Understanding Property Tax in Panama

Rules, Exemptions, and How to Stay Compliant

Panama continues to attract international buyers and expats thanks to its stable economy, favorable residency programs, and low property taxes. Whether you’re purchasing a condo in Panama City, a beachfront villa in Pedasí, or a mountain hideaway in Boquete, understanding the country’s property tax system is key to protecting your investment and staying compliant.

In this article, we’ll break down everything you need to know about property taxes in Panama.

🔍 Overview of Property Tax in Panama

Panama’s property tax (Impuesto de Bienes Inmuebles) is applied based on the cadastral (registered) value of the property—not the market price. The system uses a progressive tax rate, where higher-value properties are taxed at higher rates.

In 2019, Panama introduced a reform to lower taxes and simplify the system, especially for homeowners who live in their property full-time.

💰 Property Tax Rates

For Primary Residences ("Vivienda Principal")

If you declare the property as your primary residence, you’ll benefit from reduced tax rates:

• $0 – $120,000: 0% (Exempt)

• $120,001 – $700,000: 0.5%

• Over $700,000: 0.7%
  

For Secondary or Investment Properties

For properties not used as your main home—such as rentals or vacation homes—the following rates apply:

• $0 – $30,000: 0% (Exempt)

• $30,001 – $250,000: 0.6%

• $250,001 – $500,000: 0.8%

• Over $500,000: 1.0%
  

🏠 What Counts as a Primary Residence?

To qualify as your primary residence (Vivienda Principal), you must:

• Be a Panamanian citizen or legal resident

• Live in the home regularly (not full-time rented)

• Submit a formal request to the Dirección General de Ingresos (DGI)

Once approved, you can claim the tax exemption on the first $120,000 and receive lower tax rates on any value above that.

📅 How and When Are Taxes Paid?

Property taxes in Panama can be paid annually or quarterly.

Quarterly due dates:

• April 30

• August 31

• December 31

Payments can be made online via the DGI website, through local banks, or with the assistance of your lawyer or property manager. Late payments incur penalties and interest.

🧾 How Is Property Value Determined?

Taxes are based on the cadastral value, which usually includes:

• The declared purchase price in the public deed (escritura pública)

• The value of improvements or construction made after purchase

Pro Tip: Declare a fair value. Underreporting might reduce taxes now, but could lead to a higher capital gains tax when you sell.

🏗️ Tax Exemptions for New Construction

New buildings in Panama may be exempt from property tax for several years:

• Up to $120,000: 20 years exemption

• $120,001 – $300,000: 10 years exemption

• Over $300,000: 5 years exemption

⚠️ Note: These exemptions apply only to the building, not the land.

📑 How to Check or Pay Your Property Tax

To check or manage your tax balance:

1. Visit dgi.mef.gob.pa

2. Create or log in to your account

3. Register your property and view your balance

4. Request exemptions, pay taxes, or download certificates
   

🧮 Example Tax Calculation (Primary Residence)

Let’s say you buy a primary residence for $200,000:

• First $120,000 = 0%

• Next $80,000 = 0.5% = $400/year

✅ Total Annual Tax: $400

🔄 Capital Gains & Transfer Tax When Selling

When you sell your property, two taxes apply:

• 2% Transfer Tax: Based on the sale price or cadastral value (whichever is higher)

• 10% Capital Gains Tax: Applied to the net profit

A 3% advance is withheld at the time of sale. If your actual gain is less, you can request a refund of the difference.

✅ Summary: What You Need to Know

• Primary residences are exempt from tax up to $120,000

• Investment properties are taxed starting at $30,001

• New homes may qualify for 5–20 years of tax exemption

• Taxes are due in three quarterly installments

• You must register for exemptions and update your records
  

🏡 Need Help Managing Property Taxes in Panama?

At Panama Properties, we partner with expert legal teams to help you:

• Register your property correctly

• Apply for exemptions

• Submit tax declarations on time

• Avoid penalties and overpayment

• Navigate the full legal process of owning real estate in Panama

📍 Contact us today and let us simplify your property ownership experience in Panama.