New construction in Panama, such as homes and condominiums, benefit from a tax exoneration ranging from 5 to 20 years. This exoneration is a benefit which stays with the property, not with the purchaser. As such, if you purchase a property with a 20 year exoneration that is nine years old, you will still benefit from an 11 year tax exemption. All properties which had construction permits approved by July 1, 2009 and filed by December 31, 2011 benefit from the 20 year exoneration.
Per current law, new construction projects (those with approvals granted after July 1, 2009, or registrations filed after 2011) benefit from a tax exemption of 5 – 20 years, depending on the value of the property and relationship of the project to Panama’s tourism industry. Barring projects with specific tourism designations, residential properties are now exonerated according to the following scale:
20 years Up to US$ 120,000.00
10 years From US$ 120,000.00 to US$ 300,000.00
5 years Above US$ 300,000.00
Commercial Use/Non-residential improvements have a 10 year exoneration no matter the property value
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|
|30,001 – 50,000||1.75%|
|50,001 – 75,000||1.95%|
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
Note it is important not to take property tax exonerations for granted. While they are a property owner’s right by law, they must be applied for and properly registered. On purchases of new construction, developers will usually handle this for the buyer, but mistakes can be made. Have your lawyer confirm the exoneration is properly registered. In addition, when title to a property is transferred in the public registry, resulting in an increase to the registered value, application usually must be made to adjust accordingly the registered exoneration to take full advantage of the law. We have seen many cases where buyers were not aware that their exonerations were improperly registered, or needed to be adjusted, and as such they realized they had an onerous property tax bill to deal with at the time of sale. Again, these problems can be avoided by having an attorney verify your exoneration is properly registered.
In addition, it is important to note that exonerations only apply to the improvements on a property. They do not apply to the land itself. In a residential condominium, the property tax burden on the land will be shared by all the condo owners in the building. This tax is generally less than $500/year, and is charged in three installments annually. A 10% discount is applicable if the entire annual tax is paid within the first 30 days of the year. Interest and penalties apply when taxes are not paid. Paying your tax bill on time reduces your tax burden, and is also another way to ensure being alerted if a tax exoneration is not properly registered.
Contact us for more information regarding property taxes in Panama and how they may pertain to your purchase decision. With a finca number and owner name, we can even do a quick review of your registered exoneration!