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Panama was recently
reported by Pinkerton Intelligence Agency to be one of the safest countries
anywhere in the world.
There are laws in Panama established
specifically for protecting foreign investments, not to mention that private
property in Panama is protected by the constitution of the Republic of Panama.
Thousands of foreigners own property in Panama, and we process Panama real
estate transactions for foreigners every day without a problem.
Panama has Latin America's second
freest market economy (after Chile), a first- world
communications and road infrastructure, the dollar as its
currency, a major international banking center, the largest
Free Zone in the Americas and an unmatched geographic
position. And Panama City, the capital is a safe and
attractive place for foreigners to live.
If you talk to small and large investors here many will
tell you what a pleasure it is to work with Panama's entrepreneurial class most
of whom were educated in the States or worked for Americans in the former Canal
Zone.
The
present Torrijos administration is implementing some of the most investor and
retiree-friendly laws anywhere. They are also serious about fighting corruption-
are rarity in Latin America.
Property
taxes are only levied on properties that have a registered value of US$20,000 or
more (registered value is the value stated on the public deed that is registered
at the Public Registry). The maximum annual property tax is 2.10% of the
registered value of the land (land value under US$20,000.00 is exempt of this
particular tax, as per Law # 36 of 1995). Property tax is also levied on the
declared value of the building improvements on the land, however, the laws in
Panama offer tax exonerations for building improvements for up to 20 years (this
was implemented by the Panamanian government to promote new construction, which
makes up a large portion of Panama's overall GDP). Possession Rights properties
do not incur property taxes, since the property technically belongs to the
government of Panama.
The
closing costs vary depending on the particular transaction. For example, if the
property is held in the sellers personal name, and the buyer is transferring the
property title to a Panamanian corporation (most recommended), then the closing
costs would include; (1) the legal property transaction fee of US$1200
(includes; title search, buy/sell contract, closing, & property title transfer
service), (2) public registry title transfer fees of approx. US$200 to US$300,
(3) escrow fees from 0.5% to 1% of the transaction amount (vary depending on
amount of transaction, see
www.panamatitle.com for details), and (4) incorporation fee of US$1000 to
setup the Panama corporation. However, if the property is held by a Panama
corporation already, and the buyer is purchasing the shares of the corporation,
then the transaction is relatively simple because there is no registration of
title transfer, meaning that there is no title transfer tax, and no public
registry title transfer fees. In this case, the closing costs would include; (1)
the legal property transaction fee (includes; title search, purchase of shares
contract, and closing for US$800), (2) change of directors / resident agent of
the corporation (approx. $350), and (3) escrow fees from 0.5% to 1% of the
transaction amount (vary depending on amount of transaction, see
www.panamatitle.com for details).
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.
The
first step
is to find a Panama property you like, and negotiate the price and terms of the
sale with the real estate broker.
Second,
you should seek a qualified attorney in Panama to handle the due diligence and
title search on the property, putting your Panamanian attorney in contact with
the real estate broker to gather copies of the property title documents and
survey (if available).
Third,
have your attorney prepare a Promise to Buy/Sell Contract to lock in the
property sale and secure the terms agreed upon (a deposit of 10% is usually
required by the seller upon signing the promise to buy/sell contract), plus this
gives you time to do the due diligence and get your funds into the escrow
account
Fourth,
once the attorney has confirmed the property title is clean, then the final
closing is scheduled, where the buyer/seller sign the final Buy/Sell Contract.
Fifth,
payment is made to the seller, broker, and attorney from escrow (in some cases,
buyers/sellers agree that payment is made after the public deed of the property
is transferred and registered into the buyers name). Sixth, the Buy/Sell
Contract is registered at the Public Registry where they transfer the property
title ownership from the previous owner to the new owner
It is standard practice
in Panama for the seller to pay for the title transfer tax, however, in some
cases, depending on the negotiation between the buyer and seller, the seller may
insist that the buyer pay the title transfer taxes.
The real estate industry
in Panama is just developing and so prices are reasonable and some of the
most comparative anywhere. Investment opportunities include city
apartments and high rises, single family residences, coastal retreats, islands,
mountain land and homes, subdivisions, coffee plantations, teak forests, and
jungle habitat. Most real estate is listed for sale with brokers. Real estate
closings require the participation of a Panama real estate lawyer. The laws and
practices in Panama are different than in the US, as certain lands are untitled
and lawful ownership of such property is presently not possible. Be careful. Ask
us to help you.
Can foreigners obtain a
mortgage in Panama?
Anyone with
permanent residence should be able to get a mortgage and
those that aren't but the standards are different here than
what you are used to and may also vary greatly from bank to
bank.
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