Tributary Family Patrimony & Primary Residence in Panama
Overview
Law 66 published on October 17th 2017, regulated by Executive Decree 363 of December 4th 2018, amended articles of the tax code regarding property taxes, such as the protection of family housing and the reduction of taxes on the primary residence of families in Panama.
Its main modification was in article 764, eliminating taxes on properties valued at B/.120,000.00 or less (including improvements), as long as such properties are registered as Tributary Family Patrimony or Primary Residence.
However, it is necessary to understand the differences and similarities of the Primary Residence and the Tributary Family Patrimony.
Characteristics of tributary family patrimony and primary residence
Although these terms are commonly used when talking about property taxes, their differences lie in the legal definition.
The Tributary Family Patrimony, refers to a property permanently purposed by the owner for housing purposes with his family, who lives under the same roof. The concept of family is derived from the Panama Family Code.
In other words, the Tributary Family Patrimony is the property used for residential purposes by the owner and his family. Regardless of the number of properties owned, every owner can declare only one property as Tributary Family Patrimony.
Law 66 of 2017 allows both natural or legal persons to own property purposed as Tributary Family Patrimony. This means that property registered under legal entities (such as corporations, companies or foundations) may be declared as Tributary Family Patrimony, as long as the beneficiaries of such legal entity are part of the same family group.
On the other hand, Primary Residence is the property a natural person uses for permanent housing, which does not constitute a family patrimony. This applies to singles or widows, as long as they have no children.
In a more practical example, if you are single and purchase a house, that property can be registered as your Primary Residence. However, if you are married or have children, that same property should be registered as Tributary Family Patrimony.
In both cases, when registering a property, the owner must submit a sworn declaration to the Panama Tax Collection Agency (Dirección General de Ingresos – DGI) about the intended residential purpose for the property.
It should be noted that any natural person who fulfils the requirements can declare only one property as Primary Residence. Likewise, it is only possible to declare only one property as Tributary Family Patrimony per couple.
Also, it is important to clarify that foreign residents have the same rights and responsibilities as Panamanian regarding real estate ownership. , This means that foregin permanent residents may also register a property as Tributary Family Property or as Primary Residence.
Requirements to register tributary family patrimony or primary residence
To register a property as Tributary Family Patrimony as a natural person, the following documentation must be included:
- Copy of the public deed or original certificate issued by the Public Registry.
- Copy of the owner’s ID card or passport
- If the owner is married, certificate of marriage issued by the Panama Civil Registry. If the marriage took place abroad, certificate of marriage issued at the place of celebration with its corresponding authentication.
- In the case of single parents, birth certificates of their children.
To register a property as Tributary Family Patrimony as a legal person, the following documents must be included:
- Copy of the public deed or original certificate issued by the Public Registry.
- Valid original certificate of the Public Registry where the legal representative of the entity is clearly indicated.
- Copy of the legal representative’s ID card.
- CPA Certification, identifying family members as entity beneficiaries.
To register a property as Primary Residence, which only applies to single or widowed natural persons with no children, the following documentation must be included:
- Copy of the public deed or original certificate issued by the Public Registry.
- Copy of the owner’s ID card.
- In the case of widows, certificate of the deceased’s spouse, and copy of asset settlement or declaration of heirs.
- In the case of persons without children, certificate of no children by the Panama Civil Registry.
The government made available a comprehensive list of requirements according to the applicant’s circumstances. You can see it in the website of the DGI.
Registration process for tributary family patrimony or primary residence
In order to register a property as Tributary Family Patrimony or Primary Residence, the owner must file a sworn declaration in the Panama Tax Collection Agency (Dirección General de Ingresos – DGI) explaining the use that will be given to the property.
This sworn declaration must be filed along with the requirements described above, according to the owner’s case. The DGI usually notifies to the taxpayer within three months after the application was submitted.
It is also possible to complete the registration process using the DGI’s website dgi.mef.gob.pa. There, you can upload the registration application and attach the necessary documents, either to register a property as Tributary Family Patrimony or Primary Residence.
The process with the DGI does not have any cost to the applicant.
Contact us
Our legal team at Kraemer & Kraemer is available to clarify your doubts and guide you in the process of registering your property as Tributary Family Patrimony or Primary Residence Contact Us today.