Panama Real Estate Law

The laws of real estate vary from one nation to the next. It is always important to acquaint yourself with these rules prior to shopping for a new home or you might end up buying something you don’t end up owning.

In Panama, there are actually two different kinds of property ownership. The first is one that U.S., Canadian, and most European buyers will be familiar with.

Called “Titled Property” or “Propiedad Titulada”, this form of ownership works as the name implies. The owner of a property is recorded on a title and this is filed in the Panamanian Public Registry Office. This agency maintains all property records for the nine provinces of Panama.

Purchasing Titled Property should be accomplished in steps. The first of these is the completion of a Promise to Purchase Agreement. This step allows time for the buyer to work through their due diligence on the property. When pursuing this step, make sure to retain professionals and remember that title insurances is always cheap no matter what the cost.

When you have done your homework, you will enter into a Purchase and Sale Agreement. Unlike many other countries, your payment for the property will generally be held in escrow until the Public Deed reflecting your ownership is filed at the Public Registry.

Another common form of real estate ownership in Panama is called “Rights of Possession” or “Derechos Posesorios”. You will run across quite a lot this in Panama’s more rural areas. A Rights of Possession property is actually owned by the local or national government. You don’t actually buy this land, you essentially lease the it under a defined set of parameters for a fixed period of time. When dealing with this form of ownership, you will want to perform an extraordinary level of due diligence to insure that the term of your plans, and every aspect of your intended use are within the guidelines of your land use agreement.

If you are thinking about retiring in Panama or just visiting to develop an asset protection, business, banking, or investment strategy, make sure to begin by building a strong relationship with a local attorney. There are many third party sources able to help you select the best one for your needs. These groups provide unbiased reviews of providers in Panama’s professional community speeding you to a successful pairing.

For more information on retirement, banking, estate management, taxation, employment, forming a Panamanian foundation or corporation, real estate, trade policy, local economics, vessel registration, obtaining legal counsel, or any other topic related to doing business in Panama… click here

Thanks to a very pro-immigration and pro-investment government, one of Panama’s easiest to understand property tax schedules begins and ends with a zero!

In certain instances, you can purchase property in Panama that has been approved for a 20 year exemption from all property tax.

The statutes allowing this remarkable concession were recently extended, but not all properties qualify. Make sure to ask your real estate agent and confirm their finding with your Panamanian attorney.

If the house you have grown fond of doesn’t qualify for the tax abatement, take heart. In some instances, purchasing a property that is subject to taxes makes sense, as those with the 20 year exemption tend to be priced higher. You should also check to see how many years of the exemption remain. If a lower priced property affords savings that exceed the estimated total of your taxes during a comparable period, you might want to consider going with the lower price.

To estimate you tax bill, all you need to know is the “Registered” or “Assessed” value of the home. The annual tax total on a property is arrived at by calculating the total due in each applicable tax bracket, then summing the results. This whole process begins at $30,000 of Registered value. No tax is due until a property reaches that value.

For example, if you were calculating the taxes on a $100,000 house, your tax bill would be calculated this way.

Tax on $0 to $30,000 of value = Zero X Zero or $0.00

Tax on $30 to $50K of value= ($20,000 x 1.75%) or $350.00

Tax on $50 to $75K of value= ($25,000 x 1.95%) or $487.50 , plus

Tax on $75 to $100K of value= ($25,000 x 2.10%) or $525.00

Add the totals from each bracket and you have an annual Property Tax of $1,362.50

There are some other factors to consider, but for the most part calculating your local property taxes in Panama is this easy.

If you are considering the purchase of a vacation or retirement home in Panama, make sure to position yourself in a tax positive way. To do this you will need some help from a local attorney. If you want to insure that you make the right choice in local counsel, contact one of the many third party sources able to provide you with unbiased reviews of individuals and firms.

For more information on buying or renting real estate, forming a Panamanian foundation or corporation, employment, banking, trade policy, corporations, tax benefits, local economics, vessel registration, obtaining legal counsel, or any other topic related to doing business in Panama click here

A rise in real estate related litigation in Panama is raising eyebrows, but a closer examination reveals that his is evidence of the integrity of Panama’s real estate markets.

Much of litigation swirling through the courts is rooted in the country’s boom era condo markets In the midst of a feverish market, buyers left deposit money and contracts in the hands of developers with little thought to the implications. Now that times have changed in their home countries, some of these buyers are looking for an exit sign.

It would be unfair to say that boom era buyers were foolish to enter into agreements for units that wouldn’t be delivered for years in the future. Promises of an ocean front unit in paradise, can lead even the most sober buyer to throw their heart over the bar. What we can do is learn from the experience of these back out buyers, while snapping up some of the bargains they are leaving behind.

Litigation is always a bad outcome in a real estate deal. One of the best insurance policies against disappointment is to buy a finished until rather than one still on the drawing board. Always work with a buyer’s agent able to guide you along the way. Make sure to have your deal reviewed by a Panamanian attorney prior to closing.

Thousands of successful real estate transactions are done every year in Panama. If you were to look into the details of these you would find that the buyers involved were very adept at crossing T’s and dotting I’s. Haste and a failing of attention to detail are not advised in any endeavor. Take you time and your real estate ventures in Panama will be among your best.

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Panama has a number of laws and incentives in place to attract and protect real estate investment by foreigners. In general, foreigners are allowed by law to own real estate in Panama, with few restrictions, and acquiring property is a largely painless affair.

