One thing we love about the Dominican Republic, is the fact that it can be called one of the true Libertarian countries on earth.  Certainly, this was not the deliberate intention, but this is the reality.  The meaning is, there is minimal government regulation and oversight for many business sectors.  A businessman that is tired of government "red tape" and ridiculous regulations, will find the Dominican Republic to be a paradise.  The inherent problem with this, is that there are unscrupulous people that can take advantage.  In the case with real estate agents, there are no "truthful 
disclosure" statutes as they exist in the US.  In addition, the goal of many agents is to 
"make a quick sale", rather than develop an honest and long-lasting relationship with the client.  The concept of gaining future business from referrals seems to an alien concept for many.  To be fair, this does not apply to all real estate people, but such has been the case with enough that many foreigners have shied away from this wonderful and very affordable real estate market. 

The other problem, if not outright dishonesty, is a lack of professionalism.  Many Dominicans, not just real estate agents, do not know the tax regulations or other laws that exist in their own country.  For the average "man in the street", this is understandable.  For a "real estate professional", it is both unprofessional and unacceptable. 

Any real estate agent you are working with should be able to break-down the title transfer costs, estimated real estate taxes, and any other related information on paper for any property you are investigating.  The good ones will do it.  If you cannot get a straight answer to these questions, walk out the door.  Keep in mind that there is no formal real estate commission schedule dictated by any authority.  The average or accepted practice is a 5% commission based on the selling price, which is paid by the seller.  This rate can be negotiated. 

This sounds terrible, but It is not.  The Dominican Republic offers the best value for real estate and investment in the entire Caribbean.  The lack of formal standards just means that investors must do a little "due diligence".  The phenomenal bargains make the extra effort worthwhile. 
 

The lack of information about certain things is not entirely the fault of the people that you may encounter.  The government offices tend to give out conflicting information.  In addition, some of the tax code tends to be condradictatory at times.  If you put this into perspective, I would guess that half the people working for the IRS or Revenue Canada do not understand the tax codes they are meant to enforce.  In the past, I have contacted five different individuals in the Dominican government or private sector, and have received five different replies to the same question.  Similarly, my experience has been the same when making inquires to different offices of the IRS.  So, the point is, it is not all that suprising to encounter government clerks that do not know what they are talking about in any government. 

Things are improving in the Dominican Republic in this regard, but like any efforts of this kind, it takes time to trickle down to the bottom.  For the time being, do your homework and navigate the current system.  Once you learn the system, and you understand that you are dealing with a different culture, things will go smoothly.  For a guidebook, you may wish to purchase The Dominican Republic Report. 

One must also understand that tax sales or "Sheriff" sales are not the normal course of things in the Dominican Republic.  In most cases, the government tax office will not send you a formal tax bill or late notice.  Nor will anyone come knocking on your door if you are 12 months in arrears with your property taxes.  For this reasons, many Dominicans hold the impression that, the government either does not care about property taxes, or such a thing does not exist. Believe me, they care, and they will get you when it comes time to change title.   

Property taxes in the Dominican Republic are a form of "hidden wealth tax".  The meaning is that some properties, priced at a certain level, are not liable for annual 
property taxes.  So it is not false if someone says they do not have an annual property tax liability.  It depends.  Property taxes will be a function of whether or not the property is developed, the value of property, and the location.  Here is a general breakdown or "rule of thumb": 

Undeveloped or Raw Land - All undeveloped property in the Dominican Republic has a tax liability.  This concept was meant to encourage the building of homes, and discourage land speculation.  In the past, the Dominican Republic did have somewhat of a housing shortage.  Regardless of what any realtor or anyone else tells you, if you are purchasing a building lot or raw land, you will be liable for an annual tax liability. 
How much?  That depends on the location.  The government does have a tax schedule broken down on a tax map of the respective areas.  Areas considered to be "luxury" neighborhoods in Santo Domingo, such as Arroyo Hondo or Naco, will pay a higher tax schedule than "middle class" residential areas found in the Zona Oriental.  To give you an idea of your annual tax bill,  a 200 square metered building lot in San Isidro ( Zona Oriental) will have an estimated annual property tax in the neighborhood of 500 Dominican Pesos.  That is equivalent to US $ 32 per year, based upon an exchange rate of 16 pesos per US$1.00  Your actual tax bill, in a new development, will be determined by a government inspector.  Like everything else,  three different inspectors can all give you three different answers.  The figure I just presented is a "high" average. 

Homes or Developed Land - I mentioned earlier that real estate taxes are in effect a hidden wealth tax.  In order to encourage home ownership and home construction, the poor or lower middle class do not pay annual real estate taxes.  How so ?  Homes valued at RD $ 1,300,000 (Dominican Pesos) are exempt from annual property taxes.  Homes valued above this amount are liable for annual property taxes based upon a schedule for the valued amount above RD $1,300,000.  To put this in US Dollar terms, 
if you purchase a home or apartment priced below US $ 81,250 - you will not have an 
annual tax liability.  Since most of the real estate firms that are marketing in English 
to Americans and other foreigners prefer to market the higher priced properties (5% commission is more for a $RD 2,000,000 sale than half that amount), keep in mind that you may have an annual property tax liability based solely on the selling price. 

