Panama Property Tax and Exemptions

Last week, I had the opportunity to chat with Panama Equity’s Kent Davis about current property tax laws in Panama. He had some great insight into the “20 year tax exemption rule” that many foreign investors come to Panama hoping to take advantage of. According to Kent, the exception is a hot topic of discussion among home and condo purchasers and one of the strongest draws for foreigners looking for Panama real estate.

Here is a little timeline from Kent of changes in property taxes in Panama over the past few years, with current law explained at the end. Once again these are definitely things to confirm with trusted legal council before purchasing property – laws have a tendency to change quickly in Panama and you can never be too thorough in your research!

September 2006

All of those properties which construction permit has been issued from September 2006 and upon the registration of the improvements on the Public Register will be exempt as follows:

Property Value                                            Exemption Period

$ 100,000                                                    15 years

$ 100,000 – 250,000                                 10 years

$ 250,000                                                     5 years

July 2009

Those projects which construction permit is issued before July 1, 2009 and the correspondent improvements must have been registered at the Public Register before December 31, 2011 will be tax exempt for 20 years.

Today (September 2011)

Per current law, new construction properties can benefit from a tax exemption of 5 – 20 years, depending on the following:

• Valid date of issuance of the construction permit
• Demonstrable progress towards completion of the project
• Value of the property
• Relationship of the project to Panama’s tourism industry

In addition to new construction, Article 764 of the Panamanian Tax Code indicates additional properties which are exempt from property tax. These include:

1. Properties registered at a value of $30,000 or less including improvements to the land
2. Land used exclusively for farming and registered with the Ministry of Agriculture and Development as valued less than $150,000. The tax basis is comprised of the value of the land plus the improvement value.

However, at a recent press convention at the Capac Expo Habitat Martinelli confirmed that the government will reinstate the 20 year property tax exoneration. According to Panamanian publication, La Prensa, Martinelli also asked the builders present at the convention to approach the new Housing Minister José Domingo Arias, to increase the limits of the preferential interest to $100,000 (currently $80,000). This is definitely a topic to keep your eye on as you think about real estate investment in Panama!

Helpful Hint:
If you do buy a new property that meets the current qualifications, it does have the rights for 20 years of tax exemption, however, this is not immediately granted and conferred upon the property purchaser. You must present a copy of your public deed to the Exonerations Department of the Ministry of Economy along with some other requirements in order to get a certification a formal application of the tax exemption.

If you fail to do so, the property will start gaining monthly taxes (which could mean thousands of dollars in taxes if you don’t register correctly)

TAGS: Finance Living Abroad Panama Real Estate

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