However, any foreigner (or national, for that matter) considering a real estate purchase in Panama should enlist a legal representative to perform due diligence on the property and oversee the details of the transaction, to ensure there are no unpleasant surprises down the road. Read the rest of this entry »

Making the choice to buy real estate in Panama is a decision that should not be taken lightly. There are many issues and backhanded business practices that you need to make sure you know exactly what you are getting into and what you thoroughly need to look into that you might normally take for granted if you come from a more westernized country. Even working toilets are a commodity here that you would need to explicitly address if you expect to have one in your home, and that is just beginning to touch on the things you need to be aware of.You would not accept less than your standard requirements anywhere else, do not here. A little bit of knowledge regarding how the Panama real estate business directory will help you immensely.

Real estate law is difficult to understand for non-natives and there are many easy ways you can be taken advantage with if you do not understand the way the law is structured in Panama. Making a simple mistake by employing the wrong lawyer can mean a bad deal if you are not careful since lawyers into buying property for more than it’s worth without the amenities you expected to be present. Read the rest of this entry »

Article 764 of the Panamanian Tax Code indicates which properties are exempt from property tax. These properties include:

1. Properties registered at a value of 30,000 USD or less including improvements to the land, i.e. construction
2. Land used exclusively for farming and registered with the Ministry of Agriculture and Development at less than 150,000 USD.

The tax basis should be understood as being the value of the land plus the improvement. Article 766 of the Tax Code goes on to establish the property tax table to be the following:

Registerd Value of Property

• Under 30,000 – Yearly Tax Percentage 0%
• 30,001 – 50,000 – Yearly Tax Percentage 1.75%
• 50,001 – 75,000 -Tax Percentage1.95%
• Over 75,001 – Yearly Tax Percentage1.95%

If you have a property valued at 100,000 USD you should pay the following in property taxes:

2.10% of 100,000 USD (0.00 USD for the 0 -30,000 bracket which is tax exempt) + (349.98 USD for the 30,001 – 50,000 bracket at a rate of 1.75%) + (487.48 USD for the 50,001-75,000 bracket at a rate of 1.95%) + (524.98 USD for the 75,001 – 100,000 bracket at a rate of 2.1%) = a total of 1362.44 USD for annual property taxes

Alternative Property Tax Calculation – following Appraisal

Under the recent real estate tax amendment of 2005, the following alternative tax rate is applicable to properties whose property taxes are paid up to date and whose registered value in the public registry has been updated with a sworn declaration of the estimated value of the property, duly signed by an appraiser:

Registerd Value of Property

• Under 30,000 – Yearly Tax Percentage 0%
• 30,001 – 50,000 – Yearly Tax Percentage 0.70%
• 50,001 – 75,000 -Tax Percentage 0.90%
• Over 75,001 – Yearly Tax Percentage 1.0%

So the same property under the alternative property tax calculation would be as follows:

1.0% of 100,000 USD (0.00 USD for the 0 -30,000 bracket which is tax exempt) + (139.99 USD for the 30,001 – 50,000 bracket at a rate of .70%) + (224.99 USD for the 50,001-75,000 bracket at a rate of .90%) + (249.99 USD for the 75,001 – 100,000 bracket at a rate of 1.0%) = a total of 614.97 USD for annual property taxes

Those properties which are not paid up to in property taxes and which have not presented their estimated value in a timely manner, may not take advantage of this alternative calculation.

If you have real estate, with no improvements built on it, and you register the property with an updated cadastral value within one year of the publication of the amendment to the Tax Code – i.e. December 2007 – you will be eligible to have the property taxed according to the alternative tax rate.

In order to apply for the alternative property tax calculation you must present the following documentation:

1. Application addressed to the Director of the Cadastral Department
2. Paz y Salvo (Certificate of good standing from the tax department)
3. Paz y Salvo (Certificate of good standing fro the Public Registry)
4. Copy of cedula of the property owner or Paz y Salvo from the Company which owns the property
5. Current appraisal issued by an approved appraisal official

Panama’s real estate sector is poised for an “unprecedented boost” as a result of a new law recently passed by the country’s National Assembly giving multinational companies performing certain tasks a significant tax break, according to company specialising in investment property in Panama.

The Knightsbridge Investment Group says that the new rules, known as ‘Law 41′, are designed to encourage the establishment of multinational companies in Panama, and give exemption to multinationals from the payment of income tax in the Republic of Panama for all services provided to any entity domiciled outside Panama. In addition, the legislstion allows licensed corporations to hire trusted foreign employees to fill management positions in the company, authorizing them to work and reside in Panama, which could spell an influx of international professionals moving to the jurisdiction.

While years of economic and political stability, a healthy tourist industry, and the expansion of the country’s greatest economic asset, the Panama Canal, have underpinned the country’s real estate market, Knightsbridge Investment Group has suggested that Law 41 will give the country’s real estate sector an “unprecedented boost”.

HP and Caterpillar are just two of the first to announce new offices in Panama City, with Proctor and Gamble also rumored to be relocating a significant part of its Latin American business to Panama, Knightsbridge claims.

Residential sales prices have been increasing, particularly in prime locations, but Knightsbridge says that another interesting trend has been those related to Class A office space. Vacancy rates for Class A office space are already down from 30% last year to 3%, meaning that today there is virtually no available Class A space in Panama City. In addition, with Class A office space in such demand, lease rates have increased by approximately 20% over the past year, the company stated.

“Average lease rates for Class A are $16-$20 per m2 per month with total occupancy costs at $22.74 per m2 per month (below those in the region including Costa Rica, Dominican Republic, Bahamas, Uruguay, Caracas, Bogota, Mexico City, Buenos Aires, Sao Paulo, and Rio de Janeiro) giving ample space for growth and also allowing for multinationals moving to Panama” announced Alan Morrison, Vice President of Knightsbridge Investment Group, Panama City

“In addition, current sales prices are favorable, with the average sale price at $2,200 per m2. With these prices and Law 41 providing the final impetus for Multinational Corporations to relocate to Panama, the time is right for those looking to make an investment in real estate in Panama,” Morrison concluded.