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Taxes on Capital gains in the sale of Real Estate in Panama

One of the questions that arise when selling a property is: What taxes must be paid during or after the sale?

When there are gains in the sale of an immovable asset (i.e. this is a part of your usual business) then the income is treated as a regular income. But, when the sale of the immovable asset is not a part of the usual business of the seller, then the Income Tax is to be paid at the fixed rate of 10%, and must be paid before the registration of the transfer of the sale in the Public Registry, in addition to the 2% of tax for transfers of real estate which must be paid when selling any property.

The registered base over the property will be the lesser amount of the following: the cadastral value registered or the value of the property in the books of the company (when it is being depreciated as an asset).

When persons sell 10 or more properties in a year they are considered distributors of real estate, otherwise, your tax rate over capital gains is of 10% over the gains from the sale. Nevertheless, before the registration of the public document (title), the seller is obligated to pay to fiscal officials 3% of the higher amount between the price of the sale and the registered value of the property, as an advance in the payment of tax over the added value. As it is also the case in selling shares of stocks, the seller may declare such payment as a surplus on the tax over the real capital gains and receive a fiscal credit for the difference. This fiscal credit may be used to pay other taxes, may be transformed in cash by fiscal officials or transferred to third parties.