20 Year Property Tax has been Extended

20 year property tax exemption extended
By Steven Rich - Panama Offshore Legal Services

April 15 was a good day for taxpayers in Panama - not for U.S. citizens who led their 2007 income tax returns by April 15 - but for the real property purchasers looking to buy without having to pay annual property taxes in Panama. Law 21, 2008 went into effect on April 15, extending the 20 year property tax exemptions on new construction for another two years. The exemption applies to both new residences and commercial properties.

The 20-year property tax exemption law expired on August 31, 2007, which left the construction industry in a bind. Developers of new residential and commercial properties were not able to offer this tax exemption to purchasers, making the slightly older buildings more attractive to buyers.

The tricky part is to comply with the strict time limits. The exoneration begins on either when the Occupancy Permit is issued or the day the improvements are registered by public deed with the Public Registry of?ce, whichever comes ?rst. This must be done by December 30, 2011. Since registration with the Public Registry takes around a week, plan to ?le the required documents at least one week before the deadline.

There are two deadlines. Obtain your building permit before July 1, 2009 and complete your home or project obtaining either your Occupancy Permit or ?le your improvements by Public Deed with the Public Registry by December 30, 2011.

Properties completed after the deadline or those which fail to meet both deadlines will have different property tax exemptions based on the property improvements value as follows:

Residential use construction valued up to $100,000 will qualify for a 15-year property tax exemption. From $100,000 to $250,000 quali?es for a 10-year exemption. Over $250,000 quali?es for a 5- year exemption.

Improvements and construction of “residential purpose” properties include apartments, condominiums, single-family homes, duplexes, and any other type of property providing means of living.

Do not wait if you plan to purchase raw land and build your own home. It takes time to locate real estate in Panama. It takes time waiting for the escrow process before you can take title to the property. Now that you are the titleholder, you must hire an architect to design the home. Then once the architect designs are prepared, you can apply for a building permit. You will need to get quotes from reputable builders and select the contractor. Construction takes time in Panama. With the current real estate boom, equipment, materials and good workmen are in demand. Finally, once the home is built you can apply for your occupancy permit. Some experts predict that the entire process can take up to 30 months.

Panama’s property tax exemption is not automatic. You must apply for the exemption or you will not be entitled to it. Building project developers apply for it on behalf of all of the units, so if you purchase a condo in a new building, you do not have to worry about it. However, if you build your own home you must apply for the exemption. Go to the Direccion General de Ingresos (DGI) of?ce to get the forms to apply for the 20-year property tax exemption. You must bring a copy of the escritura publica (public deed) along with a copy of your occupancy permit and a copy of the building permit.

Take advantage of Panama’s gift of 20-year property tax exemptions while it lasts!