REAL ESTATE IN PANAMA

Whether you are renting, investing or purchasing real estate in Panama, OIS, through our qualified attorneys can provide you with the legal assistance that you need, we will help you with all the legal documentation that you require for the different types of real estate transactions.

OIS will accommodate you with Panamanian realtors that will help you find the property you are looking at the most convenient price in the local market.

Real Estate Purchase Tips:

·         Title or Possession Rights? -  Before you purchase a property (meaning, paying any amount of money), make sure the property is properly titled. Possession rights may be transferred to you but such is not recommended.

·         Title check – If you are advised by the seller of a property you are interested in that the same is titled, then you should have such title checked at the Public Registry of Panama in order to ascertain whether the property has any liens or encumbrances, as well as to identify the ownership of the property, surface area and measurements.

·         Rights of Possession – By Law, you will not be able to purchase rights of possession (squatter's rights), however, you can have them transferred over to you. It is recommended that such transfer deed be drafted by an attorney, notarized and registered with the local Municipal Government in order to provide the transaction with the formality required. Also in this case you should also have the ownership of the possession rights checked and inquire regarding any disputes.  

·         Talk to the neighbors – When interested in a property, make sure you talk to the neighbors and ask them if they are aware of any disputes, also check for the availability of electricity, water, cable TV, internet connections)

·         Planning & Zoning issues – This is of utmost importance as there could be restrictions on the property or the area where the property is located set forth by the government, specially if you are interested in developing the property and are going to build a hotel or a building for condo’s or offices.

·         Home Inspection and Pest Control Reports – This is certainly of importance for all properties because an inspection can reveal defective construction of old and new homes.

·         Homeowner's association documents – Make sure to read these carefully as there could be restrictions imposed, such as: pet restrictions, restrictions on certain improvements, etc.

Tax Incentives:

Real estate with an appraised value above US$30,000 is subject to yearly property taxes between 1.4% and 2.1%.  However, the Panama Government provides incentives to the construction of buildings and ownership of residences, which encourage investments by locals interested in a secure tax shelter.   The fact that construction provides needed employment to unskilled labor and addresses a chronic housing shortage, has prompted the Government to provide the following tax incentives:

1) 20-year exemption of property tax on the value of buildings and improvements, (in force until 2006, after which the maximum will be of 15 years.)
2) Exemption of Capital Gains Tax on the first sale of residences,
3) Banks granting residential mortgages for new residences below US$62,500 receive a negotiable tax credit equivalent to interest reduced in 2 to 4 points below the prevailing rate,
4) Buyers of residences can deduct from their taxable income the amounts paid as interest for mortgages without the tax credits listed in 3),
5) Developers can deduct up to $1,000 on taxable income from the sale of low-income housing with a price of less than US$14,000,
6) Developers can report as non-taxable income the profits from the sale of real estate that are re-invested in the construction of new residences, as long as the value of the new building is below US$62,500 and equivalent to four times the amount of the profits realized.

Foreign investors should seek the advice of competent tax counsel in their country of residence to determine their applicable fiscal compliance requirements and liabilities.