In this post, you will learn about Confotur, a special program by the Ministry of Tourism in the Dominican Republic aimed at real estate investors.
Introduction to Confotur; Law 158-01
- What is Confotur 158-01 and why is it important for private investors as well as for companies that want to build hotel, apartment, or residential properties in the Dominican Republic?
Benefits of the Confotur Law
- Overview of key benefits, such as tax exemptions and other investment incentives.
Who Can Benefit from Confotur?
- Qualifications and requirements for local and foreign investors.
Step-by-Step Application Process
- How to apply for tax relief and what documents are required.
What is Confotur?
Confotur (Consejo de Fomento Turístico – Tourism Promotion Council) is a special program offering numerous tax breaks and other benefits for investors. Thanks to it, we can take advantage of facilities such as exemption from property tax, capital gains tax, or taxes on building materials and services. This is a great opportunity to realize your dreams of owning property in the Dominican Republic and simultaneously achieve tangible financial benefits.
From this text, you will learn why this law was introduced, who can benefit from it, what the application process looks like, and what benefits can be achieved as an investor.
Benefits of the Confotur Law
The Confotur Law offers a range of benefits and incentives that make the Dominican Republic an attractive place to invest in real estate. Please remember that all these benefits, and I am referring here to individual investors, apply to the first owner who purchases from a developer in the primary market. And so:
- Exemption from property tax. Investors benefiting from the Confotur Law are exempt from property tax, i.e., “Impuesto Patrimonio Inmobiliario” (IPI), for a period of 15 years, but importantly, from the moment the developer obtains the right to these benefits. This property tax in the Dominican Republic is 1% of the value above the amount of almost $168,000, as in 2024, we convert this from 9,860,649 pesos. This is a significant saving, especially for long-term investments. This means that for a decade and a half, property owners do not have to pay tax on the value of the property they own, which naturally lowers maintenance costs and increases investment profitability.
- Exemption from the 3% transfer fee (El impuesto de transferencia)
Investors are also exempt from the 3% property transfer fee. This is similar to the Polish PCC (tax on civil law transactions).
This additional financial support makes the costs associated with property acquisition even lower, which is an important factor encouraging investment. This tax is always present in our calculation if we do not purchase property under the CONFOTUR law. We will also always pay 3% in the secondary market.
- Amortization of the net investment amount up to 20% each year for a maximum of 5 years. This allows investors to gradually account for the value of the property in their costs, further reducing the tax base and increasing the financial benefits of the investment.
- Register of properties covered by the Confotur program
- The Confotur Law requires the registration of properties, companies, and investments that are to benefit from its advantages. Such a register acts as an additional layer of protection for investors, reducing the risk associated with property purchase. Investments listed in this register are strictly monitored and verified to ensure they meet all legal requirements.
- Exemption from taxes on building materials and services
- Confotur offers exemption from tax on building materials and services related to the construction and renovation of properties. This significantly reduces the costs of implementing construction projects, making investments more profitable. Investors can benefit from this relief both when building new facilities and when renovating existing ones.
- Income tax exemption: Investors benefiting from the provisions of the law are completely exempt from income tax for a period of ten years from the completion of construction and equipping of the investment. This exemption also covers capital gains taxes and other fees related to income generated by the investment.
- Exemption from import taxes: The law provides for exemption from import taxes and other taxes such as “VAT” on machinery, equipment, materials, and furniture necessary for the construction and equipping of tourist investments. This allows investors to save significant amounts when importing necessary materials and equipment.
- Exemption from local and national taxes: The law exempts investors from local and national taxes related to company formation, capital increase, and property transfer fees. These exemptions also include fees for construction plans, studies, and construction supervision, which significantly reduces the operating costs of the investment.
- It is forbidden to establish new fees, taxes, excises, etc., during the period of tax exemption already granted.
It is worth mentioning that in October 2023, Confotur approved 42 real estate projects for an investment value of 1 billion 567 million USD.
Who Can Benefit from Confotur? Qualifications and Requirements for Local and Foreign Investors
Confotur, or Law 158-01, was created to attract investors. Both private investors and developers can benefit from it.
In addition to private investors who benefit from tax exemptions, it also, or perhaps primarily, applies to developers and investors in:
Hotel facilities, all-inclusive resorts, also on the basis of renovating a facility that is not less than 15 years old, and the degree of renovation or revitalization exceeds 50% of the area.
Furthermore, other facilities not directly associated with tourism, such as sports facilities, congress and trade fair centers, amusement parks, and buildings related to the operation of nature parks, port infrastructure, marine infrastructure, or investments in yacht marinas.
Future owners of golf courses, restaurants, sports facilities, aquariums, and all other facilities built for the expansion of the tourism industry in the Dominican Republic can also count on relief.
Further Requirements.
- Registration in the Confotur program:
- To benefit from tax relief, all investments must be registered in the special Confotur register. This registration allows for the monitoring and verification of investments, ensuring that they meet specific criteria.
- Fulfillment of investment criteria:
- Investments must meet specific criteria regarding size, location, and type of property. These criteria are intended to ensure that investments contribute to the economic and social development of the Dominican Republic.
- Documentation and compliance with regulations:
- Investors must provide complete documentation confirming compliance with building, environmental, and financial regulations.
- This documentation is essential for obtaining approval and registration of the investment in the Confotur program.
In summary, the Confotur Law 158-01 is available to a wide range of investors, both local and foreign. The key condition is the registration of the investment and the fulfillment of all formal and legal requirements, which ensures access to numerous tax benefits and other investment incentives.
Step-by-Step Application Process: How to Apply for Tax Relief and What Documents Are Required
To benefit from the tax relief offered by the Confotur Law 158-01 in the Dominican Republic, you need to go through several key steps:
- Investment Registration:
- Register your investment in the special Confotur register. This registration is necessary to gain access to the tax relief and other benefits offered by the Confotur Law.
- Form Completion:
- Complete the Confotur 158-01 application form. This form contains detailed information about the investment, including its value, location, and type of property.
- Preparation of Documentation:
- Prepare the required documents, which may include:
- Proof of investor status (e.g., income certificates).
- Financial documentation confirming the ability to carry out the investment.
- Property-related documents, such as purchase agreements, architectural plans, building permits.
- Proof of payment, invoices, and other documents confirming incurred costs.
- Prepare the required documents, which may include:
- Submission of Application:
- Submit the completed form along with the attached documents to the appropriate office in the Dominican Republic. It is important to ensure that all documents are complete and correctly filled out.
- Verification and Approval:
- After submitting the application, the relevant authorities will verify the provided documentation. If everything is in order, your investment will be approved for Confotur tax relief.
- Monitoring and Reporting:
- After the investment is approved, regularly monitor its progress and submit required reports to the relevant offices. Maintaining compliance with regulations is crucial for continued enjoyment of tax relief.
Summary
By following the above steps, investors can fully benefit from the advantages offered by the Confotur Law 158-01, including tax exemptions and other investment incentives.
While legal procedures in the Dominican Republic are not complicated, we strongly encourage you to use the services of a good lawyer. It is worthwhile to build and apply for investment incentives in the Punta Cana or Bayahibe region, and thereby offer clients better and more affordable properties. However, let’s do this with professionals and after consulting current legal opinions and a tax advisor who will properly look after your interests.
Andrzej Włodarski
