Tax laws when outside of your “homeland” can be very intimidating, well let’s be honest; they can be intimidating even in your ”homeland”. While it seems the tax laws are on a virtual Ferris wheel due to the influx of tourism and investment in recent years in Panama it should not be intimidating. Panama is very encouraging and welcoming when it comes to foreign investment and the taxes are fairly easy to understand when broken down.

Exemption

There are two laws in Panama , which allow for property tax exemption, Article 764 and Law 8. We will start with the lesser known of the two.

Article 764

This law states two exemptions:

• Land with a registered value of less than $30,000,00(thirty thousand)
• Land used exclusively in agriculture and duly registered with the appropriate authority, in this case MIDA, (Ministry of Agriculture and Development) for under $150,000.00

Law 8- Tourism Law

If you have decided to buy into a new construction project already approved for a “tourist Project”, and/or a project that was built under the approval of Law 8 and built with in the last 20 years, you can be exempt from property taxes for a maximum of 20 years depending on the registered value of the unit purchased.

Panama is a staggeringly beautiful country and being thus, it is quite possible to fall in love with a property that has neither a value of under $30,000.00 or is a gorgeous “older” home in the Canal Zone not qualifying for exemptions. In this case;

As long as the property has been duly registered after 2005 and a licensed Panamanian appraiser has sworn the value the taxes are as follows:

• $30,001.00 - $50,000.00 @ 0.7%
• $50,001.00 - $75,000.00 @ 0.9%
• Over $75,001.00 @ 1%

*Remember the first $30,000.00 is exempt from property tax so if the registered value is $200,000.00 you will pay $1700.00 in taxes per year.

There is one catch in all these laws, however, if you are not caught up in paying your taxes and not current on the registered value you could be levied up to 2.1% of the determined value. This could apply to properties, which have been in families for a long time, and the value has never been updated in the Public Registry, in which case it would be recommended to pay the cost to update to save the levied yearly taxes in the long run.

Taxes can be paid in three installments, April 30 th , August 31 st , and December 31 st .

When selling a property there is a 2% transfer tax that must be paid immediately at the time and registration of sale. (The Public Registry or Catastro usually calculates this)

If you choose to pay the 10% sales tax when selling property at the time of purchase you will no longer be accountable for any additional capital gains tax you may receive with regards to the added value of the property at the time of sale.

So as you can see the Panamanian Tax Law with regards to property is pretty straightforward. It is always recommended to contact a licensed Panamanian attorney adept in tax law prior to purchasing land to be sure of which category your purchase will fall in.