The Truth About Panama--Can You Get a Property Tax Exemption?

One of the big incentives to buy property in Panama is the country's 20-year property tax exemption law--first passed

20-30 years ago to encourage economic development and investment. This allows buyers of homes or condos to be exempt from property tax (improvements value) for up to 20 years from when construction was completed. The expiration of this exemption has been extended several times in the past, but is now due to expire Aug. 31, 2007. Unless construction on the property you purchased is complete by that time, you will no longer be eligible for the full 20-year property tax exemption.

That's not to say that tax exemptions will expire altogether or will not still be applicable, in some variations. And unless you are buying a home, condo, or building older than 20 years, you will still qualify. If your property was built within the last 20 years, your annual property tax exemption will be in effect for 20 years from the date construction was completed. If construction was completed in 2004, for example, you are exempt from property taxes through 2024. And there will also be tax exemptions for projects yet to be constructed--of five - 15 years, depending on value.

It is important to understand that the property tax exemption has existed for a long, long time--and it was never the intention of the government that it would last forever. In fact, this law was passed to enable the country to get on its feet and encourage economic growth. There is absolutely no doubt that this has happened--one has only to visit Panama to see proof that the economy is strong, and the building boom continues.

And with all these positive things that are happening in Panama--the major growth of tourism, the position of Panama as the business and financial hub of Latin American, the real estate boom, and the influx of new residents that come with that, tax dollars are sorely needed for infrastructure improvements.

There is also a new land valuation policy that changes the property tax structure for undeveloped land, and provides an incentive for landowners to revalue land properties. When they resell the land, it may increase the property tax for buyers--although not always significantly.

(We have written a longer report about what all this means to you--whether you are a current property owner in Panama or are a potential buyer--for our Panama First Alert readers. You can sign up for this free e-letter service here. If the Panama Assembly votes to extend the tax exemption once again or makes further policies you should know about, our Panama First Alert service will keep you informed.)

We're as keen on Panama as we've always been. The incentives still far outweigh any effects of these policy changes. Just remember that when you contemplate buying property anywhere in the world--and Panama is no exception--you must do your homework. If you are buying a home or condo in Panama and are concerned about property taxes, ask how much exemption time is left. Ask the developer or seller how the land is valued in the tax rolls. Before you commit any money, ask your attorney to verify this information.

But best of all--come see Panama for yourself. International Living's top Panama experts will be in Panama City for the Live and Prosper in Panama Seminar, Aug. 2-4. They love tough questions.

Suzan Haskins
Latin America Insider, International Living