• Must I be a resident to buy property in Panama?
Non residents are allowed to purchase and own property, with the same rights of Panamanians.
• Is it safe for foreigners to buy property in Panama?
Absolutely. Buying property in Panama is very safe. There are over a dozen laws in Panama established specifically for protecting foreign investments. Panamanian law guarantees that property titles, including those owned by foreigners, are protected by law. Title checks are easily conducted on-line via the Panama Public Registry. Tens of thousands of foreigners own property in Panama given its strategic location, strong legal framework for property ownership and transfer, and fast growing economy. All of that said, foreign investors can and sometimes do lose money investing in Panama real estate. It is important to work with reputable developers, lawyers, and real estate companies and do your due diligence.
• Is Panama safe?
Panama is one of Latin America’s safest countries. Violent crimes statistics are lower than many major American cities. Common sense precautions which should be exercised by foreigners living or traveling anywhere in the world will help ensure your stay in Panama is everything you hope for.
• Is the drinking water safe?
Tap water is safe to drink almost everywhere in Panama. It is not necessary to ask for bottled water at restaurants or avoid ice in drinks. Bottled water is also readily available for those with a preference.
• Is Panama Politically stable?
Following the removal of Manuel Noriega in the late 1980’s, Panama has flourished into a stable democracy, with democratic elections every 5 years.
• What is the local currency?
The currency is dollarized since 1904. The “Balboa” currency only exists in coins and is 1:1 tied with the US dollar.
• Do I need to know how to speak Spanish?
The official language is Spanish and it is therefore helpful to speak it. However, many Panamanians do speak English, and there are many foreigners living in Panama who do not speak Spanish.
• What are the steps to buy pre-construction property in Panama?
STEP 1- Find a property you like. Our advisors can assist you chose the best one that matches your needs.
STEP 2- Reserve the property. Reservation amounts range between $1,000 and $10,000. Within a period of 30 days, you are free to cancel the reservation and get the full reservation amount back. Please note that some developers restrict reservations to 15 days.
STEP 3- If you’re a second home-buyer or retiree, please skip to STEP 4. If you’re an investor planning to resell the property within a short period of time, you can (but don not have to) establish a corporation and purchase the property under the name of the corporation. We can refer you to one of our affiliated lawyers that can complete this step in approximately 3 days, the cost is approximately $1200 US. For more info on taxes and corporations, please refer to the “TAX RELATED QUESTIONS FOR REAL ESTATE IN PANAMA” section below.
STEP 4-An official “promissory purchase agreement” is sent to you, take the time to review it (by yourself or by a lawyer of your choice)
STEP 5-Within the reservation period, sign the “promissory purchase agreement” and complete the first 10% down payment.
STEP 6-Depending on the project completion dates, you will need to complete the 2nd 10% and 3rd 10% down payments before taking possession of the property. The payment dates varies from 1 month to several years, please inquire about your project payment schedules.
STEP 7-The remaining 70% is due upon project completion (again, the dates depend on the project). You can obtain financing for the full remaining 70% payment from one of the 70 International banks located in Panama. For more info on Financing, please refer to the “PROPERTY FINANCING IN PANAMA” section located below.
• What payment amount is normally accepted to reserve a property?
Reservation amounts range from $1,000 to $10,000. Within a period of 30 days, you are free to cancel the reservation and get the full reservation amount back. Please note that some developers restrict reservations to 10 days.
• What amount is normally accepted as a down payment for purchasing property in Panama?
Generally, sellers will accept 10% as a down payment upon signing the “promissory purchase agreement”. The down payment is shown as “good faith” on behalf of the buyer, so that the seller knows that the buyer is serious
• Do “promissory purchase agreements” need to be in Spanish, in order for them to be legally enforceable in Panama?
No. The law does not require a “promissory purchase agreement” to be in Spanish to be legally enforceable, however, if there is ever a dispute over the transaction in a court of law in the Republic of Panama, then the court will require that the contract be translated to the Spanish language by an official (licensed) translator of that language. Most developers prepare the original “promissory purchase agreement” in Spanish, and provide the clients with an official English translation of the contract.
