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The Lowdown on New Property Tax Rates in Panama

By in Tax with 21 Comments

Following on the announcement back in October, President Varela has now signed into effect the single biggest reform to Panama’s Property Tax laws in 40 years.

The new law kicks in on January 1, 2019 and modifies the tax rate levied on properties throughout the country, promising serious savings for homeowners — regardless of citizenship.

As we wrote in our analysis back then, other aspects of the new law are already in effect, including a moratorium on penalties and interest through the end of 2017 on any outstanding property taxes owed — we hope you took advantage of that already last year!

Here’s the lowdown on the Panama property tax rates — primary and secondary residences, exemptions and more

The law increased the 100% exemption to properties valued at $120,000 (up from $30,000) for primary residence, meaning properties under that threshold will be fully exempt starting January 1, 2019. The rates step-up from there as follows:

Primary residences:
$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, you’d pay 0.5% on $350,000 minus $120,000. That’s $1,150 in property taxes a year.

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

The Why  for President Varela

As we stipulated in our previous analysis, 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 mortgages will be notified of their tax bills.

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+

21 Comments

  1. Suzanne says:

    Hi Kent –

    You wrote above that ¨the tax value is assessed by the registered value in ANATI, the department of land and property registry in Panama. It is usually the last recorded sale and is not adjusted on an annualized basis.¨

    I heard that it will be re-valued at the time of sale and that I will have to pay taxes on what it´s valued at vs the sales price. Can you please confirm which is true? Is the new law available on the internet anywhere?

    • Kent Davis says:

      Hi Suzanne, as I understand the registry has built in an automatic yearly increase that will be assessed at the time of the sale if the sales price is lower than the registered value. Let me double check on that, as there have been some recent tax code changes in the law here.

  2. Marc says:

    Hi Kent, I’ve purchased a condo last year that will only be finish in April 2019. Will my property be eligible for the 10 year tax exoneration? Thanks, Marc

    • Kent Davis says:

      Hi Marc, the tax exoneration is going away for all buildings delivered after January 1, 2019 with the exception of those whose values are less than $120,000 which will have a lifetime exoneration on the value pertaining to the improvements and you’ll only pay Panama property taxes on the land

  3. Jimmy says:

    Ken, in reference to the registered value, who actually determines the registered value? Is that determined by a government body, like in the USA, typically the county official determines that value. I guess what I’m trying to say, for example if I build a house that truly cost me 500K, do I get to declare that it cost me 100K? I was talking to a realtor out in Boquete and basically that’s the gist I got that the owners determines the value, whatever that may be…just did not seem right, if that’s the case taxes would be pretty low.

    • Kent Davis says:

      Hey Jimmy, ANATI is who keeps the registered value on file. The registered value is determined by the last sale date and does not get updated until the property is sold.

      As far as registering improvements, you need to file the value in conjunction with the construction permit and prior to getting your occupancy permit. That is what constitutes “mejoras,” and those can still be exonerated from taxes prior to the law change next year.

  4. Jimmy says:

    How does Panama Taxing authority determine the property value?

    • Kent Davis says:

      Hi Jimmy, the tax value is assessed by the registered value in ANATI, the department of land and property registry in Panama. It is usually the last recorded sale and is not adjusted on an annualized basis.

  5. Anna Lysenko says:

    Hi Kent,

    Thank you for this insightful information! Could you clarify under which category does the land (without a house/residence) fall? And in case you own several lots, does first land counts as a primary “residence” and the second as a “secondary”?

    Thank you in advance!
    Kind regards,
    Anna Lysenko

    • Kent Davis says:

      Anna, that’s a great question and I dont have the answer to it yet. Well, I can answer the first question is that land is going to be taxed at the same percentage rate as improved properties with the same exemption rates. However, I dont think that the tax authorities have clarified how (if ever) land without improvements will ever be counted as a primary residence, meaning I assume it will always be taxed at the “investor” rate.

    • Kent Davis says:

      Hey Anna, if you only own one property in Panama, regardless of anything you own outside of the country or how much time you spend in Panama, the Panama property will be viewed as your primary residence. If you own multiple properties, the subsequent ones will be looked at by the Panama tax authority as secondary and be taxed at the “investor” rate, which is still a 50% reduction from the old Panama property tax rate.

  6. Keith says:

    Hi,

    Just looking for a definition of secondary residences. We live in Canada for half the year and in Panama for the other half. Would our Panama home be primary or secondary?

  7. Jill Sagarin says:

    Hi. Does the 10-20 year tax exemption still exist? Thanks.

    • Kent Davis says:

      Hey Jill, the tax exemption will go away for all properties delivered after January 2019. So if you own a property that is currently built and has an exoneration, then you are good. And, if you are looking to buy a property that will be valued at under $120,000 it will always be exempt.

  8. Kim Bolduc says:

    HI KENT, MY BEACH PROPERTY IN PANAMA IS VALUED  OVER ONE MILLION DOLLARS AND IT’S MY PRINCIPAL RESIDENCE, I’M CANADIAN, HOW MUCH WILL BE MY PROPERTY TAXES UNDER THIS NEW LAW, AND HOW DO I CALCULATE IT?
    MANY THANKS

    • Kent Davis says:

      Hi Kim, send me an email and I”ll give you the specifics on your property. Basically as per the article, the first 120k is exonerated then it’s a graduated tax capped at .08% once you go over $700k

  9. JOHN MILLER says:

    HOW IS THE VALUE OF THE HOME AND PROPERTY SET?

    IS AGRICULTURE LAND THE SAME TAXES?

    if there is a home on a ranch how are the taxes rated?

    how big does the ranch or farm have to be to qualify for Ag taxes, min acreage?

    • Kent Davis says:

      Hey John, the value is set by ANATI which is the catastral office of Panama’s land registry. AG land should be the same and is exonerated per the sliding scale mentioned in this article. Same thing on improvements: it’s land value + house value. Please send me an email and I’ll get you over all of the exemptions for agricultural land and business in Panama.

  10. Joe Wilmoth says:

    Hey Kent tell me more about this Chinese Built Project

    • Kent Davis says:

      Hi Joe, thanks for reaching out! I’ll send you a private email about the DAO project, which as you see, is being built by the Chinese. It’s a project we’re really excited about in case you cant tell!

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