Starting 2019, Panama has updated its property tax regime, by reducing rates per brackets and creating new ones. On top of that, a more beneficial rate and bracketed system has been created for what’s considered Family Patrimony or Main Dwelling. Let’s examine each regime.
Based on the official value of the property, you’ll end up paying taxes calculated according to the following chart:
0% From $ 0.00 to $ 30,000.00 0.6% From $ 30,000.00 to $ 250,000.00 0.8% From $ 250,000 to $ 500,000.00 1.0% From $ 500,000.00 on.
Being this a progressive formula, taxes are calculated per bracket, hence in order to estimate the tax to be paid, the value of the object property must be segmented, as well. Let’s say we want to calculate what taxes are on a $ 300k apartment, we know that the first segment up to $ 30k will be exempted, but then, taxes on the second bracket – this is, from $ 30k to $ 250k – would be 0.6% of $ 220,000.00 (difference between $ 30,000 and $ 250,000); the result for the second bracket would be $ 1320.00. Now, we still have $ 50k to complete the value of the examined property, this will fall under the third segment – from $ 250k to $ 500k – since we’re only missing $50k, then the tax for this third segment will be 0.8% of $ 50,000.00, this is $ 400.00. The total annual tax to be paid will then be $ 1720.00.
Let’s better illustrate this example with the following chart:
0% From $ 0.00 to $ 30,000.00 $ 30,000.00 $ 0.00 0.6% From $ 30,000.00 to $ 250,000.00 $ 220,000.00 $ 1320.00 0.8% From $ 250,000 to $ 500,000.00 $ 50,000.00 $ 400.00
TOTAL $ 300,000.00 $ 1720.00
As mentioned above, there is a more beneficial regime for properties considered as Family Patrimony or Main Dwelling. Each property owner may register one property as such, as long as it can be proven that this particular property has no purpose other than being their main residence, where they either live with their family or on their own.
Properties that belong to a company or foundation may qualify, as well, if and only if the applicant is the beneficial owner behind this legal entity.
Once this special status is granted, taxes on the selected property will be calculated based on the following chart:
0% From $ 0.00 to $ 120,000.00 0.5% From $ 120,000.00 to $ 250,000.00 0.7% From $ 250,000 to $ 700,000.00 1.0% From $ 700,000.00 on.
One last thing to consider is that with the execution of this new regime on January 1 st , 2019, property tax exemptions formerly being granted over the value of improvements have ceased, however, all existing exemptions already granted will remain effective until its date of expiration.
Our constant advice when it comes to these types of investments is to always hire legal representation from day ONE, guaranteeing you an uncomplicated, straightforward transaction.
By: Emilio Cornejo Vernaza LL.M. Founding Partner of PGS Attorneys and PGS Realty