Not everyone knows it well, even those who visit frequently Casco often know only part of it. But for all of us and them, the law is ending in January 2024.
This is a really good time to talk about the Casco Viejo Law, its benefits and to invite you to consider taking advantage of this moment. Please note that at the end we are providing a link to the Spanish version of Law 136. Do consult with your lawyer and let us know if you need help!
What is “Casco Law” and why you really don´t want to miss out:
Sources: Law 136 from 2013 and Law 57 from 2017
There are three main benefits:
- 30 Years with No Property Taxes
Perhaps the best-known benefit of the law. It applies to both residential and commercial. The reason is because of its location within Casco, which marks a difference with other Panamanian legislation where the main reason for the benefit would be that it is your main home. In Casco, this benefit applies to all the properties under this law.
(See Art. 19) Property will be exonerated from both improvements and land.
The benefit starts from the date of Occupation Permit.
- Special Mortgage Rate with Subsidy of 3%:
Any Property under this law is eligible to a especial financing rate of 3% below the current rate, applicable for the duration of the mortgage. This applies to both commercial and residential.
It is important to understand that this benefit doesn´t have a price cap nor a use restriction. This can be your home, or an investment. You can buy multiple properties and still access the benefit. Now, in Panama there is a special 1% FECI that gets added after your first purchase. And banks are free to apply internal policies, including how much they are willing to finance. But the Casco rate is kept as part of the equation.
See articles 1, 3, 5.
- No Income Tax on Commercial Activity for 10 Years
In my experience, this is the least known benefit of the law. It exonerates any gain taxes on commercial activity from the property that is subject to this law.
Article 18: “the owner of a property located within Casco Antiguo city of Panama that has been built, rebuilt , restored (…) will be exonerated of the payment of income tax from any revenue from commercial activities (…) for 10 years, starting with the occupation permit”.
Let´s think for a minute, perhaps you are the owner of a business in Panama, or are a service provider. Consultant, lawyer, even a restaurant. Just to give some examples. If the owner of the business is the owner of the commercial space or office, or property, and the business operates from there, then it is eligible for the benefit. It would last 10 years, so the business wouldn´t have to pay income tax for all that time.
Specially after COVID where so many businesses where hit, but are now starting to recover, this might be an important moment to think about the future. This benefit gives you a platform to stabilize and grow for 10 years.
End of the Casco Law: January 2024
These three benefits are coming to an end. To be eligible, the property must have its occupation permit no later than January 2024. Therefore, acting now is crucial. Once a project delivers and time starts running, so will the benefit. They all start with occupation permit, so as time passes by, you´ll need to subtract those years. Specially for the income tax benefit, you want to get it from day one.
This is the right moment to step in!
Spanish version of Law 136 HERE