A Makai Owner's Guide to Property Taxes in the Dominican Republic

Owning a residence at Makai involves three main potential taxes: a one-time property transfer tax, an annual property tax (IPI), and taxes on any rental income. As Makai is a government-approved tourism project under law 158-01 (CONFOTUR), buyers benefit from exemptions on the first two, significantly reducing the costs of acquisition and ownership. Rental income, however, is taxed separately.

How does Makai's CONFOTUR status affect my taxes?

Makai's registration under the Dominican Republic's Tourism Incentive Law, known as CONFOTUR, provides significant tax advantages to first-time buyers directly from the developer. These benefits are attached to the property, not the owner's nationality, and are designed to encourage investment in approved tourism zones like Cap Cana.

The two primary benefits are an exemption from the 3% Property Transfer Tax, which is normally due on the value of the property at the time of purchase, and an exemption from the annual 1% Real Estate Property Tax (IPI) for a period of up to 15 years. The law's fifteen-year term runs for the project from the completion of construction; how much of it reaches a particular title is a question for your attorney rather than something we can state for you. Your attorney will confirm the status and ensure the exemption is filed and recorded on your property's title.

What is the standard annual property tax (IPI) that CONFOTUR exempts?

The annual Real Estate Property Tax, or IPI (Impuesto al Patrimonio Inmobiliario), is a 1% tax levied on the value of Dominican real estate. However, it's crucial to understand that this 1% rate is not applied to the entire value of the property. The tax is only charged on the value above a certain threshold, which is adjusted annually for inflation by the Dominican tax authority (DGII). For individuals, this exemption threshold is substantial, meaning many properties fall below the taxable value or are only taxed on a small portion of their total worth.

For a property like a residence at Makai, with prices starting from $329,000, this distinction is important. Under the standard regime, only the value exceeding the government's annual threshold would be subject to the 1% tax. The CONFOTUR benefit makes this even simpler by exempting the property entirely from IPI for the duration of the project's approved term, removing the need for this calculation.

If I rent my Makai residence, is that income taxed?

Yes, income generated from renting your property is taxable in the Dominican Republic, and this income is not covered by CONFOTUR exemptions. This is a critical point for investors in the Wyndham-managed rental program at Makai. The tax treatment depends on your residency status.

For non-resident owners, a withholding tax of 27% is applied to the gross rental income, with no deductions. Rates change, so confirm the current figure before relying on it. This is considered a final and definitive payment, meaning no deductions for expenses (like maintenance, HOA fees, or management fees) are permitted against it. The party making the payment is typically responsible for withholding and remitting the tax.

Additionally, short-term tourist rentals are subject to an 18% Value-Added Tax known as ITBIS (Impuesto a la Transferencia de Bienes Industrializados y Servicios). The responsibility for collecting and paying this tax falls on the host or property owner, not the booking platform. Your legal and financial advisors can provide guidance on the most efficient way to structure your affairs to handle these obligations.

What other taxes or closing costs are involved in a purchase?

While CONFOTUR exempts first buyers from the 3% transfer tax, a purchase still involves other closing costs. These typically amount to a small percentage of the purchase price and cover essential legal and administrative services. These costs include fees for the attorney who conducts due diligence, drafts the purchase agreement, and represents you in the transaction. There are also notary fees for authenticating documents and costs associated with the registration of the title in your name at the Title Registry Office.

Your attorney will provide a detailed breakdown of these expected costs before you sign a contract. It's a standard part of the process that ensures your ownership is secure and properly recorded according to Dominican law.

What happens to the tax benefits when I decide to sell my residence?

The CONFOTUR tax benefits are specifically for the first acquirer of the property from the developer. When you decide to sell your Makai residence in the future, the new buyer will not automatically inherit these exemptions. The sale will be subject to the standard tax regime at that time. This means the future buyer will be responsible for paying the 3% property transfer tax, and they will be liable for the annual 1% IPI tax if the property's value exceeds the exemption threshold in effect that year.

This is an important consideration for your long-term investment strategy. While you benefit from the exemptions during your ownership, the property will trade on the open market like any other upon resale. Your attorney can provide advice on capital gains tax implications that may apply at the time of sale based on the prevailing laws.

Common questions

Do I need to be a resident to benefit from CONFOTUR tax exemptions?

No, you do not. The CONFOTUR tax benefits are attached to the approved project, in this case Makai Residences, not to the buyer's nationality or residency status. Any first-time buyer purchasing directly from the developer is eligible for the exemptions.

Who is responsible for filing for my tax exemptions?

Your real estate attorney in the Dominican Republic handles this process. As part of the closing, they will ensure that the purchase is structured correctly and that the title deed is registered with the corresponding CONFOTUR exemption, securing your benefits.

Does CONFOTUR reduce the 27% tax on my rental income?

No, it does not. The CONFOTUR law provides exemptions for property transfer tax and the annual property tax (IPI). It does not apply to income tax. Rental income from your Makai residence is subject to separate taxation, including the 27% withholding tax for non-residents.