Country Article / Postcards

Tax Holiday in Panama

Date: 05/22/2005

Dear International Living Reader,

We all know electoral promises are often disregarded after the elections. Panama is the exception that proves the rule.

As promised, the new government has extended legal provisions (due to expire this December) that allow you to build a house or condo free of property taxes for 20 years.

Law No. 50 came into effect on Oct. 4, 2004, and exempts from property tax all new residential constructions for which building permits are issued before Sept. 1, 2005 and for which occupancy permits are issued by Aug. 31, 2006.

To fully comply with the exemption, after the house or condo is completed, the occupancy permit together with the owner's declaration of improvements have to be registered at the Property Section of the Public Registry of Panama. This centralized registry includes titled properties from all over the country and is one of the features that assure foreign investors of the validity of title to their property in this country.

It is always smart to have an attorney review the title and conveyancing documentation before purchasing. It is also important to know that, normally, the seller will pay transfer tax, while the buyer pays for title documentation and registration.

With Panama City (and other hot spots in the country) in the middle of a construction boom, the buyer's market continues, and good prices are still available. You can find deals ranging from 93-square-meter condos from $61,950 with sea views in good quiet neighborhoods up to 900-square-meter luxury penthouses from $1 million with spectacular sea views in the most upscale neighborhoods.

The 20-year exemption for new constructions is a wonderful added value to your investment. The exemption is transferable, so that if you sell the property before the 20 years lapse, the new owner still will benefit from the exemption for the remaining years.

The government's decision is likely to bolster the construction boom, resulting in new opportunities for investors and those wishing to relocate to Panama.

This, added to Panama's territorial tax system, attractive Pensioner Visa program, secure banking system, and good infrastructure, explains why Panama continues to appear at the top of many indexes for the world's best places to retire (including, of course, International Living's Global Retirement Index).

Rainelda Mata-Kelly, LL.M
For International Living

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