Your Guide to Property Tax Reform

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.

BENEFIT
1. 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.

PROCEDURE
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.

REQUEST
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.

EXONERATION
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.

DEBT
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.

RATE
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.

REGISTRY
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%.

RETENTION
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.