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Property Tax Reform Becomes Effective 1 January 2019

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Property tax withholding begins  in January 2019

Lending institutions will collect the tax
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Beginning in January, Decree 362, (withholding of property tax)   will be charged by banks or financial entities where the clients have mortgages.

Any person who has a mortgage on a property, other than family property or personal housing, the real estate tax will be charged by the entity that lent the money and not the Directorate General of Revenues (DGI).

“That mortgage does not correspond to a family heritage residence, that is, the first home one has. Everything else has to pay the tax and the institutions have to withhold it, “says economist, Adolfo Quintero.

The properties that are financed through banks, entities, cooperatives or institutions that grant financing to purchase homes or real estate will charge the tax.


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Your Guide to  Property Tax Reform

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The property tax reform approved in Law 66 of 2017 which enters into force in January 2019 establishes new rates for the payment of real estate taxes. All the fees go down more so if it is the habitual residence of a family or person. To receive the benefit, taxpayers must submit an application to the Directorate General of Revenue (DGI)  to constitute the property as  family property.

Who has the right to request it? The benefit applies to the principal residence of a family or person, both national and foreign, regardless of their marital status (single, joint defacto, married, widowed …).

The decree distinguishes between the tax on family property and main residence, although in both cases there is the exoneration of the first $120,000 and the most advantageous rates will be received. The family tax estate is mainly for married couples, with or without children, or single parents. In the case of a couple of spouses who live permanently in the same home, they can only incorporate a residence as a tax family property.

2. How is it requested?
Through a form (which will be an affidavit) that the DGI will create and to which the documents proving that the person or company owns the property and the condition of the owner will be attached.

Decree 363 details the necessary documents in each case. For example, a natural person married without children must attach a marriage certificate, a copy of the identity card or passport of the owner and a simple copy of the public deed with the generals of the property (name, identity card, address) updated. Spouses with minor children must also present the birth certificate of the children. Also included in the decree are the necessary documents that must be resented when the property is in the name of a company, a trust or a private interest foundation.

3-. When should the application be submitted?
The regulation enters into force in January 2019, but the DGI can receive them from the promulgation of Decree 363, on December 4. Since the first property tax payment is made in April, it is not necessary that the application has entered before the end of the year. The rule established positive administrative silence, that is, if there is no response from the authority in three months, it will be understood that the property is a tax family property or main residence. However, if the DGI later realizes that the request is fraudulent, it may revoke the status of the farm.

4-. I live in a horizontal property (PH) and I have a tax exemption, what happens?
The asset will continue to enjoy the exemption until its end on the improvements and will be taxed at a rate of 1% corresponding to the value of the mother estate, as it happens up to now.

If the owner decides to establish it as a tax family property or main house, he will lose the remaining years of exoneration and will begin to pay with the table that exempts the first $120,000 from the payment.

5-. Should I be safe and sound with the DGI?
It is not necessary, as established in article 18 of the decree. Value of the good

6- Do I have to update the property value of my property to request the benefit? It is not required to constitute the property as a tax family property or main residence, but the authorities recommend that it be verified that the value that appears in the DGI is the same as in the National Authority of Land Administration (Anati) and is the highest value that has been registered in the Public Registry for any transfer that may have been subject to such property in your transfer history (purchase, donations, auctions, etc.) to ensure that the tax paid corresponds to the highest cadastral value that the property has acquired, since that greater value is the real tax base that generates the real estate tax and that is what the Anati must have registered.

7- What property tax rate applies to the main dwelling or family estate?
The first $ 120,0000 will be exempted. Between $120,000 and $700000will pay 0.5% and the surplus of $700,000 will pay 0.7%.For example, a home that is registered with a value of $ 150,000 will have the first $ 120,000 exonerated and will pay 0.5% on the remaining $30,000 In that case, the taxpayer must pay $150 per year.

8-. What if I do not apply to register my property as an estate or primary residence?
The general rate will apply. Exonerated the first $30,000 between $ 30,000 t and $250.000 will pay 0.6%; between $ 250,000 and $ 500.000 ill pay 0.8%; and the surplus over $500,000 will be taxed 1%.

9-. Will the bank withhold the tax?
In the case of main dwelling or family patrimony, no. The figure of banks as retention agents only applies to second homes and the rest of properties (such as land, commercial premises, industries …). The tax payable for the assets that are tax family assets may not be retained by the banks. The taxpayer will pay for the current channels to the DGI.

CLARIFICATION -10. I have doubts. Where can I consult? The DGI serves on line 524-1600 from 8:30 a.m. to4:30 p.m. You can also check the web page dgi.mef.gob.pa, or send your queries to the following address: consultsetax2@mef.gob.pa.



