Big savings are in the works for homeowners in Panama following the passage of possibly the most important real estate tax reforms in the last four decades.
While the new tax rates kick in on January 1, 2019, other aspects of the new law are already in effect, including a moratorium on penalties and interest through the end of this year on any outstanding property taxes owed.
A moratorium on back taxes through 2017
Owners of real estate who currently owe back-taxes on their properties will be able to take advantage of the tax holiday and pay their existing balance without penalties or interest. All taxes incurred through August 31, 2017 are eligible and have to be paid through December 31, 2017.
Sigh of relief? Given the endless Panamanian holiday season starting this month, you might want to get started soon!
They can be paid online on the DGI website or in person at any of the DGI’s provincial administrative offices scattered throughout the country. You just need your RUC (Registro Único del Contribuyente) and NIT (Número de Identificación Tributaria) with you. Ask us if you need help!
The lowdown on the new rates — primary and secondary residences, exemptions and more
100% exemptions were increased to $120,000 (up from $30,000) on the value of your primary residence, meaning properties under that threshold will be fully exempt starting January 1, 2019. The rates step-up from there as follows
$0 – $120,000 = exempt from taxes
$120,001 – $700,000 = 0.5% tax rate
$700,000+ = 0.7% tax rate
Meaning… if your home is valued at $350,000 balboas, you’d pay 0.5% on $350,000 minus $120,000. That’s $1,150 balboas in property taxes a year. Sweet.
Secondary residences and commercial and industrial properties:
$0 – $30,000 = exempt from taxes
$30,001 – $250,000 = 0.6% tax rate
$250,001 – $500,000 = 0.8% tax rate
$500,000+ = 1.0% tax rate
President Varela has made it his mission to formalize the titling of properties across the country — meaning land that has hitherto been untitled and simply held under laws of possession, but also: untaxed. Since a vast majority of landholdings in Panama fall under the $120,000 threshold, the move should help correct this “informal” system and pave the way toward a more modern and formal land holding — and accounting — regime, including better protections for owners with titled land.
Panama has also been getting pressure from the World Bank and other lending institutions to step up their game on collecting the millions of dollars of unpaid property taxes that owners usually just sit on until they need to sell.
Come 2019, the tax-notification system will most likely be connected with the banks in the case of a mortgage on a property. It remains to be seen how property owners with no mortgage will be notified of their tax bills.
Need help with your taxes?
For help with filing your taxes, we recommend working with our own trusted attorneys at Denfab: email@example.com.