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Panamanian Taxes Effecting Retirees in Panama
There are a lot of new things to learn when you retire in Panama or any other country; what doctors to choose, where you will buy your groceries and how to get to the mall. For more important things, it is good to have the help of people such as Panama legal services. These professionals can help you with things like understanding Panama retirement taxes and other charges you will encounter.
Income, property and retirement taxes in Panama
Retirement tax in Panama
For those who are retiring in Panama, they are entitled to a one-time exemption of duties on the importation of household goods (up to $10,000), and an exemption, every two years, of duties on the importation or local purchase of a car. If you buy or build a new house, you won't pay property taxes for up to 15 years, nor will you pay taxes on foreign-earned income. Consult your Panama legal services, but if you can move your money into a Panama foundation, you can possibly even avoid much of your US tax burden as well.
Panama income tax
The personal income tax structure in Panama relies on a sliding scale, starting at a minimum of 7% of the first $9,000, and going to a maximum rate of 27%. Whether you live in Panama or you are a foreign resident, you are only taxed against Panamanian-based income. Taxable income includes wages and salaries, other business profits, pensions/bonuses, income from copyrights, royalties, trademarks, stock sales, bonds, and securities.
You are able to deduct all medical expenses incurred while living in Panama, all donations made to charities, home mortgage interest and loans for Panamanian home improvements.
Panama inheritance taxes
Recently, Panamanian inheritance taxes have been completely abolished. Despite this, taxes on gifts of property located in Panama are in effect, and the rate depends on the degree of relationship between those involved. It is wise to consult your Panama legal services specialist to plan a will. This gift regulation does not apply to property owned anywhere outside Panama.
Panama property taxes
Panamanian properties with a registered value of $30,000 are exempt from property tax. For properties valued at more than $30,000, the rates are as follows:
- 1.75% from $30,000 to $50,000
- 1.95% from $50,000 to $75,000
- 2.1% over any property value above $75,000
If you buy or build a Panamanian residential property, you may qualify for a property tax exemption for up to 20 years if the construction permit is issued by Sept. 1, 2006 and the occupancy permit issued and improvements registered by Sept. 1, 2007. On Panamanian residences where the construction permit is issued after Sept. 1, 2006, the following exemptions will apply:
- Value up to $100,000, 15-year exemption
- Value from $100,000 to $250,000, 10-year exemption
- Value over $250,000 five-year exemption
The exemption is transferable during the exemption period to any new buyer. The land itself is not exempted and would continue to incur property tax, if its value is above $30,000.
Panama capital gains taxes
Capital gains should be included in the annual tax return, and are taxed at whatever levels the individual is being assessed for income tax. Unless you have owned the property for a minimum of two years and are not in the business of selling and buying property, you may choose to pay a flat 10% of the gross profit.
Knowing the taxes when you retire in Panama
This represents a sampling of the various taxes when living in Panama. Panamanians enjoy a light tax burden and that is passed along to foreigners as well. As with any discussion of the law, you should consult a Panama legal services representative to confirm. You will no doubt find that the Panamanian tax structure is a beautiful feature of this beautiful country.