Property Tax: Tributary Family Heritage and Main Housing

The real estate tax is the one that the State assigns to real estate properties located in Panamanian territory and is calculated on the cadastral value of the property (value of land + value of improvements), which corresponds to the value captured in the National Authority system Land Administration (ANATI). The entity in charge of collecting this tax is the General Directorate of Income. The annual amount is divided into 3 quarterly payments: April, August and December of each year.

The Family Property Tax Law that came into effect in January 2019, carried out a comprehensive reform to the rates related to the property tax, constituting the best protection for family housing and the greatest reduction of the tax in the Republic of Panama in the last 40 years. 2 important concepts to know were introduced:

Family Tributary Heritage (in spanish Patrimonio Familiar Tributario or PFT): real estate destined for permanent use by the owner, for housing purposes with her family, living under the same roof.

Main Home (in spanish Vivienda Principal or VP): that of permanent use by the owner, a natural person, for housing purposes, among their residential real estate, and that does not constitute family patrimony.

The main objective of the regulation was to exempt from the payment of property tax those whose taxable base, including improvements, does not exceed a value of B / .120,000.00 and that constitute a Tax Family Estate or Main Home.

They may apply to the benefit of Tax Family Patrimony or Main Home:

Natural persons, national or foreign;
Retirees, pensioners or those of legal age for retirement;
Real estate registered in the name of legal entities (companies, private interest foundations) or trusts, subject to compliance with certain special requirements.

In the event that the value of the property that is constituted as Tax Family Patrimony or Main Home exceeds B / .120,000.00, the property tax on the surplus will be calculated based on the following table:

For example, if you have a property with a cadastral value of B / .150,000.00 and meet the requirements to apply for the Tax Family Patrimony or Main Home benefit being approved by DGI, you will only have to pay tax based on the excess of the B /.120,000.00 (since these are exempt), that is, 0.50% of B / .30,000.00, which gives an annual tax of B / .150.00. With the previous regime, he would have had to pay an annual tax of B / .2,520.00. As can be seen, this tax benefit and the new rates represent a 94% savings in property tax.

It is worth mentioning that those properties that are acquired as a first home and are constituted as Tax Family Patrimony or Main Home, whose cadastral value is between B / .120,000.00 to B / .300,000.00, are exonerated from the property tax for a period of three years, counted from the date of issuance of the occupancy permit or the date of registration in the Public Registry, whichever occurs first.

Similarly, it is important to note that, in order to obtain the benefit in question, it is necessary to submit the application to the General Directorate of Income, that is, the qualification of a property as Tax Family Patrimony or Main Home is not automatic. As long as the interested party has not carried out the process, their tax calculation will be made using the table called “Combined Progressive Rate for commercial, industrial and other real estate that does not apply as Tax Family Assets or Main Home”, which, although it implies significant savings in relation to the old rates, it does not represent the total benefit to which you are entitled.

Real estate that is not under the status of Tax Family Patrimony or Main Home, will be taxed based on the following table:

For example, if you have a property with a cadastral value of B / .75,000.00 you must pay an annual property tax of B / .270.00. With the previous regime, she would have had to pay an annual tax of B / .787.50, which represents a saving of 65%.

Other important considerations of this law:

  • It is not a requirement to benefit from the benefit of the Family Tributary Patrimony or Main House, present any type of certificate of Paz y Salvo, or update the cadastral values ​​of real estate.
  • When real estate is constituted as Tax Family Patrimony or Main Home, the State may not increase the cadastral value through appraisals informally.
  • If a property is sold, it loses its qualification as a Tributary Family Patrimony or Main Home, for which the buyer must start the process again.
  • It can be applied to the benefit even if the asset is mortgaged.
  • For the real estate incorporated into the Horizontal Property Regime that still enjoy some exemption, it must be analyzed whether it should be maintained or applied to the benefit.
  • The State will review the exempt tax base every five years in order to raise the exonerated cadastral value of B /. 120,000.00.

The Family Tributary Heritage law seeks to support families and give other taxpayers the benefit of a reduced rate. This reduction places Panama in a more competitive place since in the region the property tax does not exceed 1% and the old rates applicable in our country, reached up to 2.1% of the property’s cadastral value.

We hope the information provided has been useful and in the same way, do not hesitate to contact us to assist you with any questions or queries.


Karyne Mora
Head of Legal – Partner

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August, 2020

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