Property Taxes in Panama
Find out about the property taxes and costs involved when purchasing a property in Panama...
Real Estate tax dues are based on the official, government assessment of the property, which is usually the declared value. Exemptions are available if the property is valued at under $30,000.
The maximum annual percentage of assessment is 2.10 percent, which is based upon two criteria:
- The value of the land
- The declared value of the improvements built
The taxable base depends on the total value of the land and all improvements. If a home is sold for more than its appraisal value, then the new value becomes the selling price for tax purposes. This should be kept in mind when calculating future taxes before buying.
Taxes can be paid in installments three times a year; at the end of April, August and December. Certification of tax clearance is necessary for the completion of any real estate transaction regarding a property. Property taxes have primary status over any other encumbrances.
Property Tax Exemption
If a new home in Panama was bought before 2009, property taxes do not have to be paid for 20 years. This is one of the principal reasons for the surge in new home and condo construction in Panama since the bill passed in 1990.
However, many of the newer construction projects in Panama still fall under the 20-year exemption, and there are new, shorter exemptions in place for future construction.
In the future, property tax exemptions will be based on a new scale:
- Up to $100,000 value, 15 years exemption
- From $100,000 to $250,000, 10 years exemption
- Value above $250,000, 5 years exemption
There are other tax exemptions besides the 20 years that it might be possible to secure. Talk to a broker and lawyer extensively to pursue all options.
An understanding of the property tax laws in Panama is essential. Finding a development or a house with years of exemption left is a great goal when searching for a home, although eventually taxes will become due.
Property Transfer Taxes
There are also several taxes placed on real estate transfers, which should be kept in mind when searching for a property, and used to help calculate the true cost of a new home.
There is a two percent property transfer tax placed on the seller upon completion of the transaction. This percentage is from either the sale price of the property or from its officially assessed value - whichever is higher.
New residential properties are exempt from this tax if the buyer uses it as a personal residence.
Capital gains earned in a real estate transaction are taxed in full, whether or not the seller operated at a loss or had taxable income. The property transfer tax can operate as credit against any income tax levied on capital gains coming from the sale.
There are an incredible variety of properties available in Panama, with an additionally impressive list of tax breaks for buyers.