Other reasons are the low roundtrip transaction costs of around 7-9% including agent's fees of 3-5% and no inheritance tax, all things buyers look for in overseas purchases. Another plus point for an investment in Panama is the low capital gains tax. Foreign owners can choose to be taxed on their gain in two ways:
5% of the sum of the following, 10% of the property's cadastral value for every year the property has been held, plus the cost of any improvements, plus the property's cadastral value at time of sale. This option consolidates transfer tax and capital gains tax, and means the final sum for the above calculation is all that a foreigner pays upon selling a Panama property.
The second option is: 2% of the higher value between the sales price, and the sum of the property's cadastral value at time of acquisition, improvement costs during ownership, and 5% of the property's cadastral value, (including improvement costs) for each year the property has been held. The second option incurs a further taxation on the selling or transfer price, less transfer costs, the acquisition cost or cadastral value, and 10% of acquisition costs for each year the property has been held, the sum of which is then taxed at standard income tax rates.
In my humble opinion, the first option is best, but advice from a financial advisor and solicitor should go hand-in-hand with any property transaction, buying and selling. Their advice on which option is best for you is far more valuable than mine. Before that, though, you have to actually buy a property; and the volume of new properties coming onto the Panama market will have you spoilt for choices.
Article comments
1 - Jay
I moved to Panama in 2003. 5 yrs. ago the real estate boom was just starting. The real reason was that real estate investors began to promote Panama as a retirement haven. Later the Panama government joined this promotion efforts. The U.S. is not the largest foreign investor in Panama. If you take a look you will find that Spaniards and Venezuelan are investing heavily in Panama. The purchasers of the luxury condos in Panama are in its majority U.S., Canadians and European retirees. Wealthy Venezuelans running away from Chavez regime are starting to arrive to Panama. The Canal transfer 9 years ago has little to do with the real estate boom. The Canal expansion has to do it. The country has received a lot of exposure and more investors of all types have been attracted to this Caribbean country. Panama is basically a Caribbean culture. They have very little to do with Central or South America. Historical ties are inexistent and their culture has nothing to do with central or South America.
2 - Jimbob
I would agree with Jay except his last two sentences. Each countries culture is unique and made up from the people that live there. Yes Caribean has an influence similar to some influence from countries to east & west to a certain extent making it uniquely Panamanian culture.
3 - MR. DISENCHANTED
I ,ALSO, HAVE LIVED IN PANAMA 5 YEARS. A GRINGO FROM THE STATES. IT'S A GREAT PLACE WITH WONDERFUL PEOPLE BUT THE "HYPERS" HAVE SPOILED THE FLAVOR. TRUST ME THE BARGAINS ARE GONE AND THE GREED FACTOR IS EVERYWHERE. THE OLD BEAUTIFUL HOUSES OF MARBELLA, SAN FRANCISCO, BELLA VISTA ARE ALL GONE ,REPLACED WITH ANOTHER CONDO TOWER. THE TRAFFIC IS SO BAD THAT YOU ARE CAPTIVE IN YOU HOUSE.... UNLESS YOU WANT TO SPEND A FEW HOURS IN THE CAR. THEY ARE WORKING ON THE ROADS, BUT WILL NEVER CATCH UP. ELECTRIC RATES ARE THRU THE ROOF AND RISING AND YET THEY KEEP OOMING ....IF IT SOUNDS TO GOOD TO BE TRUE... IT IS. I HATE TO HAVE SEEN IT CHANGE SO QUICKLY.
4 - Jim
I purchased a pre construction condo unit in 02/07 and hope to flip it for a profit. I know it is a risk but I think I will do well. Panama City is very modern with malls, nice hotels and casinos. Inside one of the modern malls you would think you are in an expensive mall in Miami, Florida. I think the traffic is bad too, but I have faith in Panama. It has something for everyone. Beautiful beaches, wonderful hiking areas in the hills, attractive women and all this is along with stable banking and great tax exemption laws.
5 - James
I think many people with savings seek to escape the collapsing economies of the bigger countries. This is great for the buyers and places like Panama, it will strengthen their economy and provides a place for buyers to hold out while their home economies repair. This will boost the property value in Panama, giving the investors something to sell when/if they return to buying in their home countries.