The new Panama tax laws #49 were implemented in September and I have been waiting for someone with a good understanding of Panama Tax law to give me a write up in English. The law firm of ICAZA, Gonzalez-Ruiz & Aleman have done a great job of doing it. I have used this law firm for about 10 years and very reputable and capable.
The bottom line is that the government is moving to tax all property in the country and although there have been tax exemptions for improvements on the land (homes and other construction) as an incentive to build and buy, the land itself is not exempt and will be subject to a rather high mil rate by comparison to other countries, both in the first and third worlds. Although the income tax rate on the sale of properties has been clarified and lowered it still is significant when coupled with the 2% transfer tax at the public registry. Like countries everywhere in the world Panama has determined that property taxes are the easiest and most efficient way of generating revenue for the state.
Personally I abhor this kind of tax for two reasons. First of all, what happens if you don't pay the tax? Usually your property can be sold by the state to pay it. Although I have not seen this in the Panama tax code yet, if it can happen then you really don't own the property and are in essence just leasing from the state. Don't pay the rent and you get thrown out! Secondly it becomes very easy for the government to increase the mil rate as they find they need more revenue which is ALWAYS the case. In other words, once the camel's nose is under the tent, he will soon be sleeping with you.
This is a PDF file of 6 short easy to understand pages.
