CONFOTUR wipes out Dominican property and transfer tax — but the IRS still wants to hear about your Sienna villa. Here's how the exemption sits alongside FBAR, Form 8938, and foreign rental income for US buyers.
CONFOTUR eliminates your Dominican Republic property tax and transfer tax for 15 years — but it does nothing to your US filing obligations. As a US citizen or green-card holder, you still report worldwide income and foreign accounts to the IRS no matter where you buy. The good news: the two systems don't fight each other, and with the right structure you rarely pay tax twice on the same dollar.
The Short Version
- CONFOTUR is a Dominican benefit: 0% property tax (IPI) and 0% transfer tax for 15 years on what a qualifying developer builds and delivers.
- The IRS still requires you to report worldwide income and certain foreign assets — CONFOTUR doesn't exempt you from that.
- Rental income from your villa is taxable in the US; the Foreign Tax Credit offsets what you'd pay twice.
- FBAR (FinCEN 114) and Form 8938 are triggered by foreign accounts, not the villa itself — but the escrow and operating accounts around it can trip the thresholds.
- Sienna holds provisional CONFOTUR status under Resolution 203-2024; final approval is not the same as provisional, and you should confirm status before closing.
What Does CONFOTUR Actually Exempt for a US Buyer?
CONFOTUR is a Dominican tourism-incentive program under Law 158-01, and it exempts you from Dominican taxes only — not US ones. On a new-build villa that a qualifying developer builds and delivers, it removes the 3% transfer tax at closing and the 1% annual property tax (IPI) for 15 years.
What's covered — and what isn't
The exemption follows what the developer builds and delivers under its construction contract. Buy a Sienna lot and villa as a delivered package, and both the land and the structure fall inside the benefit. Buy a lot alone and build your own villa outside that contract, and you're exempt on the land value only — the 3% transfer tax and the 1% IPI on the land, and nothing else. Rental income the villa earns is never CONFOTUR-exempt.
If you want the full mechanics of how the program qualifies projects, our CONFOTUR explained guide for Dominican Republic investment walks through Law 158-01 in detail. For the US side, keep reading.
CONFOTUR is a Dominican tax holiday. It is not a shield against the IRS — the two governments tax different things, and you answer to both.
Do US Citizens Still Owe US Tax on a CONFOTUR Property?
Yes — the US taxes citizens and residents on worldwide income, so CONFOTUR's Dominican exemption doesn't reduce your US bill. What it does is change the size of the Dominican tax you might otherwise credit against your US liability.
Where the two systems meet
Owning the villa isn't a taxable event in the US. The moment tax enters the picture is when the villa earns money (rent) or when you sell it (capital gain). Both are reportable on your US return regardless of CONFOTUR.
Here's the practical upshot: because CONFOTUR zeroes out your Dominican property tax, you have less foreign tax to credit — but you also keep more cash, since you're not paying that 1% IPI every year. According to the IRS, US persons must report foreign-source income even when a treaty or foreign program reduces the tax owed abroad.
How Is Rental Income From a Dominican Villa Taxed?
Rental income is taxable in both countries — but the Foreign Tax Credit generally prevents you from being taxed twice on the same dollar. The Dominican Republic taxes rental income locally; the US taxes it again on your Form 1040, then lets you credit the Dominican tax you paid.
The Dominican side
The Dominican tax authority, DGII, taxes net rental income earned in the country. CONFOTUR does not exempt rental income, so a rented villa generates a Dominican tax liability even during the 15-year property-tax holiday. For a full breakdown, see our Dominican Republic rental income tax guide.
The US side
On your US return, that same rental income goes on Schedule E, and you claim a Foreign Tax Credit (Form 1116) for the Dominican income tax you paid. You can also depreciate the villa over the IRS's foreign-property schedule and deduct operating costs. Our piece on depreciation and furnishing write-offs on a rented Dominican villa covers what the US allows and what CONFOTUR doesn't touch.
| Tax event | Dominican Republic (with CONFOTUR) | United States |
|---|---|---|
| Purchase (transfer tax) | 0% (exempt) | Not a taxable event |
| Annual property tax | 0% for 15 years (IPI exempt) | Not applicable |
| Rental income | Taxed by DGII (not exempt) | Schedule E; offset by Form 1116 credit |
| Capital gain on sale | Dominican capital gains rules apply | Reported; foreign tax credited |
| Foreign accounts | N/A | FBAR + Form 8938 if thresholds met |
Does Buying in the DR Trigger FBAR or Form 8938?
