Panama Real Estate Taxes

Real Estate Sale Transfer Tax

Sale transfer tax must be paid by the seller before finalizing the sale transaction.

A 2% real estate sale transfer tax is levied on the transfer of real estate based either upon (1) the sale price stated in the official purchase/sale document (sale contract), or (2) upon the official property value, whichever is higher.

The taxpayer may choose to pay either (1) the 2% real estate transfer tax over the greater of the purchase price of the property or the official cadastral property value, which is slightly increased per year of tenancy.

Capital Gain on a Real Estate Sale Transaction

In addition to the real estate transfer, a capital gain tax (if any) must be paid to the tax office.

The capital gain tax can be calculated in 3 options:

Option 1 – 10%

This option consists in taking the sale price of the property, less the cadastral property value and expenses related to the sale transaction. This amount will be considered the net taxable amount on which the rate of 10% will be applied.

Option 2 – 3%

This is a straightforward calculation, which will be calculated using the same method as the sale transfer tax, by taking the greater of the sale price of the property or the official cadastral property value (whichever is higher). If the taxpayer chooses this option, the paid amount will be considered final.

Option 3 – 0.00

If the property sale transaction does not generate any income, then the seller must not pay any capital gain. However, regardless of this, the capital tax forms must be filled and submitted to the tax office as well.

Real Estate or Property Tax

All land and real estate improvements thereon are subject to real estate taxes. Real Estate tax is appraised by an agency of the Ministry of Economics and Finance. It must be paid according to the official assessment value, which is usually the declared value on the sale document. Nevertheless, a few years ago, the government of Panama enacted a law that decreased the calculation basis for this tax in several options and required only a simple legal process.

Property Taxes in Panama

As of January 2019, properties can be registered under two categories which are:

Primary Property or Family Patrimony

Secondary Properties, Commercial or Industrial

The applicable property tax rates in this case are as follows: