Taxes in Real Estate Transactions in Panama

In Panama, the real estate market has experienced significant growth in recent years, becoming one of the most dynamic sectors in the country’s economy. The volume of real estate transactions has increased considerably, reflecting real state investors’ confidence in the Panamanian market.

Panama’s sustained economic growth, supported by its strategic position as a business hub and modern infrastructure, has been a key factor in driving the real estate sector.

However, it is important to note that purchasing real estate in Panama involves considering legal and tax aspects related to taxes, so seeking advice from real estate legal experts is essential to ensure a successful transaction and compliance with all legal obligations.

What are the necessary legal acts for property transfer?

Among the legal acts related to property transfer in Panama are:

Public Deed of Sale

To transfer the ownership of real estate, it is necessary to formalize the transaction through a public deed of sale. This deed must be granted before a notary public and signed by both the seller and the buyer.

Property Registration

Once the public deed of sale has been granted, it must be registered with the Public Registry of Panama. Registration ensures the publicity and enforceability of property rights, providing legal security.

Tax Payment

Every real estate purchase transaction in Panama generates the payment of certain taxes. It should be noted that taxes in real estate transactions must be settled and paid before the property transfer can be completed.

Types of taxes involved in real estate transactions

The taxes that buyers and sellers should especially consider when engaging in real estate transactions (applicable depending on the nature of each case) are as follows:

Real Estate Transfer Tax (ITBI)

This tax is one of the primary taxes to be paid in a real estate transaction in Panama. ITBI is applied to the value of the property transfer, and its rate varies depending on the type of property and its location.

Real Property Tax (IBI)

It is an annual tax applied in Panama to real estate properties, including land and buildings. This tax is calculated based on the cadastral value of the property and varies depending on its location and value.

Capital Gains Tax

This tax is applied to gains obtained from the sale of property. The tax rate varies depending on the type of property and the amount of the gain.

Improvement Tax

This tax is applied to improvements made to a property, such as constructions or renovations. The tax rate varies depending on the location and the value of the improvements.

Surplus Value Tax

It is applied in the sale of real estate and is subject to certain conditions and rates. The surplus value tax is calculated as 3% of the selling price or 10% of the profit obtained, whichever is lower.

In some cases, the difference between the purchase and sale value can be considered as the taxable base for calculating the tax.

For up-to-date and accurate information on applicable taxes in your case, please do not hesitate to contact us.

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