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Panama-New-Property-Tax-Everything-You-Need-to-Know

Panama’s New Property Tax: Everything You Need to Know

By in Exploring & Living in Panama with 0 Comments

A new year is a great time for new changes. Whether you’re mixing up your office routine or trying out a new hobby, January is synonymous with trying new things.

The most relevant change we seen in Panama as we rolled into 2019 is the new property tax reform. As of, Jan 1, there are now new rates for the payment of real estate taxes. Curious how these new rates will affect your own property taxes? Keep reading for everything you need to know. Chances are, these changes bring good news!  

What is the new property tax reform?

Starting on January 1st, 2019, the Panamanian government established new rates for the payment of real estate taxes. This change represents one of the largest property tax law reforms that Panama has seen in nearly 40 years. And the great news is that the new rates will mean savings for the vast majority of homeowners.

What do these new rates entail?

For starters, under the new policy, any primary residence property valued at $120,000 or less will be totally exempt from real estate taxes according to the cadastral value. This is a huge jump from the former exemption threshold of $30,000.

For primary residences that are valued at more that $120,000, the scale for property tax rates has also been adjusted to favor homeowners. Article 766 of the Fiscal Code outlines the rates as follows.

For primary residences:

Properties valued between $0 and $120,000 are exempt from taxes.

Properties valued between $120,001 and $700,000 will have a 0.5% tax rate.

Properties valued above $700,000 will have a 0.7% tax rate.

This means that if your home has a value of $400,000, you would pay 0.5% on $400,000 minus $120,000. That comes out to $1,400 in property taxes in a year.  

Who will these new rates apply to?

These new benefits will apply to any property that qualifies as either a Tributary Family Patrimony or a Primary Residence. While there are subtle distinctions between these two property classifications, essentially any property that serves as the permanent residential home for the owner or the owner and his or her family is eligible for the new rates.

What’s also good news is that these new rates apply for both national and foreign residents regardless of married status. Single, joint de facto, married, and widowed homeowners of any nationality can take advantage of the lower property tax rates.

The rates for secondary residences and commercial and industrial properties are also shifting, though the tax breaks here are less generous.

For secondary residences or commercial properties:

Properties valued between $0 and $30,000 are exempt from taxes

Properties valued between $30,001 and $250,000 will have a 0.6% tax rate

Properties valued between $250,001 and $500,000 will have a 0.8% tax rate

Properties valued above $500,000 will have a 1.0% tax rate

If your property already has 20 years tax exemption applied then you do not have to declare your property as your ‘Familiar Patrimony’. By declaring your property under the new property tax scheme you will face losing your current tax exemption. However, once your tax exemption has expired you will then have to declare the property under the new tax scheme.

What do I have to do?

Oftentimes tax breaks that sound appealing are only attainable by suffering through a mountain of bureaucratic paperwork, however, the new property tax rates can be taken advantage of with minimum hassle.

To receive this benefit, tax payers must submit an application to constitute their property as either a Tributary Family Patrimony or a Permanent Residence. This application can be submitted to the Directorate General of Revenue. Unless the Directorate General of Revenue responds with inquiries within three months of submitting the application, your application is automatically accepted. So in this case, no news is good news.

For those homeowners who do not apply to register their property under one of the two property classifications mentioned above, then the current property tax rates will continue to apply.

These are:

Properties valued between $0 and $30,000 are exempt from taxes

Properties valued between $30,000 and $250,000 will pay 0.6%

Properties valued between $250,000 and $500,000 will pay 0.8%

Properties valued above $500,000 will be taxed 1.0%

So don’t waste any time in submitting your application and taking advantage of these new rates. This tax reform could easily save you thousands of dollars over the course of your mortgage and is a great incentive for perspective buyers and investors to think about purchasing a new home.  

About The Author

Kent Davis, founder and Managing Director at Panama Equity real estate, has been widely quoted in publications such as Wall Street Journal, Time Magazine, The Miami Herald and the Financial Times for his unabashed views on the Panama real estate market. Panama Equity is regarded as one of the most active real estate agencies in Panama and Kent’s articles, reports, and market research projects have been syndicated by press agencies including Bloomberg and the Associated Press.   Connect with the Author via: Email | LinkedIn | Facebook | Google+

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