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!
A new year is a great time for new changes and January is synonymous with trying new things.
The most relevant change we have 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?
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 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?
Under the new policy, any primary residence valued at $120,000 or less will be 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 valued at more than $120,000, the scale for property tax rates has also 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. There here are subtle distinctions between these two property classifications. But 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. However, 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, taxpayers 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 prospective buyers and investors to think about purchasing a new home.
Al Jan
on said
Good morning,
Can you hold my hand on this a little more?
“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. ”
Can all this be done online? Is there a published form that can be used? Should one go to the DGI website? Thanks!
Kent Davis
on said
Hi Al, thanks for your question. We are now in contact in private but in short, all of this can be done online.
cindy pieterick
on said
Do you have steps to pay my Panamá tax online? I tried on Banistmo Bank site but it requests a DGI payment ticket number, which I do not have (I have RUC, NIT, and DV).
When I tried on the DGI eTax site, I do not understand where to go to pay. I found under consult payments I have previously made but not sure what are the steps to find what I owe and how to pay.
HELP!
Kent Davis
on said
Hi Cindy, no problem. Someone from our office will reach out today.
Ruben (PN-2946)
on said
Hello Cindy:
Sorry to learn that you’re experiencing difficulties in making these payments.
I went online and found this Banistmo Step-by-Step Guide on how to make such payments through their online banking system. I did not find it in English, but it seems self-explanatory for Banistmo Online Banking system users. This is the link https://www.banistmo.com/wps/portal/banistmo/empresas/productos-y-servicios/guia-pagos-dgi
If that doesn’t work you can always reach out to them via email or chat and they should be able to give you the assistance you need.
You may also want to check out DGI’s Youtube Channel. I found this video which seems to address your concerns as well https://www.youtube.com/watch?v=OYHTHZnBDYs&t=9s
I hope that this information is helpful!
vanessa zhang
on said
We are from Asia and want to move here and I would like to know about private schools around the community, with a focus on grades 8-12; If we plan to immigrate here, How should we choose property?
Kent Davis
on said
Morning Vanessa, there are some terrific schools in Panama. Have you had a chance to check out our blog? As for choosing property, we can certainly help. YOu can expect to hear from a real estate agent shortly!
Charles Banks
on said
Good day, concerning property taxes I own a 75 square meter one bedroom 2 bathroom condo in Oeste De Panama,, San Carlos, Purchased march 2020. No mortgage. Purchase price $190,000. I calculated an estimated annual cost of $400. My question is how do I make payment and to whom, ask are penalties applied. Am I delinquent for 2023 also. (I’m a permanent resident of Panama, pensionado and this is my primary residence. Thank you Charles B.
Kent Davis
on said
Hi Charles, this is with the DGI and you can do it online. There will be a small fee and you will need a taxpayer identification number first. Best to consult with an attorney or accountant for the first tax payment and then you can do it yourself in the future.
Christine Russell
on said
Hello Kent! You have been a familiar and well-respected name in Panama as long as I can remember. We bought our apartment in 2008 and hold it in a corporation. It was explained to us it was less complicated to sell when the time comes and less costs and fees in selling than holding title in our names – we are from the U.S. and we are part-tie residents when I come to Panama for my volunteer work with Spay Panama. MUCH changed when the Panama Papers came out! Are there still advantages to holding an apartment in a corporation. THANKS for you opinion and advice!
Kent
on said
Hi Mrs Russell, great to hear from you ma’am. Yes, it’s still the preferred method of conveying a property. It’s also advantageous to purchase said property under a corporation because technically the registered value of the property remains the same (since the property’s owner does not actually change). Always here if you need us 🙂