Property taxes in Panama
Overview
Panama property taxes are calculated considering the value of land, construction, and improvements to the property. Property taxes apply to all types of properties, whether single-family, multi-family, residential, condominium, commercial, or agricultural. Likewise, the tax also applies to the declared value of vacant residential, commercial, or agricultural land.
Law 66 of the 17th of October of 2017 effectively reduced Panama property tax rates, benefiting Panama property owners and investors. Panama has a “Progressive Combined Tax”.
In October 2018, President Varela made the most extensive reform to Panama’s property tax laws in the last 40 years. This new law came into effect on January 1st, 2019, and modified the property tax rate throughout the country. These changes had the objective of generating savings to owners, whether Panamanian or foreign citizens.
Properties declared as tributary family patrimony or primary residence
Panamanian law defines Tributary Family Patrimony or Primary Residence as the immovable property intended for housing purposes by the owner and his family. Owners can declare only one property as Tributary Family Patrimony or Primary Residence based on their circumstances. Once declared, the owner can have this new property tax scheme applied.
Article 476 of the Family Legal Code of Panama establishes the following: (Spanish) “Patrimonio Familiar Tributario” (Family Tributary Patrimony) is a real property that is destined for family habitational use on a permanent basis by its owner.
The Family Legal Code of Panama establishes that “Vivienda Principal” (Primary Residence) is a real property that is destined for residential habitational use on a permanent basis by its owner (whether the owner is a natural person or juridical person), and the property does not constitute a Tributary Family Patrimony.
The new tax Law 66 also enacted an exemption of property taxes on the initial US$120,000.00 of the registered value if the property is considered “Tributary Family Patrimony” (TFP) or “Primary Residence” (PR). If a property qualifies as TFP or PR, then the annual property tax rate is only 0.5% (half of 1 percent) for property values starting from US$120,001 to $250,000, while properties with values of $250,001 and above pay a rate of 0.7% (seven tenths of 1 percent).
The above-mentioned Law 66 provides benefits to real estate owners if the property is their “Primary Residence” in Panama. While the law distinguishes between a family and a single person’s primary residence, this benefit can apply to both a family and a single person. A Primary Residence of a Family includes married couples, with or without children, or parents who are single.
This benefit provides a full tax exemption for the first USD 120,000.00 of the registered value of the property (land and building construction included).
In Panamanian laws, a property owner is defined as a person who possesses an immovable property with title registered under his name, along with a spouse, along with up to two more relatives, or registered in a legal entity (e.g., an IBC) where the beneficiaries of that entity belong to the same family group.
This definition of an owner makes no distinction by age or type of legal entity. Therefore, retirees and pensioners can also declare Panamanian Property as Tributary Family Patrimony. It is also possible to declare Tributary Family Patrimony within trust accounts.
Thus, as of January 2019, the properties declared as Tributary Family Patrimony or Primary Residence must pay property taxes following this scale according to their declared value in the Panama Public Registry:
- Between $ 0 and $ 120,000 = exonerated.
- Between $ 120,001 and $ 700,000 = 0.5% of the value.
- At more than $ 700,000 = 0.7% of the value.
Apply for the Panama primary residence benefits
A special form needs to be completed at the DGI, and the applicant must submit the required supporting documentation including the property owners ID, the certification of the property title, and a sworn notarial declaration. The DGI has a term of 3 months from the form filing date to approve or reject it. However, if the DGI later determines the form or supporting documents were fraudulent, the tax-exempt status may be revoked.
The property tax rates for a primary residence, as of 1 January 2019 are:
| Property Value | Property Tax Rate | Property Tax (Yearly) |
|---|---|---|
| Up to US$120,000 | Exempt (0%) | US$0 |
| US$120,001-US$700,000 | 0.5% | US$2,900 |
| US$700,001 or more | 0.7% | 0.7% |
Example of a Primary Residence Property with a registered value of US$500,000:
| Property Value | Property Tax Rate | Property Tax (Yearly) |
|---|---|---|
| First US$120,000 | Exempt (0%) | US$0 |
| US$380,000 (remaining) | 0.5% | US$1,900 |
| Total: US$500,000 | US$1,900 |
The Panama property tax rates for all other properties, as of 1 January 2019 are:
| Property Value | Property Tax Rate | Property Tax (Yearly) |
|---|---|---|
| Up to US$30,00 | Exempt (0%) | US$0 |
| US$30,001 to US$250,000 | 0.6% | US$1,320 |
| US$250,001 to us$500,000 | 0.8% | US$2000 |
| US$500,001 or more | 1% |
Example of a Panama Property with a registered value of US$500,000:
| Property Value | Property Tax Rate | Property Tax (Yearly) |
|---|---|---|
| First US$30,000 | Exempt (0%) | US$0 |
| US$220,000 | 0.6% | US$1,320 |
| US$250,000 | 0.8% | US$2,000 |
| Total: US$500,000 | US$3,320 |
Panama horizontal properties (Condominiums)
In Spanish, a “Propiedad Horizontal” (Horizontal Property) or “PH” is a property segmented within other properties that share common areas, such as a Condominium or Apartment Building, for example. An apartment inside of a PH that has an existing property tax exemption will continue to receive the property tax exemption benefits, unless the property owner obtains property tax benefits under the Primary Residence status, in which case the previous PH property tax exoneration will end and the Primary Residence property tax rates will apply from that point forward.
Panama property tax exemptions for new construction
The Law 28 of 2012 establishes that new Panama residential properties (new Residential construction) that have construction permits issued between 2012 to the 31st of December 2018, may benefit from the following tax exemptions (on the registered value of the construction improvements only, not on the registered value of the land):
| Construction Value | Tax Exemption |
|---|---|
| Up to US$120,000 | 20 years |
| US$120,001 to US$300,000 | 10 years |
| US$300,001 onwards | 5 years |
A 10-year tax exemption on the registered value of the construction (not on the registered value of the land) will be granted for all other types of construction such as commercial, industrial, etc.
As long as the property owner does not register the property as a Tributary Family Patrimony or Primary Residence, then the tax exemptions that are granted on any construction improvements mentioned above shall remain in effect for the established term.
Land is not exempt and property tax would continue to be paid on it if its value is above US$30,000.
Property improvements exemption
Property improvements Exemption, regulated by article 81 of Law 6 of February 2nd 2005, was derogated by Law 66 of 2017. Therefore, this exemption is no longer applicable or available.
Other properties, including commercial or industrial
On the other hand, secondary residences (not declared as Tributary Family Patrimony), commercial properties and industrial properties must pay property taxes following this scale according to their declared value in the Panama Public Registry:
- Between $ 0 and $ 30,000 = exonerated.
- Between $ 30,001 and $ 250,000 = 0.6% of the value.
- Between $ 250,001 and $ 500,000 = 0.8% of the value.
- At more than $ 500,000 = 1.0% of the value.
Paying property taxes in Panama
Panama property taxes can be paid directly at the offices of the Direccion General de Ingresos (DGI). In addition, banks, financial institutions, and other institutions that grant financing for the purchase of homes or real estate are, in general, authorized to withhold property taxes in Panama.
On the other hand, the property tax will be collected by the financial institution, and not the DGI, when the property is not registered as Tributary Family Patrimony, and the property has a mortgage.
Panama property taxes are paid in 3 installments: April 30th, August 30th, and December 31st. Payments after each due date have a 10% surcharge. There is also a 10% discount if you pay the full yearly cost of property taxes before March 1st.
Other services
- Agricultural Property Exemption
- Property Transfer Exemption by Donation
- Tax Residence Certificate
Contact us
Contact us to learn more about Panama Property Taxes.