RT @PeterSchiff: Just watched Joe Kernen's love fest with Anthony Pompliano as he touted Bitcoin. Prior the 2008 financial crisis, when I…
The new Panama Real Estate Law
The Facts About New Panama Property Tax Law
A lot of confusion has been created by the implementation of the new property tax structure in Panama, which goes into effect this month. I asked our legal advisor to analyze the law and how it might impact our clients. It may be confusing, but the new law is likely to save many of our client's thousands of dollars a year.
He researched the law and discussed the details with colleagues, accountants, and tax experts to gain a clearer picture of the impact. It was still difficult to get specific answers from the tax office, which means there is still some room for interpretation of specific items in the law. But here is his opinion of the new property tax law:
This new law basically implements three (3) new fundamental property tax schemes:
- The increase of the tax exemption from $30,000 up to $120,000 for properties declared as Familiar (homestead) Patrimony. In other words, properties under $120,000 registered value will be property tax exempt (new properties are exempted for 10 years). There won’t be any more “land or improvement tax,” but if you have an exemption, your property tax will remain the same.
- The law dramatically reduces the property tax percentage. Before it was up to 2.1 percent (land and improvements combined). From now on, properties with values from $120,000 to $700,000 will pay a total of 0.5 percent over the difference between $120K-$700K. Then, from $700K and up, the property tax applicable will be 0.7 percent.
- As an owner, you are obligated to declare your property (only one property) as your “Familiar Patrimony” in order to have the new property tax scheme applied to your property, in accordance with the items above.
Now, it is very important for you to know the following:
- If your property already has the 20 years tax exemption applied, YOU DON’T HAVE TO DECLARE YOUR PROPERTY AS YOUR “FAMILIAR PATRIMONY.” If you do that, the new property tax scheme will be applied to your property and you will lose your 20 years (or whatever years are left) of your current tax exemption. Once your tax exemption has expired, you will have to declare the property as “Familiar Patrimony” and you´ll obtain the benefits of the new property tax scheme.
- Keep in mind that if you do have a current property tax exemption, you are only obligated to pay 1 percent as land tax, if the land value is over $30,000. The first $30K of land value is tax exempt.
- If your property does not have an existing tax exemption in place or the 20 years have expired, there is no expiration date or time limit to declare your property as “Familiar Patrimony,” as some people have suggested. You can declare it as soon as your exemption expires.
- If you don´t know if your property has an existing applied exemption, then don´t worry. It will be just a matter of obtaining your property tax information (you’re your special access code) and then we can find out about the status of the exemption and how many years are remaining.
- Some of you might have purchased your property through a corporation. If that’s the case, the property values remain the same and so does the exemption. But, again, it is important to obtain your property tax information and we can help with that.
- In a few cases, owners bought a property with a tax exemption but then, once the purchase had been officially registered, the DGI tax system might have changed automatically the information. If that’s the case, you will have to request an “equalization process,” which basically means that you will have to ask the DGI to “equalize” the exemption to the improvements, due to the newly completed purchase and potential change of value.
- In most cases, a Catastral Update (registered value) shall be conducted so the tax office will have updated information about your property, owner, value, exemption.
- If you have several properties, only your primary home will be considered Familiar Patrimony or will have the rights to a tax exemption (currently applied). Commercial, industrial, second residencies and lands, will have a tax application as follows:
- 0% up to $30K.
- From $30K to $250K it will have a tax application of 0.6%.
- From $250K to $500K it will have a tax application of 0.8%
- Over $500K, the tax application will be 1%.
What to do?
- If we have the tax access code for your property, we can review your property tax information and evaluate the actual status, including the exemption and if we have to file any update or correction request.
- If your property does not have an exemption, then you´ll have to apply and get it registered under the Familiar Patrimony registry to obtain the benefits of the new property tax scheme. If you have more than one property, then your primary home will be considered as Familiar Patrimony and you´ll have to pay the regular property tax on other properties.
- Get your cadastral information updated, if necessary.
- Confirm your property tax exemption rights (if any) to be applied to the property.
- Pay the land or improvement taxes due (if any).
Tightening global liquidity and the slowdown in China is restricting the capital available to the mining sector. Additionally, prices for many commodities have been under pressure this year so it is more difficult for miners to make the case to lenders that they should be afforded more leeway. That has led to reduced spending on exploration and development.