The villa itself doesn't — but the bank accounts around it can. FBAR and Form 8938 are triggered by foreign financial accounts and assets, not by directly held foreign real estate.
FBAR (FinCEN Form 114)
If the total of your foreign financial accounts exceeds $10,000 at any point in the year, you must file an FBAR. A Dominican escrow account holding your deposits during construction, or an operating account collecting rent, can push you over that line fast. The account is reportable; the real estate isn't.
Form 8938 (FATCA)
Form 8938 has higher thresholds that vary by filing status and whether you live abroad. Again, directly held real estate is excluded — but if you hold the villa through a Dominican company, the company interest itself may become a reportable foreign asset. That structuring choice matters, and we cover it in personal name vs Dominican company for a villa purchase.
FBAR penalties for non-willful failure can reach thousands of dollars per account per year. The form is free to file — the mistake is not filing it, not the tax it represents.
Should a US Buyer Hold the Villa Personally or Through a Company?
For most US buyers of a single Sienna villa, personal ownership is simpler — but the answer turns on how many properties you hold and your estate plans. Personal ownership keeps you out of foreign-corporation reporting; a Dominican company can add Form 5471 complexity to your US return.
The trade-off
Hold the villa in your own name and you report rental income on Schedule E, file FBAR on the accounts, and you're done. Hold it through a Dominican SRL and you may add Form 5471 (US information return for foreign corporations) — real paperwork, real accountant fees. The company route earns its keep mainly for multi-property investors or specific inheritance goals, which our guide on passing Caribbean property to heirs unpacks.
Whichever way you go, the CONFOTUR benefit attaches to the property, and Sienna's multilingual team handles the Dominican documentation. The US filing is on you and your CPA — so bring one who has done a foreign rental before.
Frequently Asked Questions
Does CONFOTUR reduce what I owe the IRS?
No. CONFOTUR only exempts Dominican property and transfer tax. The IRS taxes your worldwide income regardless, though the Foreign Tax Credit prevents double taxation on rental income and gains.
Do I have to report my Sienna villa on my US tax return?
Not the property itself while you simply own it. You report rental income when it earns money, capital gain when you sell, and any foreign bank accounts connected to it via FBAR and possibly Form 8938.
Is rental income from my villa CONFOTUR-exempt?
No. CONFOTUR covers property tax (IPI) and transfer tax on what the developer builds and delivers — never rental income. Rent is taxed by DGII in the DR and reported to the IRS in the US.
Is Sienna CONFOTUR-approved?
Sienna holds provisional CONFOTUR status under Resolution 203-2024. Provisional status is a real milestone but not the same as final approval — confirm current status with the team before you close, and see our CONFOTUR timing for pre-construction buyers on when the 15-year clock starts.
Will I pay tax twice on the same rental dollar?
Generally no. You pay Dominican income tax to DGII, then claim a Foreign Tax Credit on Form 1116 against your US liability on that income. Double taxation is the exception, not the rule.
The Bottom Line
CONFOTUR is a genuine 15-year holiday from Dominican property and transfer tax — worth $50,000+ over its life — but it leaves your US filing obligations exactly where they were. Report worldwide income, file FBAR on the accounts, and lean on the Foreign Tax Credit, and the two systems coexist cleanly. To see how the numbers work on a specific Sienna villa, book a Discovery Tour in Las Terrenas and sit down with our team and legal specialists.
This article provides general information about property in the Dominican Republic and is not personal financial, legal, or tax advice. Figures such as CONFOTUR benefits, taxes, and returns depend on your circumstances and can change — confirm specifics with a licensed Dominican attorney, tax advisor, or the relevant authority before making a decision.
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Written by
Sienna Terrenas Editorial Team
The Sienna Terrenas editorial team covers buying, owning, and living in Las Terrenas, Dominican Republic — from the purchase process and CONFOTUR tax strategy to villa construction and Caribbean community life, drawing on the team's on-the-ground experience in the area. Meet the Sienna Terrenas team.
