Panama Real Estate Tax Window Closing

by Mike Godfrey, Tax-News.com, Washington

23 May 2005

If you want to live free of real estate taxes in Panama for the next 20 years, you'd better hurry up. A window of opportunity closes on August 31.

The present deal, an effort to spur construction and create employment, is worth tens of thousands of dollars to ex-pats planning to retire in this peaceful haven or to buy winter homes here. Investors have rushed to save millions, and high-rise apartment buildings, hotels and shopping centers have been springing up like weeds, with the Panama City skyline a forest of cranes.

But the deadline for obtaining construction permits under the deal is August 31. Completion must be before August 31, 2006. The tax-free status is transferable when the property is sold.

What this means is that a considerable amount of older property is coming onto the market, and good deals can be had. But real estate taxes are relatively steep in Panama.

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

For example, a property valued at $150,000 would attract the following annual tax:

• From $30,000 to $50,000: $ 350.00
• From $50,000 to $75,000: $ 487.50
• From $75,000 to $150,000: $1,750.00
• Total: $2,412.50

Real estate tax savings on a $200,000 home over 20 years under the present scheme would be $69,250 – or about one-third of the purchase price of a high-quality home.

Not all is lost after September, however. Residences with construction permits issued after September 1, will have 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.

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