Panama Real Estate Laws
Buying Properties in Panamá The following is general information on purchasing real estate in Panama.
The different categories of land make it imperative to engage professionals for more detailed information.
Real estate laws on the mainland can be quite different than those on islands, coastal areas, and areas near national borders.
Before handing over any money, make sure you consult with a professional and do a proper due diligence investigation over the property.
It is important to understand the rules and process your property transaction correctly.
The first step is to find a Panama property you like, and negotiate the price and terms of the sale with the seller (or Panama 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 seller or 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.
Advantages by putting the property in the name of a corporation: 1- The corporate veil protects the property from any attacks from creditors or frivolous lawsuits against your personal name.
2-When you go to sell the property, you can simply sell the corporations shares, saving you a 2% property title transfer tax, and possible Capital Gains Taxes, 3- When you go to sell the property, the buyer benefits because the buy/sell contract does not have to be publicly registered, saving the buyer closing costs 4- When you go to sell the property, the buyer benefits from lower property taxes (or possibly no property tax if the registered value is below $30,000), because the registered value does not reflect the actual purchase price.
The "Preferential Interest Law" There is a law called the "preferential interest law", which offers special low interest rates, under the following conditions: 1- The buyer must be a first time buyer, 2- The property being purchased must be newly constructed, 3- The unit must be for residential purposes, 4- The amount being financed must be in the range of US$25,000 to US$62,500, after the down payment, 5-The financing cannot be more than 95% of the appraised value, 6- The property must be titled, 7- The loan must not exceed a 15 year term.
This is regulated under Law No.
50 (October 27, 1999), which partially amended Law No.
28 (June 20, 1995) and Cabinet Decree No.
44 (1990), stipulates that the benefits to the lending institutions are as follows: (a) 4% discount (also a tax credit to the financial institution) off the maximum fixed interest rate, which is established by the Superintendent of Banks, will be awarded if the loan value is for more than $25,000.
00 but less than $62,500.
00, (b) 5% discount (also a tax credit to the financial institution) off the maximum fixed interest rate, will be applicable if the loan is for less than $25,000.
00.
About the Government Property Taxes 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).
New properties completed by 31st August 2006 will have a 20 year property tax exemption.
Possession Rights properties do not incur property taxes, since the property technically belongs to the government of Panama.
The different categories of land make it imperative to engage professionals for more detailed information.
Real estate laws on the mainland can be quite different than those on islands, coastal areas, and areas near national borders.
Before handing over any money, make sure you consult with a professional and do a proper due diligence investigation over the property.
It is important to understand the rules and process your property transaction correctly.
The first step is to find a Panama property you like, and negotiate the price and terms of the sale with the seller (or Panama 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 seller or 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.
Advantages by putting the property in the name of a corporation: 1- The corporate veil protects the property from any attacks from creditors or frivolous lawsuits against your personal name.
2-When you go to sell the property, you can simply sell the corporations shares, saving you a 2% property title transfer tax, and possible Capital Gains Taxes, 3- When you go to sell the property, the buyer benefits because the buy/sell contract does not have to be publicly registered, saving the buyer closing costs 4- When you go to sell the property, the buyer benefits from lower property taxes (or possibly no property tax if the registered value is below $30,000), because the registered value does not reflect the actual purchase price.
The "Preferential Interest Law" There is a law called the "preferential interest law", which offers special low interest rates, under the following conditions: 1- The buyer must be a first time buyer, 2- The property being purchased must be newly constructed, 3- The unit must be for residential purposes, 4- The amount being financed must be in the range of US$25,000 to US$62,500, after the down payment, 5-The financing cannot be more than 95% of the appraised value, 6- The property must be titled, 7- The loan must not exceed a 15 year term.
This is regulated under Law No.
50 (October 27, 1999), which partially amended Law No.
28 (June 20, 1995) and Cabinet Decree No.
44 (1990), stipulates that the benefits to the lending institutions are as follows: (a) 4% discount (also a tax credit to the financial institution) off the maximum fixed interest rate, which is established by the Superintendent of Banks, will be awarded if the loan value is for more than $25,000.
00 but less than $62,500.
00, (b) 5% discount (also a tax credit to the financial institution) off the maximum fixed interest rate, will be applicable if the loan is for less than $25,000.
00.
About the Government Property Taxes 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).
New properties completed by 31st August 2006 will have a 20 year property tax exemption.
Possession Rights properties do not incur property taxes, since the property technically belongs to the government of Panama.
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