for pensioners settling in the Dominican Republic with a minimum income of USD 1,500 per month.
✅ Tax benefits for retirees:
✔ Total exemption from income tax for retirement pensions.
✔ Exemption from property transfer tax when purchasing a first property.
✔ 50% exemption from property tax (IPI).
✔ Exemption from customs duties for importing personal effects and furniture.
2.2 Tax exemptions for foreign investors
Investors benefit from numerous tax incentives, thanks in particular to the CONFOTUR Law and Law 16-95 on foreign investment.
✅ Main exemptions for investors:
✔ Exemption from IPI for 15 years for approved tourism projects.
✔ Exemption from income tax on rental income from properties located in CONFOTUR zones.
✔ Exemption from VAT (ITBIS) on building materials and equipment for tourism projects.
✔ Exemption from customs duties on imports of equipment for hotels and resorts.
3. Other tax benefits for expatriates and entrepreneurs
3.1 Investor residence program
📌 Foreigners investing more than 200,000 USD in the Dominican Republic (real estate, trade, etc.) can benefit from:
✔ An accelerated residence visa.
✔ Tax exemptions similar to those for retirees (exemption from IPI and ITBIS).
3.2 Avoidance of double taxation with certain countries
The Dominican Republic has signed agreements to avoid double taxation with several countries, including Spain and Canada.
Conclusion
The Dominican Republic offers an attractive tax environment for expatriates, whether retirees or investors. Thanks to strategic tax exemptions, the country makes it easy to buy real estate, set up a business or obtain permanent residency.
💡 Summary of tax benefits:
✔ Retirees benefit from exemptions on income tax, IPI and VAT.
✔ Investors enjoy a 15-year tax exemption on tourist properties.
✔ Permanent residency is facilitated for investors with capital in excess of USD 200,000.
✔ The tax rate in the Dominican Republic is far more advantageous than in many European and North American countries.
📌 If you are planning to expatriate or invest in the Dominican Republic, we strongly recommend that you consult a tax expert or specialized lawyer to optimize your situation and take full advantage of the tax benefits offered by the country.
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