For years, Panama has been one of the fastest-growing economies in Latin America. The country, with an average economic growth of 4.6%, promotes new opportunities for foreign investment in different industries. Buying property in Panama or investing in the country’s real estate sector is a wise decision, as it is one of the most profitable industries to get involved in. Learn about the regulations, processes, and benefits of buying a property in Panama.
Regulations to consider when buying property in Panama
Foreign executives buying property in Panama must know that this process involves two different types of regulations: civil and fiscal regulations.
Civil Regulations
Civil regulations involve the private relationship between the buyer and the seller. Article 977 of the Civil Code establishes that the obligations derived from contracts have the force of law between the parties in question. In general, the parties will be free to negotiate their own property purchase and sale contract as long as they do not engage in illegal activities.
Fiscal regulations
The fiscal or tributary regulations involve the taxes to pay for the purchase of a property in Panama. Property owners in the country must pay the ‘property tax’ (impuesto sobre bienes inmuebles) every year. You should be aware that buying property in Panama is not possible if there are current real estate debts.
Rates applicable for principal property
The rates applicable for principal property are as follows:
- 0% on properties with a value between US$0,00 to US$120,000
- 0.5% on properties with a value between US$120,000 to US$700,000
- 0.7% on properties that exceed the value of US$700,000
Non-principal property rates
The regular rates that are applicable to non-principal properties are as follows:
- 0% on properties with a value between US$0,00 to US$30,000
- 0.6% on properties with a value between US$30,000 to US$250,000
- 0.8% on properties with a value between US$250,000 to US$500,000
- 1.0% on properties that exceed the value of US$500,000
Property transference and capital gains tax
When selling or buying property in Panama, the following taxes must be considered:
- Property transference tax (Impuesto de transferencia de bienes inmuebles) – 2% applied to the property’s value
- Capital gains tax (Impuesto de ganancia de capitales) – 3% over the capital gained through the sale of the property
Process of buying property in Panama
If you are planning to buy property in Panama, you must follow these 3 key steps:
Step 1: Negotiate and elaborate a purchase/sales contract
The elaboration of a purchase and sales contract is strongly recommended with the support of a local expert to guarantee security and protect from possible frauds.
Step 2: Pay the related taxes
Pay the required taxes following the Panamanian fiscal code and the property values agreed in the purchase and sales contracts.
Step 3 – Deed preparation at the notary public
Authenticate the purchase and sales agreement at a notary public, and register the purchase and sales deed at the Public Registry of Panama.
Benefits of Buying a Property in Panama
For many years Panama has been a politically stable country that is growing economically every year and the real estate sector is no exception. Likewise, the property’s value is constantly increasing, and this creates different kind of business opportunities for investors, such us:
- Lease of properties
- Capital gain of the property and the possibility of selling it at a higher price
Buying a property in Panama will also grant foreign investors the opportunity of applying for a permanent residence if the value of the property exceeds US$300,000.
Get Assistance from Biz Latin Hub when buying property in Panama
It can be challenging for foreign executives to understand local regulations and requirements when investing in real estate in Latin America. However, buying a property in Panama can be an extremely beneficial investment when doing business in the country. Receiving the support of a local expert will significantly facilitate the process of buying a property in Panama by providing you with the necessary assistance until the process is completed. Our multilingual team of legal, accountants and payroll experts has comprehensive experience in company formation, accounting and finance, market entry support and more. Contact us now for more information on how we can advise you when buying real estate in Panama or doing business in Latin America. Learn more about our team and expert authors. Contact Biz Latin Hub today to receive our expert financial and legal services.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