• Can a foreigner open a business in Panama?
Panama law supports foreign investments and is pro-business. There are numerous incentive programs for foreign investors. Panama does not restrict foreigners from owning companies or businesses. Company start-up laws are quite flexible and inexpensive
TAX RELATED QUESTIONS
• How is the personal income tax calculated in Panama?
Panama’s personal income tax is based on a sliding scale, ranging from a minimum of 2% after the first $3,000, 7% after the first $9,000, to a maximum rate of 30% for over $200,000. Deductions are made based on incurred expenses.The income tax only applies to Panamanian-sourced income. This is irregardless of whether you are a Panamanian citizen or a temporary resident.
• How is the rental income tax calculated in Panama?
If the property is owned by a person (no corporation), the property rental income tax is based on a sliding scale. No taxes are to be paid for rental income less than $800/month, ~15% taxes are applicable for rental income of about $1,500/month, ~18% taxes are appicable for rental income of about $2,000/month, etc.
If the rental property is to be owned by a corporation, lawyers recommend to use “small operation company” that is taxed differently from a regular corporation. With a “small operation company”, the tax will be computed according to the personal income tax up to the first net $100,000 plus 30% on the net income exceeding $100,000 up to $200,000.
• Are there property taxes in Panama, if so, how much?
In a move to increase foreign investment, The Government of Panama has implemented a 20 year Property Tax exemption applicable to all buildings (both residential and commercial) but not for land. Therefore $0 property taxes are to be paid for the first 20 years. This exemption is limited to projects that have a construction permit before December 31st 2009, which is almost 100% of the new projects listed on our website
If the property is old with no exemption years remaining, the tax brackets are as follows:
Properties with a registered value of $30,000 or lower do not pay property tax. For properties of a higher value they pay as follows:
• 0% for properties below $30,000
• 1.75% for properties ranging from $30,000 to $50,000
• 1.95% for properties ranging from $50,000 to $75,000
• 2.1% for properties above $75,000.
• What is the liability for real estate investors that “flip” (buy & sell shortly afterwards) properties?
The liability for real estate investors in Panama is limited. The main liability for real estate investors is capital gains taxes, which some people avoid through the use of Panamanian corporations. As long as you deliver what is promised according to the terms of the buy/sell contract, buying and selling property in Panama is virtually liability free.
• Are there capital gains taxes on the purchase and sale of real property in Panama?
Yes, the law stipulates a 10% capital gains tax on the purchase and sale of real property in Panama. The capital gains tax is triggered upon the transfer of the title at the Public Registry.
• Is there a way to minimize capital gains taxes on property sales in Panama?
The most common strategy that people use in Panama is to hold property in the name of a Panama corporation, and instead of transferring the property to the buyers name upon the sale, the “bearer shares” of the corporation are sold as a whole to the buyer. Since corporation “bearer shares” are not registered, there is no record of the sale. Upon the sale of the shares, the new owner simply changes the board of directors/officers to take control over the corporation.
PROPERTY FINANCING IN PANAMA
• Are financing sources readily available for foreigners (non-Panamanians)?
Yes, most banks in Panama offer up to 70% financing on the purchase price to foreigners (non-Panamanians). Some of these banks include; HSBC Bank, Scotia Bank, BAC International Bank, Banco Cuzcatlan (Panabank), Banistmo, Banco General, Bank Boston, BBVA Bank, Banco Continental, Credicorp Bank, Multi-credit Bank, Banco Nacional de Panama, and others.
• What documentation is normally required for foreigners (non-Panamanians) to obtain financing?
Most banks in Panama that finance foreigners require the following 4 documentations from the applicant(s) of the loan; (1) passport photocopy (sometime an additional form of ID is required), (2) one or two bank reference letters, (3) A recent certification of work, (4) last 2 years financial statements.
• What are the interest rates for financing property in Panama?
