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Understanding Panama Real Property Taxes

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Introduction

Understanding Panama real property taxes is important before purchasing real estate here.
Explaining the Panama real property taxes begins with the types of real properties subject to the tax.

Panama has two different types of real property ownership: “Titled” with a formal deed and “Rights of Possession” where the owner has the right to possess and use government lands. Only the registered titled real properties are subject to the property tax. The property tax is a national government tax and not a local or municipal tax. Rights of Possession properties are not subject to property taxes because they are not owned by the possessor.

The registered value of a property determines the amount of property tax imposed. Typically, this is determined upon the last purchase price. However, there are circumstances when an assessment is independently done like by an appraiser. The tax is levied upon the land value and the value of the improvements (structures) on the land.

The maximum percentage is 2.1% on the “taxable base” which includes:

1. The registered value of the land; and
2. The declared value of the improvements.
Land with a registered value of less than $30,000 USD are exempt from the property tax.
Here is a table showing the sliding scale real estate property tax rates in Panama:

Property Value Property Tax Rate
• $0 to $30,000 USD 0%
• $30,000 to $50,000 1.75%
• $50,000 to $75,000 1.95%
• $75,000 and above 2.1%

Example: Assume a property is valued at $100,000 USD:

• The first $30,000 USD is exempt. • Then the next $20,000 USD has a tax rate of 1.75% = $350 USD. • The next $25,000 USD has a tax rate of 1.95% = $487.50 USD • The remaining $25,000 USD has a tax rate of 2.1% = $525 USD • The Total Tax is $1,362.50 USD

20 Year Property Exoneration

New construction residential buildings are exempt from paying property taxes for 20 years from the occupation permit date. Land is not included, only the newly constructed improvements are exonerated. The exoneration applies to the real property and not its owner. If the property is sold, the remaining years of exoneration will continue.
If the land is valued at more than $30,000 USD the property tax on the land will still apply.
Note: The exoneration is not automatic. Property developers must apply for the exoneration. If you purchase a new construction home and the exoneration was not applied for, you must make the application yourself. The Ministry of Economy has an Exonerations Department where you will take a copy of the title deed to apply for the tax exoneration.

The Panama Real Property Transfer Tax

When title to real estate is transferred to a new owner a 2% Property Transfer Tax is imposed based upon the greater of the total value of the sale (typically, the sales price) or its registered value plus the value of the improvements plus 5% for each year since the property was obtained and the sale.

Conclusion

Understanding Panama real property taxes begins with knowing the types of real estate subject to taxation. Raw land with no structures are tax exempt up to a value of $30,000 USD. Real properties with improvements are taxed on a sliding scale up to a maximum of 2.1% of the property’s value.

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