Improvements to Panama’s Taxes and Laws For Ex-Pats
By: Larke Newell
Panama, being ever welcoming to ex-pats entering the country, has made more improvements to their system in order to encourage this trend. Whether it be to retire to a safer, less costly, and warmer retirement haven, to relocate for business or employment purposes, or to raise a family in this healthy, safe, and, again, less costly environment, these changes will fit the bill.
After recently attending a very informative presentation by Senora Rainelda Mata-Kelly, a very well-known and respected immigration and tax lawyer in Panama City, I came away confident that once again Panama has shown her desire to pave the way with greater incentives so that more and more “wannabe” ex-pats will take the plunge and relocate to this welcoming isthmus.
First and foremost, in my mind, are the changes in property taxes, due to take effect January 1, 2019. This is the most important change in Panamanian real estate taxes for many years. Although Panama currently boasts a very effective property tax incentive, the approaching reform will improve it extensively.
The current exemption allows new house constructions or extensive renovations to your main residence to be property tax free for a maximum of twenty years. However the land itself has no exemption for a value over $30,000.00.
When the new rules come into effect, if you purchase your new home for a value less than $120,000.00 you will pay no property taxes. Purchases over that amount will only be taxed for the amount between that amount and your purchase price at the rate of 0.5% per year. As an added incentive, first time home buyers, main residence only, will receive a three year exemption on values of $120,000.00 – $300,000.00.
Commencing in 2019 there will be two levels of property tax rates – one for the main home and another for a second home, vacant lot, or commercial property. For example, in the second case, there will be an exemption of $30,000.00 only.
It has been declared that there will be no re-valuing of properties for at least five years after 2019. There are two precautions of which to be aware:
1. In Panama you do not receive tax notices. It is your responsibility to pay them correctly and on time each year.
2. If you will be taking advantage of this tax exemption it is advised that you have your application in by July, 2018 in order to have it processed in a timely manner prior to January 2019. At this time they are declaring that after submitting your application, if you hear nothing back from them within three months, you can assume that your application has been accepted.
Next, changes have been implemented regarding entry and residency visas as follows:
1. Up to the present those holding interim visa/residency cards while their permanent one was in the process, had one year to legally use the temporary one. As of now the interim card coverage will be only six months. However, in my experience, and to my knowledge from others, six months is ample time, providing you have hired a good lawyer.
2. Most people are now well informed on the Friendly Nations Visa and it is being considered the best and easiest to obtain as long as you are a citizen of one of the countries on the list. There are fifty countries involved so there is a good chance you will qualify. Reliable information is widely available online regarding this visa but this is a brief list of the finer points:
– it is necessary to have a local bank account containing $5000.00 plus $2000.00 for each dependant residing with you.
– you can obtain a Panamanian corporation or foundation.
– if you will be employed here you will need to show an employment contract from a local company.
This visa offers a swift application process leading to a permanent residency and the opportunity to apply for citizenship after five years.
There is a new rule in effect concerning corporations and private interest foundations as well. This applies only to those being operated from outside Panama. It is now imperative to disclose where the accounting for the business is done and where the actual books are located. As to income earned in other countries, Panama does not require you to pay income tax on those funds.
Panamanian banks have upgraded their regulations as well. It is now possible to designate a beneficiary for all bank accounts in your name. It is a simple procedure and can be accomplished by a signed letter of permission presented at your bank.
One last rule to assist you in making your paperwork easier and more manageable. If your home is within your foundation and there is no income being generated from the foundation, it is no longer necessary to file a “no income’ tax return each year. However, one word of caution: if you are in this situation and have thus far been filing these returns you must either continue to do so or apply to discontinue. Otherwise you will be fined for non-filing.
This is merely a sample of the ways that “the powers that be” in this country continue to strive to encourage ex-pats. They welcome newcomers and they encourage them to stay.
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