The legislature had already given their full approval in September by passing Bill 509 after 3 debates.
The new property tax rates are effective January 1, 2019.
There are now new and higher exemptions from property taxes
This means that if you buy your primary home in Panama for under $120,000, you will not owe any property taxes. Starting January 1, 2019, your property would be fully exempt.
Currently, Panama’s property tax is a graduated tax. I believe that is not changing.
If so, when you purchase a $200,000 house you would only pay property tax on $80,000 of its value. (ie., $200,000 minus $120,000 exemption = $80,000 of taxable value.)
As you will see in the tax rates below, that means you would pay a 0.5% property tax rate on this $80,000 of value. Which means, you would only owe $400 a year in property taxes. Wow.
This is a substantial reduction in property taxes in Panama.
Currently, only the 1st $30,000 of property value is exempt from property taxes.
Since the majority of property in Panama is valued under $120,000, this means that most property in Panama will be exempt from property taxes.
You can read about the current (through 2018) property tax rates in Panama in this post.
The reform bill also offers an amnesty program for those who currently have unpaid property taxes.
My understanding is that if you pay your taxes by December 31, 2017, all fines and interest will be waived. Any unpaid tax through August 31, 2017 is eligible for the amnesty program.
I am not positive about the details of this amnesty program. If you know more, please share in the comment section below.
Keep in mind, if you own titled property, you owe taxes.
You will never get a bill for your taxes. It is up to you to remember to pay them - and on time! If you don't pay them, the government will take their cut (tax + interest + fees) when you sell your property.
Primary Residence
$0 - $120,000 = Exempt
$120,001 - $700,000 = 0.5% tax
$700,000+ = 0.7% tax
Secondary Residence, Commercial Properties, Industrial properties
$0 - $30,000 = Exempt
$30,001 - $250,000 = 0.6% tax
$250,001 - $500,000 = 0.8% tax
$500,000+ = 1.0% tax
Currently, the Panama government is spending alot of time and energy encouraging people to title their property. For many reasons, the government wants to improve its real estate transaction systems. A first step is getting land titled.
Most land in Panama is not titled. And most people are happy with owning Right of Possession (ROP) or untitled land. One reason for this is that once land is titled, it will be taxed.
For this reason, it is hard to convince people to title their land.
They have never paid property taxes, and never expected to do so. And really, who wants to pay taxes? Plus many property owners cannot afford to pay property taxes, of any amount.
The solution: Exempt most property owners from property taxes.
Since most land in Panama is valued at under $120,000, the government decided to make that the exemption threshold.
This rationale for the property tax reform is complete and total conjecture on my part. I have not read anything to support my supposition, but it seems right to me.
What do you think? Please share your thoughts in the comments below.
