Real Estate taxes in Panama are based on the official, government assessment of the property, which is usually the declared value. Exemptions are available if the property is valued at under $30,000.
Annual percentage of assessment is 2.10 % , based upon two criteria:
- The value of the land
- The declared value of the improvements built
The taxable base depends on the total value of the land and all improvements. If a home is sold for more than its appraisal value, then the new value becomes the selling price for tax purposes.
Taxes can be paid in installments three times a year; at the end of April, August and December. Certification of tax clearance is necessary for the completion of any real estate transaction regarding a property. Property taxes have primary status over any other encumbrances.
Property Taxes in Panama
Transfer taxes in Panama are paid by the seller, and are 2% of either the updated registered value of the property or the sale price. The updated value is the registered value, plus 5% per annum of ownership. If the property is bought by a corporation, it is customary for the shares of the company to be sold (instead of the property), thus eliminating the need to pay transfer tax.
Rental Income Taxes
If you receive rental return on the property, you will be liable for income tax up to a maximum of 30% (on returns greater than $200,000). However, if you invest in one of a special tourism zones, you can be exempt from income tax for 15 years.
Properties in Panama with a registered value of $20,000 or lower do not pay property tax. For properties of a higher value, they pay the following:
- $20,000 to $50,000: 1.75%
- $50,000 to $75,000: 1.95%
- Above $75,000: 2.10%.
If you buy or build a residential property in Panama, you can be exempt from property tax in Panama for up to 20 years. The 20-year exemption applies to cases where the construction permit is issued before Jan. 1, 2004, and the completed construction registered before Dec. 31, 2004. Houses or apartments where construction permit is issued after Jan. 1, 2004, will have the following exemption on property tax:
- Value up to $100,000: 15-year exemption
- Value from $100,000 to $250,000: 10-year exemption
- Value over $250,000: 5-year exemption.
The exemption is transferable during the exemption period to any new buyer. The land itself is not exempted and would continue to pay property tax if its value is above $20,000.
Capital Gains Taxes
The Panama Capital Gains Tax rate differs by the type of property being transferred. Only properties located in Panama are subject to the capital gains tax. The standard rate is 10% of the realized gain from the sale.