Quite recently, in 2017 (Law 66 of 2017), Panama modified its Property Tax regulations for the first time since 2005. Back in 2005, the modification was more like a benefit granted to taxpayers who updated their land recorded values and therefore a special rate was applied to the new value, nevertheless, those who did not want to update stayed with the current rates at the moment.
The normal rate, until 2019, was up to 2.1% of the recorded value and the benefit granted in 2005 was up to 1%.
On top of the rates, there was a special property tax exemption for new improvements on the land (improvement means any building on the property such a house, and apartment building or a commercial building). Depending on the use and value, the property tax exemption could go from 5 to 20 years of tax exemption.
GENERAL RULE
As a rule, every property with a land recorded value of $30,000.00 or less do not pay property tax.
(NOT SO) NEW LAW
Law 66 of 2017 became law in that same year but came into effect in January 1st 2019.
The Law basically changed the following:
- A new normal property tax rate for all properties, beginning in
- 0.6% for properties with a land recorded value of $30,000.01 up to $250,000.00
- 0.8% from $250,000.01 up to $500,000.00
- 1% from $500,000.00 to infinity
SPECIAL EXEMPTION / NEW CATEGORIES
- A new category of properties with a special rate.
- The new category is main residence or Tax Family Wealth (Patrimonio Familiar
Tributario)
- The taxpayer can have several properties but only the one where he/she
and/or the family lives can apply for these categories.
- The special rate for these categories is the following:
- 0% for properties with a land recorded value of $0.00 up to $120,000.00
- 0.5% for properties with a land recorded value of $120,000.01 up to
$700,000.00
iii. 0.7% from $7000,000.01 to infinity
The special rate came to replace the property tax exemption that used to go up to 20 years, Therefore, for improvements built after 2019, the new rates apply as well as the owners can apply for the new category.
Foreigners can apply for this type of special exemption as long as they are permanent residents in Panama. Nevertheless, foreigners owning the property where they live through a company or private interest foundation can apply regardless of their immigration status.
FORMER TAX EXEMPTION IS VALID BUT ONLY RETROACTIVELY
The former property tax exemptions granted at the time are still valid until their expiration dates, and this is also retroactive, meaning that if an improvement was built before 2019, such improvement can apply for the former property tax exemption (this is possible but not as simple since there are some details we cannot go into in this article because of its length).
FARM LAND
Property dedicated to agriculture can apply for an especial property tax exemption valid for 10 years and renewable every 10 years as long as the property remains as agricultural.
This special property tax exemption can be granted to land with a property recorded value of up to $500,000.00. If the value is higher, it cannot apply for the exemption.
CONTACT US
In CANDANEDO CORREA we can analyze for you the best option for your benefit and help you apply to one of these categories in order to minimize, as much as possible and within the boundaries of the law, your tax burden.
OLIVER CANDANEDO
+506 6070-1902
