Tax on property income in Panama
Taxation Researcher | April 05, 2019
Effective Tax Rate on Rental Income
|Click here to see a worked example|
Global Property Guide research
Nonresidents are only taxed on their Panamian-sourced income. Married couples are generally taxed separately but they may opt for joint taxation.
INCOME TAX (Impuesto sobre la renta a Personals Naturales)
Income earned by nonresidents is generally taxed at a flat rate of 15% on gross income.
Rental income is taxed at progressive rates. Individuals who earn rental income can deduct the following from their gross rent: municipal and national taxes, maintenance and repairs, administrative expenses, and depreciation of the property.
|TAX BASE, US$||TAX RATE|
|Up to US$11,000||0%|
|US$11,000 - US$50,000||15% on band over US$11,000|
|Over US$50,000||25% on all income over US$50,000|
CAPITAL GAINS TAX
Taxable capital gains are calculated by deducting the following from the property value at the time of disposal (selling price or market value): acquisition costs, improvement costs, and transaction costs.
Capital gains realized from transactions that are part of ordinary business activities are taxed at the standard progressive income tax rates.
VALUE ADDED TAX (Impuesto a la
transferencia de bienes corporales muebles con crédito fiscal)
Leasing immovable property in Panamá is subject to VAT, levied at a flat rate of 7% on the gross rent.
Entities with an average monthly turnover less than US$3,000 (during the previous tax year) and an average yearly turnover of US$36,000 are exempted from VAT.
Property Tax (Impuesto de Inmuebles)
Real estate located in Panamá, whether urban or rural, is subject to property taxes. The tax base depends on the total value of the land, plus all improvements, as appraised by Land Commission (Oficina de Catastro). Real estate transactions at prices above the appraisal value automatically increase their value for tax purposes.
The property tax is imposed at progressive rates.
The property tax rate ranges from 0% to 0.70% for real property subject to family wealth or main residence benefits. The property tax rate is 0% to 1% for commercial and industrial real estate, land, other residences and other properties.
Income earned by companies is taxed at a flat corporate tax rate of 25%. Income-generating expenses are deductible when calculating taxable income.
CAPITAL GAINS TAX
Capital gains realized by companies from transactions that are part of ordinary business activities are taxed at the standard progressive income tax rates.
Capital gains realized by companies from transactions not part of ordinary business activities are taxed at a special flat rate of 10%. A 5% withholding tax is levied on the transaction, which will then be credited against the taxpayer´s capital gains tax liability.