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Family Patrimony
By declaring your home your main residence or family patrimony in Panama, you could enjoy tax incentives
Law 66 was published in October 2017, and it amended articles of the tax code regarding property taxes, such as the protection of family housing and the reduction of taxes on the primary residence of families in Panama.
Its main modification was in article 764, which under the new law, properties with values up to USD 120,000 will be tax exempt, if declared to be the primary residence or tributary family patrimony. This law went into effect on January 1st, 2019
The former rule of tax exemption for properties not declared as the primary residence or tributary family patrimony in Panama with values up to USD 30,000 is still in place, for properties not declared as the primary residence or tributary family patrimony.
A property owned by an individual or in co-ownership by spouses or two relatives or owned by a legal entity whose beneficiaries are individuals of the same family, can be subject to obtain the benefits of this law. Also, retirees, pensioners, or trusts owning properties can benefit from the law, under the same conditions established previously
Foreign residents have the same rights and responsibilities as Panamanian regarding real estate ownership. This means that foreign permanent residents may also register a property as Tributary Family Property or as Primary Residence.
Differences between Tributary Family Patrimony and Primary Residence
What is complicated is the are the differences and similarities of the Primary Residence and the Tributary Family Patrimony.
Tributary Family Patrimony
The Tributary Family Patrimony, refers to a property permanently used to house his family. All the family must live under same roof. The concept of family is derived from the Panama Family Code.
Regardless of the number of properties owned, every family can declare only one property as Tributary Family Patrimony.
Law 66 allows both natural or legal persons to own property purposed as Tributary Family Patrimony. This means that property registered under legal entities (such as corporations, companies or foundations) may be declared as Tributary Family Patrimony, as long as the beneficiaries of such legal entity are part of the same family group.
Local or foreign individuals may declare the tributary family patrimony for their property which is the permanent residence of their family. Individuals may declare it for themselves, their spouse, or children.
Primary Residence
The Primary Residence is the property a natural person uses for permanent housing, which does not constitute a family patrimony. Only single individuals or widows, without children, may declare the primary residence.
A natural person who fulfils the requirements can declare only one property as Primary Residence.
Sworn Declaration
In both cases, when registering a property, the owner must submit a sworn declaration to the Panama Tax Collection Agency (Dirección General de Ingresos – DGI) about the intended residential purpose for the property.
This sworn declaration must be filed along with the requirements described below , according to the owner’s case. The DGI usually notifies to the taxpayer within three months after the application was submitted.
It is also possible to complete the registration process using the DGI’s website dgi.mef.gob.pa. There, you can upload the registration application and attach the necessary documents, either to register a property as Primary Residence or Tributary Family Patrimony in Panama.
To register a property as Tributary Family Patrimony as a natural person, the following documentation must be included:
- Copy of the public deed or original certificate issued by the Public Registry.
- Copy of the owner’s ID card or passport
- If the owner is married, certificate of marriage issued by the Panama Civil Registry. If the marriage took place abroad, certificate of marriage issued at the place of celebration with its corresponding authentication.
- In the case of single parents, birth certificates of their children.
To register a property as Tributary Family Patrimony as a legal person, the following documents must be included:
- Copy of the public deed or original certificate issued by the Public Registry.
- Valid original certificate of the Public Registry where the legal representative of the entity is clearly indicated.
- Copy of the legal representative’s ID card.
- CPA Certification, identifying family members as entity beneficiaries.
To register a property as Primary Residence, which only applies to single or widowed natural persons with no children, the following documentation must be included:
- Copy of the public deed or original certificate issued by the Public Registry.
- Copy of the owner’s ID card.
- In the case of widows, certificate of the deceased’s spouse, and copy of asset settlement or declaration of heirs.
- In the case of persons without children, certificate of no children by the Panama Civil Registry.
None of the application types have a cost from the DGI
Panama Horizontal Properties (Condominiums) Property Tax Exemption
In Spanish, a “Propiedad Horizontal” (Horizontal Property) or “PH” is a property development with various properties that share common areas, such as a Condominium or Apartment Building, for example. An apartment property inside of a PH that has an existing property tax exemption will continue to receive the property tax exemption benefits, unless the property owner obtains property tax benefits under the Primary Residence status, in which case the previous PH property tax exoneration will end and the Primary Residence property tax rates will apply from that point forward.