Can you purchase a decent home for less than 1,300,000 Dominican Pesos, and as a result not have an annual property tax bill.  The answer is YES.  Of course, it all depends upon where you want to live and what kind of home you are comfortable with. 
You can certainly find a home (new construction) in residential neighborhoods for this price range.  Just keep in mind that it will be a small home, in the area of 1200 to 
1500 square feet of space.  If it is important for you to have a certain kind of home, or to live in a particular area, you may pay more accordingly. 

Building A Home on your Lot - The most confusing aspect of the property tax code becomes evident when discussing the idea of building a new home on property you have already owned for a while.  In theory, it is possible to have an annual tax bill when the property was undeveloped, only not to have an annual tax bill if both the property and dwelling are re-valued below RD $ 1,300,000.  Again, the government incentive is to build or own a home.  The problem many foreigners encounter when buying an existing home from a local Dominican is as follows.   
 

Many Dominicans, in an effort to cheat the tax system, do not file the construction documents, nor do they report capital improvements when building on property.  In fact, a large percentage buy a building lot, and then go ahead with a private building contractor without filing for construction permits.  Many may purchase the land, build a home, and never pay taxes at all.  How is this possible?  Remember that a Sheriff's sale for back due property taxes is an un-heard of concept in the Dominican Republic. 

The government will get you when it comes time to transfer title or sell the property. 
It is difficult to explain to the authorities how a house has existed for 10 years, without the existence of such a property on the tax map.  Never the less, this is the problem. 
Many owners wishing to sell their property may not have paid any taxes, and may not be able to pay the tax bill (including the 50% multa or fines) in order to clear title transfer.  This problem, in and of itself, is one reason buyers have a problem obtaining a new title rapidly with some properties.   
 

The previously mentioned issue is just one reason why an independent title search by you, the buyer, is highly suggested.  But this is not the only reason.  Like a very large number of other countries, there is no title insurance in the Dominican Republic.  In this regard, the buyer must thoroughly research any property that they are considering. Partly for back tax issues, but also for ownership.  In the past, there have been individuals who have attempted to sell land they did not even own.  In truth, this has been more of a problem in the countryside, or with some very old properties, but it has happened.  Also, considering that the Dominican Republic does recognize squatter's rights, you could encounter someone that has built a home & lived in it for twenty years. That does not necessarily mean that they own the land underneath it, or that they have gone through the process of obtaining legal title through the court system. 

Again, this is more of problem with some older properties or raw land in undeveloped parts of the country.  I do not want to give the impression that every home you encounter will have a title problem associated with it, but it is a concern to keep in the back of your mind. 

One little trick some real estate agents like to play is, "hide the title transfer tax".  Every title that is transferred in the Dominican Republic, be it a home or undeveloped land, carries a list of taxes or fees that are equal to roughly 7.48% of the property value. Period.  There are no exceptions to this rule.  I do not care what your Dominican neighbor in New York told you.  This is a fact.  Real Estate agents will often "hike up" the selling price, in order to cover the taxes that they know must be paid to transfer title.  Some will go so far to tell you that there are no title transfer taxes or property taxes in the Dominican Republic.  That sounds wonderful, but won't you be surprised when it comes time for you to sell your property five years later (thinking that you did not have to pay this when you made your purchase).  Believe it.  You paid it, you just did not know it.  More correctly, it came out of the net settlement to the seller, minus the 5% broker's commission and anything else tacked on.   

We have heard of one broker telling potential buyers the total costs for property transactions in the Dominican Republic are 20%.  I do not know what kind of calculator this guy owns, but 5% + 7.48% = 12.48% (and remember that the 5% can 
be negotiated down). 
 

If this article has discouraged you from buying a piece of Caribbean paradise, it was not meant to.  Title insurance does not exist a long list of countries, but people still own homes and make money in real estate.  Opportunities and difficulties exist in every market.  The key is understanding the "rules" and the local culture.   Most foreign buyers have been burned in other real estate markets, because they were easy targets, and because they did not know any better.  Learn the rules and the tax codes. 

The truth is, the Dominican Republic offers some the least expensive real estate, and one of the largest percentages of virgin beach front property in the entire Caribbean. 
Is the title transfer tax high in comparison to other places? Sure it is, but the government has to get tax revenue from some source.  After all, considering that bank account and investment account interested is 100% tax free (on US Dollar accounts and certain types of peso investments), and that it is possible to own a home that is 100% free from annual property taxes, the Dominican Republic is one of the best deals around.