Reevaluation Time Bomb / Panama

Property Reevaluation Time Bomb
Posted By:
wildtoucans
Tue Sep 3, 2013 6:11 pm |
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ATTENTION PROPERTY OWNERS:

Important communication about property revaluation.

What is the Cadastral Revaluation Program?

The cadastral revaluation is a mechanism of systematic reappraisal of real estate properties performed by the Ministry of Economy and Finance of Panama (MEF), by disposition of the article 770 of the Tax Code of Panama.

Who is performing the Cadastral Revaluation Program?

This program was launched by the MEF in September 2011 when private companies Activentas SA, Asectenias SA and Best Value Properties Inc. were hired to perform a massive appraisal over 16,000 properties throughout the national territory without consulting the owners previously.

How can these companies assign a new value to my property without my consent?

Representatives of these companies went directly to thousands of properties claiming to come from the MEF to take pictures of the exterior and interior of each property. If the owners were not available at that time or did not let them into their property, the appraisal companies would proceed to revalue the property taking into account a number of arbitrary elements such as footage, zoning, external appearance, recent appraisals of adjoining properties and advertising graphic designs published by the construction companies for sales purposes.

How does the cadastral revaluation affect me?

Once the revaluation takes effect the owner will be forced to pay more taxes to the Department of General Revenue (DGI), also part of the Ministry of Economy and Finance (MEF). If the Property Tax increases, the owner must additionally pay more money every year just for owning the property.

If the Property Transfer Tax increases it means that the current owner will not only have more trouble selling the property in the future, but at the time to sell will have to pay a much larger sum in taxes, reducing what could be recovered from the initial investment.

How can I know if my property has been revalued?

A few months ago the MEF began publishing resolution lists on national newspapers with the revaluation of properties. The information is published only for three days and is not found anywhere online. The lists are also published in special printed bulletins set by the MEF and its regional offices, as well as each district office.

How I can stop my property’s cadastral revaluation?

There is a legal mechanism to put a pause and a high probability of putting an end to this “new tax” that MEF wants to apply to the owners called “Motion for reconsideration and appeal in subsidy†to the revaluation. Once the owner learns that their property has been published by the MEF on a cadastral revaluation resolution list, he or she has the right to submit, through a competent attorney an appeal for reconsideration.

How much time do I have to request the reconsideration and appeal in subsidy?

It must be filed within fifteen (15) working days following the third day of publication of the resolution in the newspapers. If the appeal is not filed within that timeframe the resolution takes effect immediately and as a result, the owner may not freeze the revaluation of his property and new tax amounts must be paid starting immediately.

It is important to note that the process of filing the motion for reconsideration takes approximately 3 business days, so it is recommended that this procedure is done well in advance and not at the deadline. A legalized/notarized power of attorney is also obligatory to file in the reconsideration request.

What are the benefits of filing the motion for reconsideration?

This will not only suspend the new value given to the property until the reconsideration petitions are not resolved one by one, but it will keep the previous value, positively benefiting owner’s equity as the tax increase in the Property Tax and Property Transfer Tax will be frozen during this period. That gives homeowners the ability to buy time while they decide what to do with their property and save Property Tax in the meantime.

If my property is still tax exempt, the cadastral revaluation being applied to my property still affects me?

Although in Panama properties enjoy a tax exemption of 20 years in the construction, it is necessary to note that the land is not included in this exemption. With the new revaluation of properties in Panama, land is being revaluated substantially. Also, Property Transfer Tax is not included in this exemption.

If I am retired or about to retire, what is my status towards the revaluation?

The properties belonging to retirees or pensioners are exempt from the revaluation applying to them. However, they must use appropriate mechanisms to request and make sure that it does not come into effect. If the property owner of a legal person, like a corporation or a foundation, then the property does not enjoy this benefit, which is only granted to owners who are retired natural persons. If the person is close to retirement, the motion for reconsideration may suspend such revaluation, making time to become retired and then freeze the value of the property permanently.

Who should I hire to represent me and to submit the motion of reconsideration on my behalf?

It is advisable to perform such procedures through a qualified attorney, preferably specialists because procedural, tax and property matters should not be taken lightly. Also, the attorney should handle scientific and technical arguments for this type of case.

What if the MEF has already issued a resolution of revaluation on my property?

If an owner did not know of the publication of the resolution of his property and 15 working days passed, then it is too late to apply for the motion of reconsideration that would suspend the implementation of the new property taxes. Anyway, it is recommended that you contact a specialized firm to keep you aware of any event that may come up from which you could benefit.

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