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Property Purchase Legal Issues

Panama - Property Purchase Legal Issues

There are no restrictions on foreign nationals owning a property in Panama apart from the rule which states they cannot buy a home or land within 10 miles of one of the country’s borders. There are also some limitations on some of the islands. A law was created in 1998 to protect the investment of foreigners in Panamanian property, so that they are not affected by changes in tax, duties and local laws. Expats who purchase property in Panama are entitled to the same rights as Panamanian nationals when they purchase a property. There are also no restrictions on how long you need to wait before you can sell the property.

A person does not have to be a resident of the country in order to buy a property there. Panama is becoming a very popular destination for those who want holiday homes, who will be travelling on tourist visas rather than residency. However, if you need a mortgage then you will need to have some form of residency and a local ID card in order to make the mortgage application.

Buying a property as a company is an idea that will be suggested to you by your lawyer. One of the main benefits of doing this is that when you come to sell the property you will not need to pay the transfer taxes – currently standing at 2%. This exemption is applicable for up to 20 years and if you need to carry out any renovations or construction work you will qualify for an exemption from any import duties However, you need to take into account the cost of setting up a Panamanian company and this would need to be done each time you purchase a property, so if you want an apartment in Panama City and a small villa on the coast then you will need to set up a corporation for each one.

Setting up a company costs around $700 and then there are fees and taxes to be paid each year. If you own the property for 10 or more years this could actually work out to be more expensive. Owning a property through a company will also not save you money on capital gains tax.

Another benefit of owning a company this way is that there is a limitation of liability. There will be no legal action taken against the owner in the event of debts or repossessions that are connected to the property.

Any outstanding debts on the property before you buy it should be settled by the previous owner. One of the restrictions on buying property is that any outstanding bills need to be settled before the new owner can take possession. Your lawyer will be able to check that this has been done. Your lawyer should also be able to clarify the situation regarding the details of the boundaries of the property, any special characteristics of the property and any issues such as shared access.

There are no restrictions on purchasing rural properties and developing older property, providing the land is titled. There are some areas in which there is land which has been set aside by the government and which is not available to buy and some of the autonomous islands will not allow the purchase of property. If you need to apply for planning permission you may find that is it a time consuming process and you may experience a number of obstacles along the way. The Panamanian authorities are not known for dealing with these matters quickly and you might find it is more costly than you had first anticipated and you should not place any time limits on the process as it is likely to take twice as long as you had first planned.

There are some areas in Panama where building and renovation work may require special environmental impact reports but this will not necessarily stop you from being able to carry out work. Most areas do not have building restrictions although you will require a permit to carry out any type of building work. This can be done at the offices of the local government for the area. If you want to build a home over the water you need to have special permission from the maritime authority.

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