The first purchaser of a property located in a project developed under the Tourism Development Promotion Law 158-01 (amended), or the "Confotur Law," is entitled to multiple tax exemptions, the full scope of which is not always fully understood.
These benefits were originally granted to the developer (or promoter) of the project, according to the main section of Article 4 of the aforementioned law, and extended to the first purchaser of one or more properties as a direct investor through the addition of paragraph IV to the referenced article by Law 184-02.
Among other exemptions are the Income Tax, the Tax on Assets, Corporate Capital Taxes, and the Property Transfer Tax.
Paragraph IV of Article 4 of Law 158-01 states that "The exemptions established by this law will benefit individuals or entities that make one or more direct investments with the promoters or developers in any of the activities indicated in Article 3, and in the tourist areas and provinces and municipalities described in Article 1, with any subsequent transfer to third-party buyers being excluded from such benefits."
In relation to this text, some mistakenly question whether the benefits of Article 4 of the Confotur Law also apply to the first purchaser in the tourism project, whom they label simply as a buyer. They argue that by purchasing a property, the buyer does not make "one or more direct investments with the promoters or developers..." as stipulated in the aforementioned article.
However, the Supreme Court of Justice has settled this issue by establishing the scope of exemptions in favor of the first tourist purchaser. By ratifying a ruling from the Administrative Superior Court, it stated the following: “Contrary to what the appealing institution (DGII) claims, by establishing in its ruling that the company ID, S.A. 'is the first purchaser of a property located within the Campo de Golf D and F project, classified by Confotur to benefit from the exemptions granted by Law No. 158-01, as amended by Law No. 184-02, and having acquired it directly from the promoter of the referred project, it also makes them a beneficiary of the exemptions listed in paragraph b) of Article 4 of Law No. 158-01, related to national and municipal taxes on property transfer rights,' the lower court correctly interpreted and applied the legal provisions governing the matter. According to the provisions of Law No. 184-02 in its Article 8, paragraph IV, which introduces amendments to Law No. 158-01, it is stipulated that the exemptions contained in the aforementioned law will also benefit individuals or entities that make one or more direct investments with the promoters or developers of the project benefiting from tourism incentives, which applies in this case, as the lower court states in its ruling: 'the company now appealed, Inversiones Delords, S.A., directly acquired the referred property through a purchase from the company Costa Sur Dominicana, S.A., which is the company developing or promoting the Campo de Golf DyeFore project, a recipient of tourism incentives, according to the Confotur resolution.' Therefore, by deciding that the exemption from the Property Tax/Sumptuous Housing Tax and the Tax on the Transfer of Industrialized Goods benefited the appellant for making its investment directly with the promoting company of the project, and ordering the General Directorate of Internal Taxes to refund the amounts paid by the appellant for those concepts, as they were undue taxes..." (Inv. Delords vs DGII, BJ. NO. 1196, July 2010).
It is evident that for the Supreme Court, the tax benefits of the aforementioned Article 4 of Law 158-01 (amended) extend to the first purchaser as the buyer of a property developed under the protection of Law 158-01. Furthermore, if due to an oversight, they have paid taxes unduly, a refund is warranted.
Once the scope of the law regarding the exemptions is understood, and assuming that the Administration has recognized them as we have outlined, the first purchaser faces another battle—this time against excessive administrative bureaucracy.
While the logic and principles of administrative procedure suggest that all exemption requests involved in the purchase of a tourist property should be made jointly and at a single counter for the convenience of the investor, these processes have been hindered by the excessive paperwork required by the competent authorities.
To obtain the exemption from taxes on assets, property transfer, and capital, it has been unreasonably required to submit at least three separate and successive requests, forcing the applicant to provide the same supporting documents for the exemption each time and pay for each procedure individually.
At the Ministry of Finance, the first purchaser who wishes to benefit from the incentives in question is typically required to request the exemption from the transfer tax in order to proceed with the property transfer before the Real Estate Jurisdiction.
In addition, the General Directorate of Internal Taxes will require an increase in the capital of the company in accordance with the new acquisition, which means that another exemption request must be processed, along with the corresponding fee payment at the Ministry of Finance.
Once the transfer is completed, it will be necessary to complete the process for the third time regarding the asset tax, using the property title obtained by the first purchaser as a result of the previous procedures.
A solid tax planning of the operation is essential, ensuring that it is carried out in the correct order and in accordance with the law, while we await the authorities' decision to simplify these procedures.