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Legal
Chapter 8: In This Chapter
• Introduction• Foreign ownership• Financing• Commercial real
estate• Residential real
estate• Rental property• Licensing and
brokerage
• Government• Legal system• Taxes and fees• Economy and
business• What you need to
know• Beyond the basics
Page 217
Map of Panama
Source: CIA World Factbook
Page 218
Introduction to Panama
• Isthmus of Panama• Tropical climate• Nine provinces and
four territories• Panama Canal
Source: Wikipedia
Page 218-221
Panama—The Rich Tapestry
Source: Wikipedia
Page 222
Panama—The Rich Tapestry
Source: Wikipedia
Page 222
Panama—The Rich Tapestry
Source: Wikipedia
Page 223
Panama—The Rich Tapestry
Source: Autoridad de Turismo Panama
Page 223
Foreign Ownership of Real Estate
• Titled properties– Office of Public Registry– Recommended
• Possession rights– National and municipal governments control
some properties on beaches and special tourism zones
– Not recommended
Page 224
Financing
• Panamanian home mortgages available– Buyers must purchase life insurance– Companies only insure people to age 75– USA mortgages also available
• Commercial mortgages available
Page 225
Commercial Real Estate
• Multinational corporations– FDI inflows
• Tourism• Howard Special
Economic Area/Panama Pacifico
FDI Inflows—2007-2012
Source: The World Bank Group
Page 225-228
Residential Real Estate
• Second-home and retiree market• Pace of development
– Infrastructure– Exercise caution
• Comparables difficult to obtain
Page 228-230
Rental Property
• Pro-landlord– Caseload makes evictions lengthy
• Law 93 and rental properties• Leases• Common practices
Page 230-231
Licensing and Brokerage Practices
• Law 6 requires licensing– Foreigners must have at least 5 years of
residency
• Listings• Transaction process
Page 232-234
What You Should Know About Government
• Presidential democratic republic with executive, legislative, and judicial branches
• Pro-market policies to seek investment– Track proposed changes
• Government struggles with corruption– Improvements made
Page 234-235
Legal System
• Civil law system• Corporate law based on Delaware, USA• Problems with corruption• Competent, trustworthy attorneys
necessary
Page 235
Real Estate Taxes and Fees
Real Estate Taxes and FeesTax or Fee Amount Paid by
Lawyer/Notario Fee 2% Buyer
Title Transfer Fee 2% Seller
Registration Fee 0.25% Buyer
Escrow Fee 0.5-1% Buyer
Incorporation Fee* US $1,000 Buyer
Title Insurance 0.5-1% Buyer
Agent Commission 3-5% Seller
Property Tax (annual payable to state)† 1.75-2.1% of value Owner (Buyer)
*If the buyer chooses to form a Panamanian corporation to purchase and own real estate.†New construction properties may be exempt from property taxes for a certain number of years; however, these laws are in flux and should be researched for current status.Source: Global Property Guide
Page 236
Business and Income Taxes
• Individual income tax– First US $11,000: exempt; US $11,000-$50,000: 15%; over US $50,000: 25%– On Panama-sourced income only
• Business income tax– Greater of 25% on net income or 1.17% of gross taxable income– Panama-sourced income only
• Withholding tax– Dividends: 5-10% depending on source– Interest: 12.5-13.75%
• Branch-remittance tax– 10% on after-tax income
• Capital gains– 10% – Advance payment requirements
• Other taxes
Page 236-237
Economy and Business
• Economy structured to attract FDI– Hub of global business and banking– Comparisons to Singapore
• Colón Free Zone• Offshore banking• FDI from Venezuela• Panama Canal expansion
Page 238-240
What You Need to Know
• Panama Canal• Incentives to foreign investment• Titled properties vs. possession rights• Panamanian mortgages and life insurance• Commercial and residential opportunities• Broker licensing• Corruption• Offshore banking
Page 241
Beyond the Basics
• Greetings• Attire• Appointments• Negotiations• Business dining• Communication challenges
Page 241-243
Key Contacts
• ACOBIR• AMCHAM• USA Embassy Panama• Authority of Tourism Panama• Ministry of Commerce and Industry
Page 243-244
Exercise: Matching
Page 245
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