The interest rates are generally right in line with those offered in the United States. November 2007 bank rates were between 6.1% and 6.5%.
• How long is the mortgage approval process?
Depending on the bank, 5 working days is the average.
• What are the costs involved in setting up the mortgage?
There is only a closing cost of approximately 1.5% of the loan plus legal fees (about $1,500). This includes the deed, bank lawyer’s fees, notary, and registration in Panama’s public registry.
• If you take a 5 year term and decide to sell in 2 years, are there prepayment costs and how are they calculated?
Yes those figures depend on the bank. Scotia Bank charges a penalty of 2% of the mortgage amount within the first 2 years and 1.5% from the 3rd to 5th year.
• Are there any special financing deals available in Panama, for retirees?
Yes. If you have obtained a Pensioned Visa (this is a type of resident visa for foreigners who have proven that they receive a pension of at least US$500 per month) in Panama, and you are of a certain age, then you qualify for special discounts for interest rates on mortgages.
DEVELOPING REAL ESTATE IN PANAMA
• Is it possible for foreigners to enter in the real estate development business in Panama?
Absolutely. The Panamanian government welcomes foreigners to develop real estate in Panama.
• If I buy a large plot of land, what are the procedures to get residential lot development permits?
The first step is to get the property surveyed topographically by a Panamanian licensed topographer / engineer. Second, you need a Panamanian licensed architect to design the master plan. Third, you need a Panamanian engineer to prepare the construction drawings. Fourth, you need a Panamanian licensed environmental engineer to prepare an environmental impact study. Fifth, you present the project to and get it approved by the ANAM (Autoridad Nacional del Ambiente), which is the equivalent of the Environmental Enforcement Agency in the USA. Sixth, you present the project to the municipal engineer to get the construction permits. Depending on the project, there may be additional steps necessary in terms of permitting
• What is the time frame and cost to obtain permits for developing residential lots in Panama?
The time frame and cost depends on the size of the project, and the region you are developing in. Some projects can take years to obtain permits and cost upwards of US$50,000, others can take as little as 3 months and cost a few thousand dollars. It really depends on the specifics of the project, where it is located, and the impact it will have on the environment. Usually, once the environmental impact studies are approved by ANAM, the other municipal permits are relatively quick.
• What are the costs for surveying property in Panama?
Currently, surveyors charge in the range of $200 per lot or per hectare (2.4 acres per hectare) for regular linear surveys (outlining the perimeter, size and borders of the property). Topographical surveyors charge from $150 up to $500 per hectare, depending on the location of the property, condition of the property, and the specifics needed (for example, if you want special information included, such as identifying specific species of trees, depth of rivers, etc.). It is important to hire a surveyor that is reliable, and who will provide accurate data, as well as computerized surveys (usually done using a program called AutoCAD).
• What do environmental impact studies cost in Panama?
Environmental impact studies range in price from as little as $750 to $75,000, depending on the size of the project, impact on the environment, and depending on the environmental engineer you hire for the job. For large developments with high environmental impact, we recommend hiring a top quality environmental engineering firm to handle the environmental impact study, as they have the human resources and organization to prepare a study that will get approved under harsh scrutiny and difficult circumstances. For smaller, non-impacting projects, an individual environmental engineer may suffice. However, please note that the environmental impact study is detrimental to the permitting of the project, and it is important to hire qualified engineers to prepare your environmental impact study, otherwise, if the project is rejected by ANAM, you may be forced to wait up to 2 years to re-present the project for approval.
IMMIGRATION and VISAS
The Panamanian government has created several laws which, depending on the particular type of visa applied for, enable foreigners to obtain legal temporary or permanent residency, work permits, and in some cases citizenship and / or passports in the Republic of Panama. Most of these laws have been created to promote foreign investment in the country which benefits the local environment or local economy of Panama.
Below we have listed several immigration programs. Some of these programs offer temporary or permanent residency, citizenship, and passports and others may not. Some of these programs only offer temporary resident visas, or work permits.
