With recent tax reforms, many owners of "apartments" in Panama, have asked the question of really how these new tax reforms affecting the payment of property taxes on my condo? Reviewing the situation of several customers in our office, we found that such apartments, which were previously taxed $ 13,600.00 and now finds that the statement of his apartment in the Directorate General of Revenue, is $ 43.600 ..!. Step to explain the Why?.

First understand that the value of their apartment now splits into two values: "value of the land" and on the other hand, "value of improvements." As we know, the value of improvements (mean by "better" infrastructure construction undertaken on a vacant lot), is the construction of the building itself, and therefore, from their point of view, his "improvement" is the particular apartment. According to Panamanian tax law is then the value of his apartment (the improvement) which is exempt from paying property taxes for 5, 10 or 15 years (depending on the value of that improvement).

On the other hand, the value of the land is the assessed value (not to be confused with the value "registrar") to which the developer bought the "ground" and build upon the improvement ("Building") or simply value of land without considering what the building cost. What reform has done is take the value of land and divided proportionally between each of the apartments that were built on that land. So you can find to be exempt from paying property tax for the better but have to pay property tax on the proportional value of his apartment on the value of the land on which your building was built.

Example: $ 1,000,000.00 (land value) / 50 apartments = $ 20,000.00

Therefore, it would be worth $ 20.000 of his apartment on which you calculate the property tax.

What used to happen is that the value of land allocated to each apartment was less than $ 30,000 (or slightly higher) and before the Act 49 of 2009 (the first package of reforms) the first $ 30,000 were exempt, paying only on the amount than this, based on a table that increases gradually.

Here's another example: A hypothetical case, an apartment before the reform was paying $ 238 a year property tax as the apartment is taxed 1.75% of $ 13,600.00, as follows:

Value of land = $ 43,600.00

Exempt -------------- $ 30,000.00.
$ 13,600.00 x 1.75% = 238.00 per year

The current Panamanian tax administration decided to retain the basis of exemption (first $ 30,000) only for improvements, but not for the "ground." Now the value of the land for farms condominiums (apartments), is taxed as follows:

- 1.20% of first $ 20,000, plus 1.75% of the value between $ 20,000 and $ 50,000.00.

In the hypothetical case that we handle, we are talking about an amount of $ 23.600 (the value of land above the first $ 20,000.00), and adding $ 413.00 for a total of $ 693.00 per year, thus:

Value of the land on which building was built = $ 43,600.00

$ 20,000.00 x 1.40% = $ 280.00
$ 23,600.00 x 1.75% = $ 413.00

$ 693.00 per year (to reform)

Therefore, this increase is reflected in your outstanding balance.