Panama Real Estate Taxes: Guide for Owners and Foreign Investors

Understanding everything related to Panama real estate taxes is an important part, not only for local property owners but also for foreign investors who wish to manage their assets efficiently and avoid unnecessary costs. Although Panama’s fiscal system is relatively straightforward, knowing which tributary obligations apply and how they are calculated can make a significant difference when buying, holding, or selling property.

This guide provides a practical overview of the main Panama real estate taxes, along with key considerations every owner or investor should keep in mind.

Panama Property Taxes

The main tributary levy to real estate is the Panama Property Tax. This tributary levy is assessed annually and calculated based on the cadastral value registered with the fiscal authorities.

This Panama real estate taxes type is applied on a progressive and cumulative basis, meaning that each bracket is fiscalized separately. The first USD 30,000 of the cadastral value is always exempt, regardless of the total value of the property, as follows:

• The first USD 30,000 of assessed value is tax-exempt.
• The portion of the value between USD 30,000 and USD 250,000 is taxed at 0.6%.
• The portion between USD 250,000 and USD 500,000 is charged at 0.8%.
• Any value above USD 500,000 is fiscalized at 1.0%.

This is an example for a property with a cadastral value of USD 300,000:

Key Note: Many people make the mistake of applying 0.8% to the full 300,000 ($2,400), but as we can see, the Panama real estate taxes system is more “friendly” because it has consideration for the first value levels.

Cadastral Value vs. Market Value

It is important to distinguish between these concepts to understand how Panama real estate taxes are applied, since the tributary burden is not calculated on the value paid for the property, but on its legal registration:

• The cadastral value is the official value registered with Panamanian authorities and used as base fiscal purposes.
• The market value reflects the actual sale price of the property.

Real Estate Transaction Tax in Panama

In addition to annual property taxes, there are specific tributary obligations that apply to the sale of real estate; these are the main costs you should consider:

• Real Estate Transfer Tax in Panama (ITBI): Is assessed at 2% of the registered cadastral value or the sale price, whichever is higher.
• Capital Gains Tax: The seller has two options to calculate capital gains assessments on the sale of real estate:
  • 3% of the sale price or cadastral value, whichever is higher.
  • 10% of the profit.

These Panama real estate taxes, which are paid before closing, are generally assumed by the seller, unless otherwise agreed between the parties.

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Foreign Investors: Key Tax Considerations

Panama maintains an open and investor-friendly framework for foreign nationals:

• Foreigners may own property without restrictions.
• No residency or special visa is required to purchase real estate.

However, foreign property owners must:

• Comply with annual Panama property tax payments and any other applicable fiscal charges.
• Seek professional advice to ensure proper structuring of the investment.

Practical Tips for Property Owners

1. Paying the annual property tax in full before the end of February grants a 10% discount on the total amount due.
2. Review your cadastral records to ensure accuracy.
3. Pay the Panama property taxes on time to avoid penalties and interest.
4. Keep proper documentation for all real estate transactions.
5. Consult legal expert and fiscal professionals before buying or selling property, especially for high-value investments.

Legal Advice for your Real Estate Investment in Panama

Having the professional legal advice of the Kraemer & Kraemer team allows you to guarantee that your real estate transactions are structured efficiently and in full compliance with Panamanian legislation. Contact us today.