Panama Tax Information
Since the enactment of Cabinet Decree No. 109 (1970), successive legislation has been passed offering tax benefits to developers. It has been widely accepted that, as a result of these incentives purchasers of real property have also benefited.
Panama Tax Information: TRUST LAW
Panama oversaw the modernization of its Trust institutions with the enactment of Law No. 1 (1984). Although this law is devoted to general commercial activities, Article 35 refers to income arising from trust property or any other act, in respect thereof. This Article establishes an exemption from all taxes (including transfer tax on real estate), contribution, assessment or liens if any of the following items exist:
1. Property is located abroad or off shore.
2. Money or income deposited by legal entity or natural person in the trust, as long as the funds are originated from other sources other than Panamanian.
3. Shares or securities of any kind issued by corporations whose funds do not arise from Panamanian sources; even if such monies, shares or security are deposited in the Republic of Panama.
* The foregoing exemption, to be applicable in Panama, must be invested in a Housing development project or Urban programs for the development of industrial parks in Panama. In any case, the earnings resulting from such an investment shall be exempt from Panamanian Income Taxes.
Panama Tax Information: CONDOMINIUMS
Since the promulgation of Law No. 13 (1993), which amended Cabinet Decree No. 217 (1970), the City of Panama has witnessed new designs and construction on housing, commercial offices, clinics and shopping centers. Incorporating a condominium under the present regulatory structure is a fairly simple procedure, which takes approximately four months.
Owners of apartments, regulated under Law No. 13, normally obtain loan services from one of the five licensed mortgage banks (Banco General, Banvivienda, Primer Banco de Ahorros (Pribanco), Caja de Ahorros and/or Banco Hipotecario) in Panama. However, several of the more than eighty General License Commercial Banks in Panama also provide long term loan facilities.
Panama Tax Information: PROPERTY AND TRANSFER TAX
The Fiscal Code refers to:
Article 766 regulates Property Tax:
The maximum annual percentage of assessment is 2.10% over the value of the land (land value under US$20,000.00 is exempt of this particular tax, as per Law No. 36 of 1995). The property tax is also levied on the declare value of the improvement build on the land. The owners must pay according to the official assessment value (which is usually the declare (commercial) value on the last purchase Deed).
Transfer Tax on Real Property:
This tax is regulated under Article 701, and was amended in 1991 with the implementation of Law No. 31 and in 1995 by Law No. 28. The Law confirms that all sellers are obligated to pay, at the moment of a transfer of a real property, the transfer tax, but allows the seller, to apply one of two options. Option 1) the seller could select the 2% tax of the declared commercial sale price, which is understood as a advancement payment on the capital gain or the 5% tax of the assessment value, which is established by adding a 10% increase per annum, on the purchase value, stating the year that the owner (this alternative is understood as been the final payment for capital gain from the seller, due to the transfer).
Capital Gain Tax:
This tax is applicable, if the alternative of 2% for Transfer Tax is used for the transfer of real property and if there is a capital gain. This tax is also regulated by Article 699 and for corporations acting a sellers, a 10% flat tax payment on the profit will be applicable, notwithstanding, if shareholders are foreigners. Another percentage will be applicable if the seller is a natural person. If there is no capital gain on the transfer of a property, the 2% transfer tax, paid in advance for the sale, use to be understood, as a credit for the seller will be lost.
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