Taxes on Real Estate Sales in Panama
The sale of a real estate property in Panama results in the payment of taxes. The Panamanian law requires the payment of the following taxes upon a real estate transaction closure:
Real estate transfer tax
The Real Estate Transfer Tax is assessed at 2% of the registered cadastral value or the sale price, whichever is higher. This tax must be paid by the seller at the time of closing.
Capital gains tax
The capital gains tax applies in cases where the seller’s usual commercial activity is not real estate purchase and sale. For example, natural persons who sell a house or a plot of land in Panama.
It is important to understand the following concepts for the capital gains tax:
- The sale value is generally the agreed sale price between the parties.
- The cadastral value is the value in the public registry.
- The taxable base is the difference between the sale value and the sum of the property cost plus the transaction cost. That is:
- Taxable base = sale value – (property cost + transaction cost)
Knowing these concepts, the seller has two payment options for capital gains:
- Pay 10% of the taxable base definitively at the time of completing the sale.
- Pay a 3% advance, calculated on the sale value or the cadastral value (whichever is higher). The seller may choose to have this payment considered as definitive. If this advance is greater than 10% of point (1), then the seller is entitled to a refund of the difference.
Back taxes on real estate
It is common for real estate owners in Panama to only pay property taxes at the time of sale. However, this means that the seller must not only pay all the back property taxes, but also all accumulated fines. Otherwise, the real estate property cannot be sold.
Real estate taxes in Panama are usually low, and it is recommended to keep property tax payments up to date to avoid surcharges when selling.
How to pay these taxes
All the mentioned taxes are paid through the DGI’s eTax platform and are the responsibility of the seller. Also, it is necessary to present an eTax certificate for each of them before transferring the property title in the Panama public registry.
The back taxes on real estate must be paid off first. As a result, eTax issues a clearance certificate. In Panama, property taxes are collected every quarter, so this clearance certificate is valid only until the end of the on-going quarter.
Next, eTax enables the forms for the payment of the Real Estate Transfer Tax and the Capital Gains Tax. Once each form is completed and payment is completed, eTax issues a certificate of receipt for each of them.
These two certificates, along with the payment receipts, and the property tax clearance, are necessary for the process of transferring the property title in the public registry.
Acquiring real estate in Panama can help you qualify for permanent residence programs, such as the Friendly Nations Visa or the Qualified Investor Visa.
Our experienced team of lawyers is prepared to assist you in any tax process. Please contact us at email@example.com for more information.