After months of debate, the Panama legislature has approved a radical reworking of the property tax code, which will save many homeowners thousands of dollars a year.
The bill, which has been described as “the most important reduction of property tax in the last 40 years,” will reduce the top rate from 2.1 percent to 0.7 percent on a homeowners’ main residence, according to news reports. The new bill will also establish for the first time separate property tax rates for second homes, capped at 1 percent for homes valued over $500,000.
Main residence valued at less than $120,000 will be exempt from property tax. Between $120,000 and $700,000, the rate will be 0.5 percent and ticking up to 0.7 percent for any property valued over $700,000.
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In the past, the tax code made no differentiation between a second home and a commercial property, which resulted in high rates. The new code will exempt second homes valued at less than $30,000, and set the rates at 0.6 percent for properties between $30,000 and $250,000; 0.8 percent for homes between $250,000 and $500,000; and 1 percent for second homes valued at more than $500,000.
The new levels will go into effect in 2019, El Capital Financiero reports. The rates move Panama’s property rates below the levels of many jurisdictions in the region. It will also reduce overhead for homeowners and change the ROI calculations for many investors. And they shouldn’t impact the existing 20-year property tax exemption already in place on many new buildings in Panama City, including the Trump Ocean Club which has an exemption until 2031.
The amounts and rates will be reviewed every five years, offering the possibility of re-adjusting the ceiling of the exempted amount in function of what is happening in the market, according to El Capital Financiero.
Read the full El Capital Financiero (in Spanish) here.