Draft bill 129.

Summary.

The draft bill directs its incentives to landlords, tenants, property owners, and investors whose activities take place in Calidonia, Bella Vista, Betania, and San Francisco, districts of Panama City. Private banks, the Savings Bank (Caja de Ahorros), the National Bank of Panama (Banco Nacional de Panamá), the National Mortgage Bank (Banco Hipotecario Nacional), and other financial institutions, including savings and loan associations, may participate in the tax regime. It also covers other legal entities engaged in mortgage lending that register in advance with the Ministry of Economy and Finance (Ministerio de Economía y Finanzas) and meet the requirements for these loans.

The preferential mortgage loans must be used exclusively for construction, in whole or in part, on a vacant lot in the specified districts. The resulting building must qualify as social housing under Law 468 of 2025, its amendments, and its regulations, insofar as they do not conflict with the draft bill. The loan requires a mortgage secured by the property built, whose location is established by a certificate from the Public Registry (Registro Público) or the National Land Administration Authority (Autoridad Nacional de Administración de Tierras). At the lender’s discretion, the security may instead consist of other properties located outside those districts.

The Superintendent of Banks of Panama would calculate and publish a reference rate during the first 15 days of each quarter, or monthly if considered necessary. To calculate it, the Superintendency of Banks of Panama would receive monthly information from the Savings Bank and the 5 private banks with the largest mortgage portfolios on interest charged on first mortgages outside the regime and repayable over at least 15 years. The rate would be the average of those interest rates, rounded to the nearest quarter of a percentage point. The institution would identify those banks by January 31 of each year. Contracts registered with the Directorate General of Revenue (Dirección General de Ingresos) to obtain the incentive would have no minimum or maximum term and would be subject to bank policies.

The difference between the reference rate and the rate actually charged constitutes the preferential rate differential, capped at 4 percentage points. Each year, lenders would receive a tax credit applicable to income tax over the original term of the loan, calculated according to the difference in income generated by the 2 rates and subject to the differential in effect when the loan was granted. The Executive Branch (Órgano Ejecutivo), through the Ministry of Economy and Finance, would regulate the calculation. An extension through refinancing or a second mortgage would not extend the benefit period.

Unused tax credits could be applied during the following 3 years or transferred under a written contract. The Executive Branch would regulate their receipt and transfer by state financial institutions; their boards of directors could authorize transfers through public auction. Institutions would attach to their income tax returns a schedule of credits for the tax year, accumulated credits, and transferred credits, along with the corresponding contracts. Income and profits arising from the transfer or use of a transferred credit would be exempt income. Each loan would have to be registered with the Ministry of Economy and Finance to use the credit; the creditor would include the differential claimed as a tax credit in taxable income. If the mortgage loan is transferred, the benefit would pass to the new creditor, and the ministry would be notified of the transfer. Transfer of the mortgaged property would not change the tax regime during the original term.

Construction would have to begin within 1 year after the loan is approved. The first transfer of a building or land intended for the construction of social housing in the specified districts would be exempt from real estate transfer tax if the minimum investment were no less than 50,000 balboas (B/.50,000.00). Articles 17 and 18 add a title on unused properties to the Fiscal Code. The proposed provisions impose a tax of 1% of the cadastral value on certain lots without permanent buildings that have an occupancy permit, or with buildings that remain without a permitted use for more than 1 consecutive year; they establish exclusions and refer to other provisions of the Fiscal Code. The draft bill would take effect 1 year after its promulgation. Its provisions concern the cited tax, banking, and land authorities, as well as lenders, property owners, investors, landlords, tenants, and the residential construction sector.