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Panama Real Estate Taxes (Capital Gains Tax) PDF Print E-mail
Written by Worldwide Properties   
Saturday, 29 March 2008

Panama Real Estate Taxes (Capital Gains Tax)

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, previously:

  • 1.75% from $30,000 (lowered to $20,000 in 2005) to $50,000; plus
  • 1.95% from $50,000 to $75,000; and
  • 2.10% on values above $75,000

Valuations under the 'cadastral' system were updated in 2005, and from 2006 the tax was 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.

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 is 30% on the taxable gain after deductions, but the calculation basis is quite complex, at least for persons not otherwise paying much tax.

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

Incentives introduced in 2004 to encourage development gave savings on a $200,000 home over 20 years of $69,250 – or about one-third of the purchase price of a high-quality home. But they were finally withdrawn on August 31, 2005, with existing projects needing to be completed within a year.

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

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

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