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Panama has a number of laws and incentives in place to attract and protect real estate investment by foreigners. In general, foreigners are allowed by law to own real estate in Panama, with few restrictions, and acquiring property is a largely painless affair.

However, any foreigner (or national, for that matter) considering a real estate purchase in Panama should enlist a legal representative to perform due diligence on the property and oversee the details of the transaction, to ensure there are no unpleasant surprises down the road.

Properties in Panama should generally be registered with the Public Registry (which has a searchable database)and the Land Registry Office. Registered properties are knows as titled land. However, there are many parts of Panama's territory, particularly the more remote, rural areas, that have not yet been officially inscribed.

In these cases, ownership may stem from possession rights, when a person/family has lived on or worked the land for more than five years. These properties can be purchased, but require a little more legwork to ensure the right of ownership is properly transferred.

Rights and Restrictions on Foreign-Owned Property

The right to private property is guaranteed in Panama's Constitution. The right for foreigners to own real estate in Panama is well-enshrined in Panamanian law. Law 54 of 1998 guarantees foreign investors the same property rights and responsibilities as national investors with no restrictions except those outlined in the Constitution and other laws (such as environmental laws). It also guarantees the right to dispose of and repatriate the capital, profits, dividends, etc. relating to real estate investments.

Real Estate Taxes

Land tax of up to 2.1% applies to all owned land in Panama, titled or not, valued above $30,000 ($150,000 for farmland). The tax rate is set on the registered value of the land and any improvements (i.e., buildings and other structures) upon it.

Upon the sale of a property, income tax is also applicable (rates vary depending on whether the transaction is part of one's usual business, or a one-time event), as well as a 2% transfer tax. The transfer tax can be exempted under some of the government's real estate incentives, or if the land is donated to a spouse or immediate family member.

Island and Coastal Properties

Neither foreigners nor nationals can own beaches, lake or river shores, except under special circumstances, as these are considered part of the state's natural heritage. However, concessions of up to 60 years, with a 30-year extension, can be granted in these areas, under Law 2 of 2006. All beachfront property must allow public right of passage for 22 meters from the high tide line.

Islands were once also off-limits to purchase by foreigners, however Law 2 now allows foreign persons or corporations to purchase up to 50% of an island's surface for tourism projects. This same law limits development to 30% of the total island's surface. Aboriginal lands, protected areas and properties located within ten kilometers of national borders continue to be excluded.

Tax and Investment Stability

Law 54 also provides ten years' tax and investment stability for those who invest at least $2,000,000 in certain sectors, including tourism, industrial, agricultural, exports, agroforestry, mining, export processing zones, commercial and petroleum free zones, telecommunications, constructions, port and railroad development.

This means the laws and tax regimes in place at the time the investment is made, including any incentives and benefits, will continue to apply to qualified investors for ten years, regardless of any changes that are made to the law during this time. This provides a stable and predictable setting for investments, without fear of radical changes.

The tourism sector in this case is of particular interest to real estate investors, as hotels, condominiums, housing for retirees, etc., are all considered of tourism interest. Those interested in qualifying for the investment stability benefit must apply to the Ministry of Commerce and Industry.

Useful Links:
Panama Public Registry: Registro Publico (Spanish)
Ministry of Commerce and Industry: Ministerio de Comercia y Industrias (Spanish)