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Panama: Personal Taxation

Real Estate Taxes (Capital Gains)

There are annual taxes on the value of real estate, plus capital gains tax on profits from the sale of real estate, and a transfer tax arising on sale.

The annual tax, under Article 766 of the Fiscal Code, is based on official valuations, and is levied on a sliding scale:

  • 1.75% from US$30,000 to US$50,000; plus
  • 1.95% from US$50,000 to US$75,000; and
  • 2.10% on values above US$75,000

Valuations under the 'cadastral' system were updated in 2005, and as from 2006 the tax is based on the new values at the following rates:

  • 0.70% on any value exceeding US$30,000 up to US$50,000;
  • 0.90% on any value exceeding US$50,000 up to US$75,000; and
  • 1.00 % on any value in excess of US$75,000.

The real estate tax was extended to certain properties not previously covered as a result of a fiscal reform package approved in 2009.

The 2009 package also changed the way in which Capital Gains Tax is levied on real estate gains under Article 701 of the Fiscal Code and Articles 89 and 90 of the Income Tax Regulations. The rate of tax was 30% on the taxable gain after deductions, but the calculation basis was quite complex, at least for persons not otherwise paying much tax. Under Law 49 of 2009, a 3% tax must be withheld as an advance payment towards capital gains tax, either on the sale price or the property's value, whichever is higher.

The tax on the transfer of real estate (not new homes) is 2%, payable by the seller, which is credited against capital gains tax (see Income Tax, above).

Residences with construction permits issued after September 1, 2005 benefit from the following exemptions:

  • Value up to US$100,000: 15 years
  • Value from US$100,000 to US$250,000: 10 years
  • Value over US$250,000: 5 years

Land is not exempt and property tax would continue to be paid on it if its value is above US$30,000.

These incentives were continued with some changes by 2008 legislation: improvements to real property authorized by construction permits issued after July 1, 2009, are exempt from real estate taxes for a period of 10 to 15 years.

 

 

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