Panamanian Real Estate Taxes
Transfer Tax
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, whichever is higher. 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.
Inheritance/Gift Tax
Inheritance taxes in Panama have been completely abolished. Despite this, taxes on gifts (inter-vivos) of properties located in Panama are in effect, and the rate depends on the degree of relationship between the donor and the donee. This does not apply to property owned anywhere outside Panama.
Rental Income Tax
If you receive rental return on your 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 the special “tourism zones,” you may be exempt from income tax for 15 years.
Property Tax
Properties with a registered value of $20,000 or lower do not pay property tax. For properties of a higher value, they pay as follows:
- $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 may be exempt from property tax for up to 20 years. However, this provision is being phased out gradually. 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 Tax
Real estate gains should be included in the annual tax return, and are taxed at whatever level the individual is being assessed for income tax.