If you are not familiar with the process of paying taxes in Panama you are better off hiring an attorney who will help you through the process. Many law offices have bilingual attorneys who easily guide you. However, it will be wise to first become knowledgeable of the Panama property tax laws by reading this article.
Learn How to Calculate your Annual Panama Real Estate Taxes
In Panama, real estate tax, also known as property tax, is not municipal, but national and the entity responsible for its collection is the Ministry of Economics and Finance located on Ave. Peru, in Panama City. It must be paid according to the official assessment value, which is usually the declared value on the sale document.
Real estate located in Panama, whether urban or rural, is subject to property taxes.
The tax base depends on the total value of the land, plus all improvements, as appraised by Land Commission (Oficina de Catastro).
Real estate transactions at prices above the appraisal value automatically increase their value for tax purposes.
The maximum annual percentage of assessment is 2.10%, which is based upon two items:
1) Over the value of the land. 2) Over the declared value of the improvements built.
The taxable base will depend upon the total value of the land plus all improvements.
Certain properties and improvements are exempt or can obtain exemptions from real estate taxes according to special incentive tax laws. In order to have received a 20-year exoneration on improvements, construction permits would have been need to be approved by July 1st, 2009 and need to be filed via the Public Registry before December 31st, 2011.
Properties currently under the old 20 year property tax exemption will continue to enjoy those benefits. If your property is not applicable for the 20-year tax exemption, then the following revised Panama property tax exemption exists:
Property Tax Exemption: Residential
• 15 years Up to US$ 100,000.00
• 10 years From US$ 100,000.00 to US$ 250,000.00
• 5 years Above US$ 250,000.00
• Commercial Use/Non-residential improvements have 10 year exoneration no matter property value
Taxes can be paid in three installments, namely by April 30th, August 31st, and December 31st. Property taxes are only levied on properties that have a registered value of US$30,000 or more (registered value is the value stated on the public deed that is registered at the Public Registry).
The maximum annual property tax is 2.1% for any property valued above $75,000.
Possession Rights properties do not incur property taxes, since the property technically belongs to the government of Panama. A Property taxes cover the fiscal year that runs from July 1 to June 30. Current taxes may be paid in full on or before August 31.
Individuals also can pay half of their property taxes on or before August 15, and pay the other half on or before January 15 without interest and penalty.
Panama Property Tax: Property Tax Rate for Real Estate (Excluding Condos):
Value of the property Property Tax Rate
US$ 0.00 up to US$ 30K (exempted) 0%
US$ 30K up to US$ 50K 1.75%
US$ 50K up to US$ 75K 1.95%
US$ 75K and above 2.10%
Panama property tax is calculated based on the value of the land plus the value of all constructed/registered improvements. The property tax calculation under Panamanian Law is as follows (assuming a $100,000 property)
* The First $30,000 of the property value is exempt from tax.
* The next $20,000 is taxed at a rate of 1.75%, which works out to $350.00
* The next $25,000 is taxed at a rate of 1.95%, which works out to $487.50
* The balance $100,000 - $75,000 = $25,000 is taxed at a rate of 2.10%, which works out to $525.00
* Now you have to add up the dollar amounts above: $350.00 + $487.50 + $525.00 giving you a total of $1362.50 per year in property taxes.
However, real estate tax differs for condominiums (apartment buildings) in Panama.
Property Tax Rate for Condos:
Value of the property Property Tax Rate
US$ 0.00 up to US$ 30K (exempted) 0%
US$ 30K up to US$ 100K 0.75%
US$ 100K and above 1.0%