Panama Real Estate FAQs

Q1: Is it safe for foreigners to buy property in Panama?
A1: Absolutely. Buying property in Panama is very safe. There are over a dozen laws in Panama established specifically for protecting foreign investments, not to mention that private property in Panama is protected by the constitution of the Republic of Panama. Thousands of foreigners own property in Panama, and brokers process Panama real estate transactions for foreigners every day without a problem.

Q2: Is it legal for foreigners to buy property in Panama?
A2: Yes, it is legal for foreigners to own titled property in Panama in their personal names, although normally it is recommended that clients hold all property in the name of a Panamanian corporation for asset protection and tax reasons. Panama possession rights property, however, should always be held in the name of a Panamanian corporation, where the foreign person is the shareholder (or a Panama private interest foundation or trust can be appointed as the shareholder in place of the foreign person) of the corporation.

Q3: What are the procedures to buy real estate in Panama?
A3: 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.

Q4: What advantage is there to putting a property in the name of a corporation, instead of putting the property in my personal name?
A4: 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, and (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.

Q5: Is it safe to buy a Panamanian corporation’s shares which hold title to property in Panama?
A5: As long as a proper due diligence investigation is done on the corporation and a proper title search is done on the property that the corporation holds, then it is generally safe to buy property this way in Panama. It is important to hire qualified attorneys to handle the due diligence, and put the proper clauses in the Buy/Sell Contract of Shares of the corporation, such as;
(1) a clause that guarantees the buyer that the corporation does not have any pending debt or liability other than that established in the contract and indemnifies the buyer from any such liability,

(2) a clause that makes the seller responsible for any liability for previous actions of the corporation and/or it’s directors, and

(3) a clause that guarantees the buyer that the purchase is for 100% of the corporations shares as well as for 100% of the property title number xxx (with the description of the property), which is duly owned by the corporation, whose shares are owned by (the seller).

Q6: Are there any government taxes or fees for transferring Panama property titles from the sellers name to the buyers name?
A6: Yes. The Panamanian government charges a 2% property title transfer tax. The 2% is based on the registered value (the value established in the registered deed of sale). In addition, there are other fees charged by the Public Notary and the Public Registry which total in the range of $200 to $300 for registering a buy/sell contract for the sale of real estate in Panama.

Q7: Who normally pays for the property title transfer tax in Panama, the buyer or the seller?
A7: It is standard practice in Panama for the seller to pay for the title transfer tax, however, in some cases, depending on the negotiation between the buyer and seller, the seller may insist that the buyer pay the title transfer taxes.

Q8: Who normally pays for the closing costs on Panama real estate transactions, the buyer or the seller?
A8: Generally, each party pays for their own closing costs. For example, the seller pays his/her attorney to review the buy/sell contract, and the buyer pays his/her attorney for drafting the buy/sell contract, doing the title search, title transfer, and escrow services. However, in some cases, buyers and sellers negotiate special terms whereby the buyer or the seller pays all closing costs, so it really depends on the particular negotiation between buyer and seller.

Q9: What are the average closing costs for Panama property transactions?
A9: The closing costs vary depending on the particular transaction. For example, if the property is held in the sellers personal name, and the buyer is transferring the property title to a Panamanian corporation (most recommended), then the closing costs would include; (1) the legal property transaction fee of US$600 (includes; title search, buy/sell contract, closing, & property title transfer service), (2) public registry title transfer fees of approx. US$200 to US$300, and (3) incorporation fee of US$1000 to setup the Panama corporation. However, if the property is held by a Panama corporation already, and the buyer is purchasing the shares of the corporation, then the transaction is relatively simple because there is no registration of title transfer, meaning that there is no title transfer tax, and no public registry title transfer fees. In this case, the closing costs would include; (1) the legal property transaction fee (includes; title search, purchase of shares contract, and closing for US$600) and (2) change of directors / resident agent of the corporation (approx. $350).

Q10: How long does it normally take to register a property title transfer in the Public Registry of Panama?
A10: In some cases, it can be done within 2 business days, if we pay extra for quick expediting. However, in normal circumstances, it takes from 1 to 3 weeks, depending on the volume of transactions at the Public Registry.

Q11: How long does it normally take, from start to finish, to purchase property in Panama?
A11: The time frame from start to finish is normally about 6 weeks, however, it really depends on a variety of factors which are dependent initially on the buyer and the seller, the negotiation between buyer and seller, and subsequently dependent on the attorneys and the public registry.

(1) The buyer and seller to agree on the price and terms (time frame can vary depending on the negotiation),

(2) seller provides our firm with all the due diligence documentation on the property title so we can do the title investigation (time frame depends on the seller),

(3) attorneys do initial title search & draft the promise to buy/sell contract (time frame is approx. 1 day assuming we have all the required information from buyer and seller),

(4) buyer and seller review the promise to buy/sell contract and agree to set a date to sign (time frame varies depending on the buyer and sellers),

(5) buyer sends payment for down payment and legal fees to escrow (time frame depends on the method funds were sent),

(6) buyer and seller sign promise to buy/sell contract and down payment is paid to seller from escrow,

(7) final title search is completed (time frame is approx. 5 days),

(8) buyer sends final payment to escrow (time frame depends on the method funds were sent),

(9) attorneys draft final buy/sell contract (time frame is 1 day),

(10) closing takes place and buyer/seller sign final buy/sell contract (time frame is 1 day),

(11) contract is registered at the Public Registry for title transfer procedure to begin (time frame ranges from 2 to 30 days, depending on the Public Registry’s volume),

(12) attorneys receive deed from Public Registry, draft official English translations, and prepare final documents to send to buyer (time frame is approx. 5 business days).

I hope this list of FAQs sheds some light on the process. For newcommer, it can be an intimidating process. I know from firsthand experience. I can assure you, if you have confidence in the people you chose to work with, the process can be exciting and enjoyable.