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TAXES
New construction in Panama, such as homes and condominiums, have traditionally benefited from a property tax exemption of 20 years. This exemption is a benefit which stays with the property, not with the purchaser. As such, if you purchase a property with 20 years exemption that has been lived in for three years, you will still benefit from a 17 year tax exemption.
Per current law, new construction properties benefit from a tax exemption of 5 – 20 years, depending on a number of factors including date of issuance of the construction permit, demonstrable progress towards completion of the project, value of the property, and relationship of the project to Panama’s tourism industry. Many predict that the 20 year property tax exemption statue for ALL new construction will be renewed in the near future. In the meantime, foreigners can definitely count on a 5 – 20 year exemption based on criteria listed above.
In addition to new construction, Article 764 of the Panamanian Tax Code indicates additional properties which are exempt from property tax. These include:
1. Properties registered at a value of $30,000 or less including improvements to the land
2. Land used exclusively for farming and registered with the Ministry of Agriculture and Development as valued less than $150,000. The tax basis is understood as being the value of the land plus the improvement.
The property tax rate on all other properties is as follows:
Registered Value of Property
Yearly Tax Percentage
Under 30,000
0%
30,001 - 50,000
1.75%
50,001 - 75,000
1.95%
OVER 75,001
2.10%
As an example, if you have a property valued at 100,000 USD that does not qualify for an exemption, you would pay the following in property taxes:
0.00% on the first $30,000 = $ 0.00
1.75% on the next $20,000 = $350.00
1.95% on the next $25,000 = $487.50
2.10% on the next $25,000 = $525.00
Total Tax Burden = $1,362.50 Alternative Property Tax Calculation - following Appraisal
Under the recent real estate tax amendment of 2005, the following alternative tax rate is applicable to properties whose property taxes are paid up to date and whose registered value in the public registry has been updated with a sworn declaration of the estimated value of the property, duly signed by an appraiser:
Registered Value of Property
Yearly Tax Percentage
Under 30,000
0%
30,001 - 50,000
.70%
50,001 - 75,000
.90%
OVER 75,001
1.0%
A $100,000 property under the alternative property tax calculation would be as follows:
0.00% on the first $30,000 = $ 0.00
1.75% on the next $20,000 = $140.00
1.95% on the next $25,000 = $225.50
2.10% on the next $25,000 = $250.00
Total Tax Burden = $615.00
Contact us for more information regarding property taxes in Panama and how they may pertain to your purchase decision.