Please read through the programs and determine which is the best for you:
Programs offering Immediate Panamanian Passport:
Immediate Passport Program
Programs offering Permanent Residency & Passport:
Self Economic Solvency Visa
Agricultural Investor Program
Small Business Investor Program
Tax Free Processing Zone Investor Program
Programs offering Permanent Residency only:
Retired or Pensioned Program
Programs offering Temporary Work Visa only:
City of Knowledge Work Visa
Programs offering Temporary Immigrant Visa only:
Multiple Entry & Exit Visa (Optional):
Multiple Entry and Exit Visa
Many international investors and companies find Panama to be an excellent location for investing in reforestation, manufacturing plants, assembly plants, distribution facilities for import/export, software creation facilities, call centers, and a variety of other business activities. Many times, investors find that legal residency qualification is just an “extra benefit” to the investments that they are making in Panama.
Obtaining a second residency in Panama is useful for those who wish to:
· Have a second home overseas in a tropical country where they can live at or visit.
· Have a “safe haven” to escape to in the event of war or any type of civil unrest that may threaten their family.
· Actually live in Panama permanently, perhaps after retirement.
· Relocate to a tropical, stable, safe country where it is very economical to live in comparison with most other developed countries such as the US, Canada, Europe, etc.
· Relocate to a more “tax friendly” country where foreign earned income, capital gains, and interest income is not taxed.
· Relocate to a country where frivolous lawsuits are not recognized by courts, and assets can be truly protected through a corporate shield, without the risks of “piercing the corporate veil”.
· Relocate to a country where one can begin business operations economically, and without heavy restrictions, regulations, or taxes that hinder the growth of the business.
· Relocate to a country where real estate is still affordable for purchasing homes in the city or land at the beaches, mountains, lakes, etc.
Panama Immigration Statistics
According to the National Immigration Directory, 1,118 retiring foreigners (pensionado visas) immigrated to Panama between January 2002 and April 2005. The trend is accelerating rapidly, showing a 29% increase in 2003 over 2002, and 99% in 2004 over 2003. The 2004 increase was over 400%. In 2005 already 2500 new immigration visas have been issued. The largest group are US nationals, making up 67% of the total.
RELOCATING PETS TO PANAMA
• What do I need to know before relocating my pet to Panama?
In many cases, pets are valued as much as family members, if not more… As a result, their comfort and safety when traveling are as big of a concern as ours. The following provides information that can help you make the best decisions for your pets travel needs.
Your dog or cat must have papers proving that a rabies vaccine was administered between thirty and 180 days prior to entry into Panama.
You must take your pet to the vet for a complete health check as well as to get a certificate for international travel. This health certificate for international travel must be completed within 10 days of the date you plan to travel to Panama.
You must then have your pet´s certificate of international travel stamped by the nearest Panamanian Embassy or Consulate. These stamps cost approximately $30.00.Once you arrive in Panama with your pet, you must then pay a fee of $130 USD. You must also take an oath agreeing to home quarantine your pet for 40 days.
If any of the above steps are neglected it is possible that the authorities will take your pet upon arrival to Panama to be quarantined for 40 days at the airport vet facilities at a cost of 12 USD per day. In most cases these facilities are not as plush as what your pet may be accustomed to.The airport vet is the only person who can approve your animals papers and release your pet. The normal hours of the airport vet are between 9AM to 12PM Monday through Friday. And 1PM to 4PM Monday through Thursday. With this in mind, try to arrange the arrival or your pet´s flight according to the airport vets work schedule.
• What do I need to know about transporting my pet in an airline?
• Some airlines have embargos on pet transport during extreme summer or winter months.
• Some airlines will allow you to take your pet in the cabin with you as long as your pet meets certain weight and size restrictions
• There is usually an extra fee associated with bringing pets. Some airlines charge according to the weight of the animal others charge a flat rate.
If at all possible, try to arrange for your pet´s flights to be as direct as possible. The less time your pet has to spend traveling, the less stress he will experience.