Panama Property Taxes

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Below is a comprehensive overview of Panama real estate and property tax rates and formulas.

Panama Property Tax Law

Law 66 of the 17th of October of 2017 effectively reduced Panama property tax rates, benefiting Panama property owners and investors. Panama has a “Progressive Combined Tax” (see table below). The new tax law 66 also enacted an exemption of property taxes on the initial US$120,000.00 of the registered value if the property is considered “Tributary Family Patrimony” (TFP) or “Primary Residence” (PR).

If a property qualifies as TFP or PR, then the annual property tax rate is only 0.5% (half of 1 percent) for property values starting from US$120,001 to $250,000, while properties with values of $250,001 and above pay a rate of 0.7% (seven tenths of 1 percent).

Definition of Tributary Family Patrimony (TFP) – What does it mean?

Article 476 of the Family Legal Code of Panama establishes the following: (In Spanish) “Patrimonio Familiar Tributario” (Tributary Family Patrimony) is a real property that is destined for family habitational use on a permanent basis by its owner.

Definition of Primary Residence – What does it mean?

The Family Legal Code of Panama establishes that “Vivienda Principal” (Primary Residence) is a real property that is destined for residential habitational use on a permanent basis by its owner (whether the owner is a natural person or juridical person), and the property does not constitute a Tributary Family Patrimony.

Panama Property Taxes for Primary Residence

The above-mentioned law 66 provides benefits to real property owners if the property is their “Primary Residence” in Panama. While the law distinguishes between a family and a single person’s primary residence, this benefit can apply to both a family or a single person, if the property is their place of primary residence. A Primary Residence of a Family includes married couples, with or without children, or parents who are single.

This benefit provides a full tax exemption for the first US$120,000.00 of the registered value of the property (land and building construction included).

Procedure to Apply for the Panama Primary Residence Benefits

A special form is completed at the DGI, and the applicant must submit the required supporting documentation including the property owners ID, the certification of the property title, and a sworn notarial declaration.  The DGI has a term of 3 months from the form filing date to approve or reject it. However, if the DGI later determines the form or supporting documents were fraudulent, the tax-exempt status may be revoked.

Panama Horizontal Properties (Condominiums) Property Tax Exemption

In Spanish, a “Propiedad Horizontal” (Horizontal Property) or “PH” is a property development with various properties that share common areas, such as a Condominium or Apartment Building, for example. An apartment property inside of a PH that has an existing property tax exemption will continue to receive the property tax exemption benefits, unless the property owner obtains property tax benefits under the Primary Residence status, in which case the previous PH property tax exoneration will end and the Primary Residence property tax rates will apply from that point forward.

Panama Property Tax Rates for Properties with Primary Residence Status:

The property tax rates for a primary residence, as of 1 January 2019 are:

PROPERTY VALUE PROPERTY TAX RATE PROPERTY TAX (Yearly)
Up To US$120,000 Exempt (0%) US$0
US$120,001 – US$700,000 0.5% US$2,900
US$700,001 or more 0.7%

 

Example of a Primary Residence Property with a registered value of US$500,000

PROPERTY VALUE PROPERTY TAX RATE PROPERTY TAX (Yearly)
First US$120,000 Exempt (0%) US$0
US$380,000 (remaining) 0.5% US$1,900
TOTAL: US$500,000 TOTAL PROPERTY TAX: US$1,900

 

Panama Property Tax Rates for All Other Properties (not Primary Residence)

The Panama property tax rates for all other properties, as of 1 January 2019 are:

PROPERTY VALUE PROPERTY TAX RATE PROPERTY TAX (Yearly)
Up To US$30,000 Exempt (0%) US$0
US$30,001 to US$250,000 0.6% US$1,320
US$250,001 to US$500,000 0.8% US$2000
US$500,001 or more 1%

 

Example of a Panama Property with a registered value of US$500,000

PROPERTY VALUE PROPERTY TAX RATE PROPERTY TAX (Yearly)
First US$30,000 Exempt (0%) US$0
US$220,000 0.6% US$1,320
US$250,000 0.8% US$2000
TOTAL: US$500,000 TOTAL PROPERTY TAX: US$3,320

 

Current Panama Property Tax Exemptions for New Construction

Law 28 of 2012 establishes that new Panama residential properties (new Residential construction) that have construction permits issued between 2012 to the 31st of December 2018, may benefit from the following tax exemptions (on the registered value of the construction improvements only, not on the registered value of the land):

CONSTRUCTION VALUE TAX EXEMPTION
Up to US$120,000 20 years
US$120,001 to US$300,000 10 years
US$300,001 onwards 5 years

 

A 10 year tax exemption on the registered value of the construction (not on the registered value of the land) will be granted for all other types of construction such as commercial, industrial, etc.

As long as the property owner does not register the property as a Tributary Family Patrimony or Primary Residence, then the tax exemptions that are granted on any construction improvements mentioned above shall remain in effect for the established term.

New Formula for New Construction Tax Exemptions

As per Article 4 of the new law 66 of 2017, all new residential construction that is the purchasers first residence and is constituted as Tributary Family Patrimony or Primary Residency, and the registered cadastral value is between US$120,000 to US$300,000, shall be exempt from property taxes for a period of 3 years, as of the date of the issuance of the occupation permit or the date of inscription in the Public Registry, whatever happens first.

As of the 1st of January 2019, as per Article 764-A of Law 66, 2017, all properties with a value that does not exceed US$120,000 (including land and construction improvements), and that are registered as Tributary Family Patrimony or Primary Residency, will be exempt from property taxes.

Retired or Pensioner Property Tax Benefits

Any person who is retired or pensioned or is of legal age for retirement (57 years old for women and 62 years old for men) may incorporate their domicile (property) as Tributary Family Patrimony or Primary Residency.

Contact Us if you need our legal services regarding any property tax issues or Panama taxes in general.

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