Property Taxes and Family Patrimony Regime

Starting in 2019, Panama has updated its property tax regime, reducing rates by segment and creating new ones. In addition, a more beneficial rate and a bracket system have been created for what is considered family patrimony or primary residence. Let’s examine each regime.

Based on the official value of the property, you will end up paying taxes calculated according to the following table:

0% From $0.00 to $30,000,000

0.6% From $30,000.00 to $250,000,000

0.8% From $250,000 to $500,000.00

1.0% From $500,000.00 onwards.

As this is a progressive formula, taxes are calculated per segment, so to estimate the tax to be paid, the value of the property must also be segmented.

Let’s say we want to calculate what taxes there are in a $300k apartment, we know that the first segment up to $30k will be exempt, but then, taxes in the second segment, that is, from $30k to $250k, would be 0.6% of $220,000.00 (difference between $30,000 and $250,000); the result for the second group would be $1320.00.

Now, we still have $50k to complete the value of the property being examined, this will fall into the third segment, from $250k to $500k, since we only have $50k left, then the tax for this third segment will be 0.8% of $50,000.00, which is $400.00. The total annual tax to be paid will then be $1720.00.

Let’s illustrate this example better with the following table:

0% From $0.00 to $30,000.00 $30,000.00 $0.00

0.6% From $30,000.00 to $250,000.00 $220,000.00 $1320.00

0.8% From $250,000 to $500,000.00 $50,000.00 $400.00

TOTAL $300,000.00 $1720.00

As mentioned earlier, there is a more beneficial regime for properties considered Family Patrimony or Primary Residence. Each owner can register a property as such, as long as it can be demonstrated that this particular property has no other purpose than to be their main residence, where they live with their family or on their own.

Properties belonging to a company or foundation can also qualify, only if the applicant is the ultimate beneficiary behind this legal entity.

Once this special status is granted, taxes on the selected property will be calculated based on the following table:

0% From $0.00 to $120,000.00

0.5% From $120,000.00 to $700,000.00

0.7% From $700,000.00 onwards.

One last aspect to consider is that with the implementation of this new regime on January 1st, 2019, property tax exemptions previously granted on the value of improvements have been eliminated, however, all existing exemptions already granted will remain valid until their expiration date.

Our constant advice when it comes to this type of investment is to always hire legal representation from day one, guaranteeing you a smooth and uncomplicated transaction.

By: Emilio Cornejo Vernaza LL.M.

Founding Partner of PGS Attorneys and PGS Realty

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