Dominican Republic: Overview

RENTAL YIELDS

Last Updated: Jan 13, 2009

No yields figures

There is not enough information on rents for us to be able to estimate rental yields but houses in Puerto Plata do sell at an average of US$1,594 per square metre whilst apartments are slightly higher at around US$2,118 per square metre. Property sizes range from 75 to 500 sq.m. for both Puerto Plata apartments and houses.

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TAXES AND COSTS

Last Updated: Jan 20, 2009

Taxes are high in the Dominican Republic

Rental Income: Non-resident foreigners earning rental income in the Dominican Republic are liable to tax at the corporate rate of 25%.

Capital Gains: Capital gains are treated as normal income and taxed at progressive rates, from 15% to 25%.

Inheritance: Inheritance taxes are levied at a flat rate of 3% for properties.

Residents: Residents are taxed on their worldwide income and some kinds of investment income derived from abroad at progressive rates, from 15% to 25%.

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BUYING GUIDE

Last Updated: Apr 03, 2008

Moderate costs in the Dominican Republic but beware of fraud

Roundtrip transaction costs are around 12.3% - 17.3% of property value. The agent’s commission of 5% - 10% the property value accounts for the greater part of the costs and is usually paid by the seller. The buyer pays the transfer tax (3%), property registry tax (2%), document stamp tax (1.3%) and legal fees (1%).

Buyers must be vigilant. There is much history of fraud by real estate agents in the country, and little protection is offered to the buyer. Any knowledge of Spanish must be shown off. Real estate agents tend to offer higher prices to foreigners, especially when their services are employed in English.

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LANDLORD AND TENANT

Last Updated: Jun 08, 2006

Rent control favors tenants

The law is strongly pro-tenant.

Rent Control: Rents are strictly controlled in the Dominican Republic. The maximum monthly rent is fixed at 1% of the rental property’s value. The tenant can request the Rent Control Authority to reduce the rent if it exceeds the maximum rate.

Tenant Eviction: It is not easy to evict a tenant even when the owner decides to use the property for personal reasons. A hearing must be conducted and the tenant is usually given months, or even years, to look for an alternative dwelling that he can afford.

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ECONOMIC GROWTH

Last Updated: Feb 11, 2008

Catching up in tourism and development

Despite recent economic growth, the Dominican Republic is still one of the least developed countries in the Caribbean. The economy is primarily dependent on agriculture, trade, and tourism. The economy grew an average of 3.5% per year from 2000 to 2005. The GDP growth rate for 2006 was a stellar 10.7% (after 9.3% in 2005) and growth of 6% is forecast for 2007.

Tourism is a major contributor to the country’s economic development. It is relatively cheaper than other Caribbean islands making it one of the most popular destinations.

The Dominican Republic’s President, Leonel Fernandez, began his second non-consecutive term in August 2004. He successfully ran for president in 1996, and during his first term the Dominican Republic experienced economic growth of 7% a year. But his successor, Hipolito Mejia, oversaw rampant inflation, a plummeting currency and high unemployment. Campaigning amid economic turmoil Fernandez pledged to reduce inflation, to stabilize the exchange rate and to restore investor confidence.

Upon taking office he introduced austerity measures, including cuts to state spending. The moves helped to secure an International Monetary Fund loan. He has since overseen a policy of actively encouraging tourism. Problems of poverty, inequality and violence remain, but the Dominican Republic is clearly on the right track.