Panamá, Casco Viejo, Casco Antiguo
Derick Brown is a certified public accountant (CPA) who has been serving several of our clients from Casco through his company Think CPA for years. In this blog, we bring you all a tremendous gift: a series based on his new book: “Real Estate Investor’s Manual, Understanding Taxes and Accounting for Real Estate in Panama.”
This is the first time a manual has been published in both Spanish and English. On our YouTube channel, we will be posting the interview in English in episodes, and on this blog, we are uploading the most relevant answers translated into Spanish.
His book is important, and today you can request it on Amazon. We are not taking royalties from the links; rather, it is extremely important to us that our clients and investors have a tool to guide them in their conversations with their lawyers, accountants, and real estate agents. Sometimes it is even difficult to know what questions to ask. That’s why we have created this series of videos and blogs, and we urge everyone to buy the book.
In this first installment, we will be talking purely about property taxes in Panama. We will also touch on Casco Viejo. It is important to emphasize that Derick’s professional opinion is his own, and it is not the intention or role of Arco Properties or any of its agents to provide financial advice. For more information, please refer to the book or contact Derick Brown.
Where to purchase the book:
- If you are in Panamá: The Real Estate Investor’s Handbook (Paperback) ($ 25) (cuanto.app)
- Amazon: Amazon.com: The Real Estate Investor’s Handbook: Understanding Panamanian Real Estate Tax & Accounting Rules: 9798857808566: Brown Joseph, Derick Brian
Arco: So, tell me Derick, how did this book come about?
Derick: My web developer going MIA and one too many cups of usa replica rolex datejust 126234bkso mens rolex calibre 2836 2813 automatic coffee, that’s basically how this book came about… It was supposed to be a short blog about a recent change in capital gains tax regulation, that I was going to post on my website, and follow-up with a newsletter. However, my web developer went missing, I found out he was sick months later, and while being at some of my favorite coffee shops, I just kept writing about property taxes, and before I knew it, I had so much information that I thought maybe I could make this a short eBook. Then I just kept writing and got the idea of maybe I can turn this into my first print book.
I don’t know if it’s a coincidence or destiny, but the first written content that I ever published was 3 years ago and oddly enough it was about property taxes for apartments under the PH regime.
Arco: What are the most common misconceptions about taxes in Panama?
Derick: In general, that we don’t pay taxes in Panama, that you can come here make money and pay zero taxes. Regarding property taxes, how tax exemptions work, when are taxes paid, how are they calculated.
Arco: OK, let´s give a definite answer to everyone out there watching this video…True or False: is Panama a Tax Haven?
Derick: I hate to be the bearer of bad news, but no, Panama is not a Tax Haven.
Arco: Let´s start with some basics. Who do you pay taxes to in Panama? What are the entities?
Derick: In Panama you pay taxes to the DGI, which is the national tax administration (like the IRS of Panama). You also pay taxes to the local municipalities, depending on in what district your business is located in. Each municipality has their own set of rules.
Arco: Who needs to pay taxes in Panama?
Derick: Anybody that earns taxable income in Panamanian territory, whether it’s a private person, a corporation, or a private interest foundation.
Arco: There are so many scenarios when purchasing a property. I think it can get confusing, especially when you start adding complexity such as corporation and entities. But again, trying to get the basics covered and look at some of the most common cases:
Let´s say I´m a foreign investor and I´m purchasing a property with the purpose of using it as a second home. Could you name what type of taxes I would be paying? (just list them)
Derick: Mainly, Property tax.
If you rent your second home from time to time, you will also be obligated to keep accounting records and submit annual tax returns.
Arco : So even if I´m purchasing under a corporation, does the entity need to pay all those taxes?
Derick: Yep. Purchasing it through a corporation means you also have to pay an annual corporation fee called “tasa única”, which is $300 for corporations and $400 for private interest foundations.
Arco : Of course, we are in Casco, perhaps this is a good moment to talk a bit about the special property tax incentives here, let´s say for resales and for properties being delivered up until the end of the current law.
So, because there were three different laws, and the incentive runs with the occupation permit, not the owner, it is important to understand when the property got built / got its occupation permit.
Arco : Would this also apply to commercial property? Let´s say a commercial local? Or even a building?
Derick: Yes, the property tax incentives also apply to commercial properties.
Arco : What happens after this period? What would be the typical property tax in Panama?
Derick: Once the current tax exemption expires, property taxes will automatically be calculated based on the current rates for second homes or investment properties, or main homes. In the book you’ll find examples of property tax for each property type.
Arco : What is a Taxable Family Estate or Main Residence? (by the way, this book has the complete breakdown of what documents you need to apply to any of these)
Derick: a) Taxable Family Estate: Property intended for permanent use by the owner for housing with their family, who lives under the same roof.
- b) Main Residence: Property of permanent use by the owner (individual), for housing purposes, amongst the person’s residential properties, which does not constitute Taxable Family Estate.
The main benefit of this is that the property tax rates are lower… In the book you’ll find examples.
Arco : Are these benefits applied automatically or do you need to make sure they get registered to the tax authorities?
Derick: To take advantage of these benefits, the owner must register their property as a taxable family estate or main residence with the DGI.
Please note that registering your property as a taxable family estate or main residence isn’t always beneficial, because your property could already have a different tax incentive. It’s always important to check before. In the book there is a section explaining this.
For example, if you own an apartment is Casco Viejo, which is currently exonerated on the total value, meaning you pay zero property taxes until the end of the exoneration, it wouldn’t make sense to register that property as your taxable family estate or main residence.
Arco : We just came out of Halloween, so you are allowed to give one horror story that got fixed… =) no names need to be named!
Derick: Picture this: Claire, an enthusiastic property owner, sips her morning coffee, delighted at the thought of her impending property sale. She had found a buyer, negotiated terms, and was days away from signing the papers. But just as the ink is about to dry, a shocking revelation halt everything. Claire owes thousands in back property taxes, and the sale can’t proceed until every penny is settled. Her dream deal crumbles right before her eyes.
Sadly, Claire’s story isn’t unique, especially in Panama.
Over the years, a recurring sentiment echoes among property owners: “Someone told me my apartment was tax-exonerated for 5, 10, even 20 years! I’ve never once thought about property taxes since then.”
But herein lies a widespread misconception, particularly among apartment owners under the Horizontal Property Regime (PH) in Panama. Is your apartment truly immune from these lurking property taxes, or, like Claire, are you in for a rude awakening?