Bienes Raices y Propiedades (Real Estate Transactions)
Foreigners, whether residents or non-residents, enjoy the same rights and privileges when purchasing and selling real property as do Panamanian citizens.
Article 764 of the Panamanian Tax Code indicates which properties are exempt from property tax. These properties include:
Properties registered at a value of 30,000 USD or less including improvements to the land, i.e. construction.
Land used exclusively for farming and registered with the Ministry of Agriculture and Development at less than 155,000 USD.
A new law (No. 58 of December 28, 2006) has been recently signed offering incentives for investors wishing to build, furnish or remodel lodging facilities outside the Panama’s Special Tourism Zones. The new law establishes attractive tax exemptions for a minimum investment of US$3 million in the Metropolitan area, including exemptions on the import of material and equipment, the import of vehicles for tourism development, and a 20-year exemption of property taxes.
Outside of the Metropolitan area, the minimum investment is US$50,000.
Although there have been 10 Special Tourism Zones declared in Panama, there are other areas with great investment potential such as mountain regions and islands, among others.
The new law is expected to draw more foreign investors to Panama as the country becomes more popular among expats from Europe and North America.
Panama has three different types of property:
Panama has a very sophisticated Public Registry with a cadastral department that oversees the registration of titled properties in all nine provinces of the country. Titled property is very similar to that of “fee-simple” titles in the USA. Panama Titled property is the most preferred type since it is easily verifiable in the Public Registry system, as well as provides the most security from an investment standpoint, since private property is guaranteed by the constitution of the Republic of Panama. Generally, banks will issue mortgage loans on titled properties, registering liens against the title as collateral on the loan. Titled properties also generally incur annual property taxes when the registered value is over US$30,000.
Titled Property procedures:
Title Search: you should hire a competent lawyer to do a title investigation consisting of;
a) verification at the public registry that the title is in fact in the name of the seller, and it is free and clear of encumbrances, liens, or other issues that could affect the free disposition or transfer of the title;
b) the catastral survey map should be reviewed, and in some cases it is recommended to have a professional surveyor physically verify the maps points on the property, to avoid future boundary conflicts;
c) verification of utility debts (water and sewage, power, telephone, etc.).
Promise to Purchase Contract: Generally a small down payment is made at the signing of the promise to purchase contract, and its’ purpose is to secure the property and provide enough time for the title search, as well as to coordinate payment arrangements for the closing and the setup of a corporate property holding structure (if applicable). This contract must be registered at the Public Registry to guarantee that the property cannot be sold to any third parties in the interim prior to the final closing.
Buy-Sell Contract: This contract is registered at the Public Registry and the final balance is paid to the seller, or in some cases, if an escrow agent is used, payment is made once the title is transferred to the buyers’ name.
Title Transfer: The property ownership is officially transferred to the buyer once the property title is transferred to buyers’ name, which is done immediately after the buy-sell contract is signed by each party and registered at the Public Registry. In some cases, if the title is in a corporations’ name, and the seller agrees to sell the corporations’ shares, then there is no transfer of title, only a transfer of shares of the corporation.