The Tourism Incentives Law 158-01 was enacted in October 2001 to stimulate real estate investments and large infrastructure projects related to tourism in the Dominican Republic, particularly in designated tourism zones across the island. The map below highlights these zones. This law is also commonly known as CONFOTUR, an acronym derived from its Spanish name.
CONFOTUR aims to develop less-served tourist areas in the Dominican Republic and promote environmental protection in those regions.
The law essentially benefits those willing to promote or invest capital in tourism-related infrastructure, including real estate developments. The advantages extend to the end clients of these properties, allowing both local and foreign real estate buyers to benefit from the law in approved projects.
Advantages of CONFOTUR for Developers
As mentioned, the CONFOTUR Law offers financial exemptions to developers like large hotel chains, medium-sized real estate developers, and investors aiming to build residential and tourism projects. The project must meet a series of strict criteria outlined in the law, reviewed by a specific government organization.
If these criteria are met, developers can benefit from the following exemptions under Article 4 of the law:
- Full exemption from national and municipal taxes on company formation, capital increase, national and municipal taxes on property rights transfers (including sales, swaps, contributions in kind, and other forms of property rights transfers), and the Luxury Housing and Unbuilt Land Tax (IVSS). This also covers fees for project planning, studies, consulting, supervision, and construction. Contractors involved in the project’s construction are eligible for this exemption.
- Full exemption from import taxes and other levies, such as rates, duties, and surcharges, including the Tax on the Transfer of Industrialized Goods and Services (ITBIS), applicable to machinery, equipment, materials, and furniture needed for the construction and initial setup of the tourism facility.
Once a project is approved under the CONFOTUR Law and the aforementioned benefits are granted, investors can deduct their investments from their taxable net income.
Advantages of CONFOTUR for Final Buyers
In addition to these significant benefits for developers, projects approved under the CONFOTUR law grant final buyers several tax exemptions. Individuals purchasing properties and promotions under CONFOTUR will be exempt from:
- The 3% Transfer Tax for transferring the title certificate into the buyer’s name with the General Directorate of Internal Revenue (DGII). This waiver of 3% of the property’s value, paid to the DGII for transferring the title certificate to the new owner’s name, is a substantial saving.
- The Annual Property Tax, which is 1% of the value exceeding DOP 7,438,197 (about USD 148,000, as of June 2019) for individuals. For instance, a property valued at USD 200,000 will be taxed on its excess amount of USD 52,000 at 1%, which is USD 520 annually. This tax is paid in two semi-annual installments, with payment deadlines on March 11 and September 11 each year. For companies, the Annual Property Tax is replaced by a 1% Asset Tax that applies to the entire property value.
- The tax in cases of capital increase, sales (e.g., in case of resale of the property), and contributions in kind.
- The tax on declared rental income, which stands at 27%.
