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Panama FAQs

	Do foreigners enjoy the same property rights as Panamanian citizens?
	Is obtaining title free and clear of all encumbrances relatively safe and easy?
	What exactly is the difference between titled land and "right to possession", and how should it effect the decision of someone purchasing property in Panama?
	What are the laws regarding water front property or the maritime zone? What constitutes the maritime zone?
	Can property be owned by a Panama Corporation as well as an individual?
	Can a Panama Corporation sell its shares?
	Are concessions available, and if so what are the requirements?
	How is the real estate tax calculated and applied?
	Is there capital gains tax to be paid of profits earned by the sale of real estate?
	What are the normal closing cost associated with purchasing property in Panama?
	Are there any specific tax incentives relating to the purchase or development of real estate?

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Do foreigners enjoy the same property rights as Panamanian citizens?
Yes, except foreigners cannot acquire land within 10 kilometers of the country border and on islands that have not been declared a special development area.

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Is obtaining title free and clear of all encumbrances relatively safe and easy?
In Panama, all property titles are registered at the "Registro P�blico" (Public Registry) through a bureaucratic yet straightforward process, but we strongly recommend title insurance.

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What exactly is the difference between titled land and "right to possession", and how should it effect the decision of someone purchasing property in Panama?
Not all properties in the Republic of Panama are of private domain and are subject to registry in the Public Registry Office. Many beach front properties, islands and real estate in special tourism zones such as �Bocas del Toro� and �Portobelo� are owned and managed by the national or local municipal governments and only �possession rights� are granted for a determined period of time over these lands. Possession rights are basically land use acknowledgments, which are essentially recognized based on the occupation and use of a certain area of land over time. Persons interested in investing in projects located in these restricted areas should be very careful to ensure that the award of the �possession right� or �limited ownership� be duly granted by the pertinent national or local municipal government authorities. In this sense, it is important to verify the following aspects before investing in this type of real estate:

	That the correct authorities issue the award of the piece of land.
	That the award contains a complete description, including limits, boundaries, encumbrances, and other important details of the land. A complete blueprint shall be drawn and approved.
	That the activity to be undertaken by the purchaser is allowed, that is, that the construction or building to be made is acceptable to the national or local government.
	That the award be extensive for a period of time suitable for the purchaser.

Due to the lack of uniformity regarding the granting entity for “possession rights” it is of utmost importance to review each purchase individually and make recommendations specifically for each land option. The length of the transaction process for the possession rights transfer will vary and can take up to 6 months, depending on many factors, such as the date of recognition of the possession rights, inspection by the granting entity, among others.
Many land developers in these special areas have undertaken the task of procuring the possession title documents and transfer the ownership of the same by means of the sale of a Panamanian corporation and its assets. Special caution should be taken with these transactions as the Panamanian corporation could have undertaken other businesses besides that related to the property and there is no official registry of the commercial undertakings of the same.

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What are the laws regarding water front property or the maritime zone? What constitutes the maritime zone?
Foreigners are encouraged to invest in Panama and not only in real estate; there are tax incentives and investment incentives in almost every sector of the government for foreign investors. Property can be purchased just like elsewhere in the world and title is taken 100% in the name of the person or entity who is buying the property. Property can be purchased personally, through or corporation or business entity and even by foreign businesses.

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Can property be owned by a Panama Corporation as well as an individual?
Yes.

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Can a Panama Corporation sell its shares?
Yes.

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Are concessions available, and if so what are the requirements?
Concessions are similar to a lease and are available; however, the terms may vary for each case depending of the type of property and use.

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How is the real estate tax calculated and applied?

Real Estate taxes are established according to the following values:

	Properties with a registered value of up to US$30,000.00 are not subject to real estate tax
	Properties with a registered value ranging from US$30,000.00 to US$50,000.00 must pay real estate tax at a rate of 1.75%
	Properties with a registered value ranging from US$50,000.00 to US$75,000.00 must pay real estate tax at a rate of 1.95%
	Properties with a registered value over US$75,000.00 must pay real estate tax at a rate of 2.10%

Properties with a registered value of up to US$150,000.00 destined to agricultural activities, further to the customs of the region and certified by the Ministry of Agricultural Development are also eligible for real estate tax exoneration.

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Is there capital gains tax to be paid of profits earned by the sale of real estate?
The real estate capital gains tax has been modified as per the latest tax reform in force since February 2, 2005. Generally, if the property has been owned by the seller for less than 24 months, a 2% property transfer tax is to be paid based on the highest of the registered value or the sale value. This transaction must be reported in the tax return form of the Seller. Should there be represented a higher tax than the one paid, the corresponding additional payment must be paid.

If the property has been owned by seller for more than 24 months, the taxpayer can choose to pay income tax on a fixed 10% rate, without having to add the sale price to the taxable income of the Seller and without having to deduct the property transfer tax already paid.

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What are the normal closing cost associated with purchasing property in Panama?
Realtor commissions are usually 5% of the selling price, although this varies depending on the location. In Panama, the general rule is that the real estate commission is paid by the Seller. The buyer must pay the expenses including the registration of title and lawyers’ fees. The amount to be paid is estimated according to Title II, Chapter 1, Article 314 of the Fiscal Code.

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Are there any specific tax incentives relating to the purchase or development of real estate?
The principal incentives for the development of real estate projects in special tourism zones are contained in Law 8 of 1984. Additionally, from time to time, the government enables an incentive of real estate tax exemption for up to 20 years for new constructions, but to confirm if it is currently available, please contact info@businesspanama.com.