During the month of September 2017, important changes occurred to Panama´s property tax reform. It turns out that after many reviews, The National Assembly finally approved the controversial bill of Law 509 Project, that reforms the Tax Code on Property Tax (IBI). According to the MEF, Ministry of Economy and Finances, the ones who presented the reform in the first place, this bill represents “the most important tax reduction” of this particular tax in the past 40 years.
So, What’s the reform about?
The reform states that from 2019, all properties that have a value of $120,000 or less will be exempt of paying property taxes forever. As in never again. This includes their property along with its turf, construction (i.e. house) and improvements. The exonerated amount of taxes will be reviewed every five years based on the properties value. This tax exemption only applies to principles residences.
What this means is that main dwelling properties will benefit from a significant reduction of 60%! This represents great news for property owners in Panama and for those who have had Panama in their minds, as a potential location for property investment.
But what if have a higher value property in Panama?
The reform also states that properties valued from $121,000 to $700,000 will pay 0.5% of property tax and if the property surpasses the $700,000 the percentage increases to 0,7%. Which means owners will only have to pay a small fee in real estate taxes once the exoneration period is over.
Second residences and commercial properties with a value between $30,000 and $250,000 will pay a 0.6%. While properties valued from $250,000 to $500,000 will pay 0.8%. Now, if the property value is $500,001 or above, the owner will have to pay 1% of property taxes.
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