Regulations for Buying Property in Panama

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.

The current rate of real estate is divided in two types: 

• Rates applicable for principal property ( the principal property is where you live).
• Regular rates (applicable for additional properties that are not the main home). 

The rates applicable for principal property are: 

The regular rates that are applicable to non-principal properties are: 

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): This tax is applied to the purchase-sale transaction of a property and represents 2% applied to the property’s value registered before the ANATI or the National Land Administration Authority. This tax must be paid before signing the purchase-sale in a notary public, as it is mandatory to attach the payment receipt to the draft of the deed.

Capital gains tax (Impuesto de ganancia de capitales): The capital gains tax is the last tax involved in the transaction of buying a property in Panama. The capital gains tax must be paid by the seller and correspond to the 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 

Before starting the process, we strongly recommend the elaboration of a purchase and sales contract with the support of a local expert. The purchase and sales contract will guarantee security in the transaction and will protect you from possible frauds. 

Step 2: Pay the related taxes

The second step is to pay the taxes mentioned above following the Panamanian fiscal code and the property values agreed in the purchase and sales contracts. Investors must consider that once the property is transferred in their favour; they will need to comply with the real estate tax payment annually.

Step 3 – Deed preparation at the notary public

After paying all the required taxes, you’ll need to authenticate the purchase and sales agreement at a notary public. The authenticated deed will need to be registered at the Public Registry of Panama.  You must consider that to register the purchase and sales deed, the property can’t have debts before the IDAAN (Instituto de Acueductos y Alcantarillados de Panamá). 

Finally, the registration of the property transference at the public registry of Panama will be completed in approximately 10 business days.

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.

Additionally, 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.

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