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  • Moderator_02 changed the title to Property Tax Reform Becomes Effective 1 January 2019
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Panamanian Supreme Court suspends withholding tax

Fri, 12/28/2018 - 14:21


The Administrative Chamber of the Panamanian Supreme Court temporarily suspended, and partially, two articles of a decree regulating the withholding of property tax by Banks, financial institutions, cooperatives, and other institutions, informed the Judicial Branch (OJ).

It deals with articles 8 and 9 of Executive Decree 362 of November 29, 2018, against which a contentious administrative nullity claim was presented by lawyer Ernesto Cedeño.

With the presentation of the magistrate Cecilio Cedalise Riquelme, and with the endorsement of the magistrates Efren Tello and Abel Zamorano, the Third Chamber of Contentious Administrative of the Supreme Court of Justice (CSJ), agreed to the request for provisional suspension of some of the already mentioned items.

The ruling suspends the effect of both provisions related to the retention of property tax by the banks of general license, financial institutions, cooperatives and other institutions that work in relation to this type of activities as of January 1, 2019.

The decision of the judges to order the suspension of the decree effects seeks to prevent "serious and notoriously difficult and impossible repair damage."

The suspension of the effects of the contested administrative act only operates in relation to all the financings that have been granted or will be made before the entry into force of Executive Decree 362, the Judicial Branch said on its website.

Through this Executive Decree, issued by the Ministry of Economy and Finance of Panama (MEF), the model for the withholding of property tax is regulated.

Law 66 of 2017 established the property tax reduction and the Executive defends it as the "most important reform to this tax in the last 40 years."

Accordingly, the ruling indicates that the other property tax withholding mechanisms for general license banks, financial institutions, cooperatives and other institutions that intervene or act as withholding agents will have normal effects when they enter into operation after of January 1, 2019.

The magistrates explain that Article 20 of Executive Decree 362 states that this legal norm has an area of execution or application as of January 1, 2019, "therefore, such regulation in none of its parts indicate that it will have retroactive effects regarding its validity and applicability before that date.”.

"It is evident that there is an alleged violation of the legal system, hence the partial suspension of the effects of Articles 8 and 9 of the Executive Decree already mentioned must be accessed," the magistrates indicated in their opinion.

The ruling cites an extract from the lawsuit in which Cedeño states that "if the act objected by the undersigned is not suspended, all residents of the Republic of Panama could be freely granted a retroactive tax discount, which has not even been authorized by any judicial authority, based on transactions materialized before it even came out, Law 66 of 2017. "

"These retroactive discounts would severely affect the assets of all citizens as of January 1, 2019," says lawyer Cedeño in his lawsuit.



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Property Tax: Moratorium Extended

In Panama, the National Assembly approved extending until June 30, 2019, the deadline for taxpayers to pay the real estate tax, free of interest and surcharges.

Friday, March 1, 2019

The meeting provided a two-way tool by allowing taxpayers a more convenient period to catch up with their debts and the General Revenue Directorate to make the relevant collections that today are uncollectable by lack of knowledge of people, explains a statement from the National Assembly.

Congressman José Antonio Domínguez told Prensa.com that "... the extension of the moratorium until June arises because of the delay at the National Land Administration Authority (Anati). Taxpayers who take advantage of the moratorium must update the cadastral value of the property, while those who are constituting their property as tributary family patrimony to have the first $120,000 of the value of the property exonerated must update the generals of the property, but not the cadastral value."

Dominguez added that "... There have been problems with Anati. They have not complied with the times for Panamanians to pay taxes,' if they do not speed up the proceedings in the entity, the deputies could request new extensions of the moratorium."

If the president of the country approves the bill approved by the Assembly, it would be the third moratorium, since in 2017 and 2018 others had already been authorized.



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Moderator comment: The www.dgi.mef.gob.pa provided in the last lline of this news article does not work. If someone can determine the correct web address, let us know and we will edit this posting.


Property tax withholding plan begins August 1


Posted 25/07/2019

Panama’s  property tax withholding system kicks in on August 1, to speed up the receipt of payments. 

Rafael Brown, legal advisor of the DGI. told TVN that “it is not a new tax, but a collaborative mechanism between the institution (DGI), the banks or financial entities that become retention agents. and the taxpayer, so that the collection of this property tax be expedited, which is an obligation of those who are not exempted by the regulations of either the incorporation of first homes, family assets or any other exemption ”. the advice of the DGI, explained that to make use of the system, taxpayers only have to link an account either current or savings,  or a new exclusive for this purpose, so that there is the funding of the money that will be collected in the items corresponding to the property tax, mainly from 2019.

This whole process can be done on the website www.dgi.mef.gob.pa



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