Buying real estate in Panama as a US citizen?

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How to buy and own real estate in Panama as a US citizen

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¡Bienvenidos a Panamá!

Panama is known for its canal, tropical rainforests, and modern cities.

If you're an American citizen looking for a blend of urban sophistication and natural wonders, owning property in Panama is an enticing opportunity.

However, making a property investment in Panama as a US citizen involves navigating new laws and regulations, which can be quite challenging.

No worries, we will give some indications in this blog post made by our country expert.

Our goal is to simplify this information for you, ensuring it's easy to understand. Should you have any further questions, please don't hesitate to get in touch with us.

Also, for a more detailed analysis, you can download our property pack for Panama, made by our country expert and reviewed by locals.

Can American people buy property in Panama?

Do you need to be a local or a permanent resident to buy a property in Panama?

You don't need to be a citizen of Panama to buy and own property there.

In fact, American citizens, along with other foreigners, have the same property ownership rights as Panamanian nationals. This means you can buy property in Panama without being a permanent resident.

You don’t necessarily need a specific visa or permit just for the purpose of buying property. However, for other aspects like staying for an extended period or conducting certain transactions, you might need to adhere to the country’s visa requirements.

Regarding the possibility of buying property 100% online from the United States, it’s technically feasible.

The entire process, from searching for property to signing contracts, can be done remotely. However, it's highly advisable to visit the property in person or have someone you trust verify it for you.

Also, engaging with a reputable local attorney can be crucial to navigate the legal aspects.

A tax ID in Panama, known as a RUC (Registro Único de Contribuyente), is not necessary just to buy property. However, it becomes important if you plan to engage in activities that generate income in Panama, like renting out the property.

Regarding a local bank account, it's not a mandatory requirement for purchasing property, but it can make the process smoother, especially for transactions and paying local expenses related to the property.

Other specific documents you will need at the start include your passport and a second form of ID.

Plus, you will need to conduct due diligence, which involves ensuring the property title is clear and free of liens. This is where having a local lawyer really helps, as they can assist with this process and ensure everything is legally sound.

What are the rights and requirements to buy real estate in Panama as a US citizen?

In Panama, American citizens, just like other foreigners, enjoy the same property ownership rights as Panamanian nationals.

This means Americans can buy and own property in most parts of Panama under the same conditions as locals. However, there are certain specifics and limitations to be aware of.

One notable restriction is related to property near Panama’s borders and certain coastal areas.

Foreigners, including Americans, are not allowed to own property within 10 kilometers of the international borders. This is a security measure by the Panamanian government.

Additionally, there are restrictions on owning property on islands that are considered of strategic importance for national security.

Regarding coastal properties, while you can own property near the coast, there's a special regulation for beachfront land. In Panama, the first 22 meters from the high-tide line is considered public domain, and the next 200 meters is often concession land, which means it’s controlled by the government and can be leased but not owned outright.

There’s no restriction on the number of properties an American can own in Panama. You can own multiple properties, whether for personal use or investment purposes.

As for a minimum investment requirement, there isn't a general minimum investment amount set for property purchases by foreigners.

The investment value primarily depends on the property market and your personal or investment goals.

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What about buying land in Panama as an American?

Let’s focus a bit more on the land ownership system in Panama.

As a US citizen, you can buy land in Panama, including various types of land for both residential and commercial use.

However, there are specific areas and types of land where restrictions apply.

Firstly, as mentioned earlier, foreigners, including Americans, can't own land within 10 kilometers of international borders in Panama. This restriction is in place primarily for national security reasons.

Also mentioned before, in coastal areas, while you can buy land near the coast, ownership regulations get a bit tricky when it comes to beachfront property. The first 22 meters from the high-tide line is considered public land, and the subsequent 200 meters is often concession land, meaning it can be leased but not owned outright. This applies to both residential and commercial properties.

Foreigners often buy land in popular areas like Panama City, Boquete, Coronado, Bocas del Toro, and the Pacific and Caribbean coasts. These areas are attractive due to their development, amenities, natural beauty, and sometimes because of the expatriate communities present.

Zoning and land use planning significantly impact where and how you can use the land in Panama.

Different regions have different zoning laws that dictate what type of development can take place. For instance, certain areas are designated strictly for residential purposes, while others can be used for commercial or mixed-use.

It's important to understand the zoning regulations of the specific area where you're considering buying land, as this will dictate what you can and cannot do with the property.

Common land ownership issues in Panama include unclear property titles, boundary disputes, and irregularities in the land registry.

Ensuring that the land has a clear title is crucial, as there have been cases where properties were sold with disputed or unclear titles, leading to legal complications for the new owners.

Additionally, it's not uncommon for there to be discrepancies in property boundaries, so a thorough survey and legal review are essential before finalizing a land purchase.

Buying property and becoming resident in Panama

as an American, you can indeed obtain permanent residency in Panama through real estate investment, thanks to a specific program tailored for this purpose.

This program is part of Panama’s friendly nations visa, which includes the United States.

To gain residency through real estate investment, you need to invest a minimum amount in Panamanian property. This amount has varied over time, so it's important to check the current requirements through a local attorney or the Panamanian consulate.

Typically, the investment must be free of any liens and mortgages.

The process begins with purchasing the property in Panama that meets the minimum investment criteria.

Following this, you’ll need to gather various documents, including proof of your investment, a clean police record, and other personal documents. These documents may need to be apostilled or authenticated, depending on Panama’s requirements.

Once you have all the necessary documents and have made the qualifying investment, you can apply for residency. The process involves submitting your application through a Panamanian lawyer to the National Immigration Service.

The application process includes several steps, such as initial temporary residency and later converting that to permanent residency.

Once granted, the permanent residency is indeed permanent, meaning it doesn't expire.

However, to maintain your residency status, you need to ensure that you visit Panama periodically. The exact requirements can vary, so it's essential to stay updated on the current laws.

This residency can eventually lead to citizenship, but it requires a separate process.

After several years of permanent residency, you may be eligible to apply for Panamanian citizenship, but this involves additional steps, including proving your ties to Panama and possibly passing language and history tests.

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What is the process to buy property in Panama as an American?

How to get started? What are the different steps?

If you need a detailed and updated analysis of the process (and the mistakes to avoid), you can check our full guide about property buying in Panama.

When you're interested in buying property in Panama as an American, the process starts with finding the right property, which can be done through online listings, real estate agents, or personal visits.

It's crucial to work with reputable agents and legal professionals, as they can guide you through the local real estate market and legal processes.

Once you've identified a property, the next step is the title search.

A title search in Panama is an essential step. It verifies that the seller has the legal right to sell the property and that it's free of liens or encumbrances. This is usually conducted by a lawyer or a notary in Panama. They will review the public registry to ensure the property's title is clear and the history of ownership is straightforward.

After confirming the title's status, you move to the property transfer phase. This involves signing a Purchase and Sale Agreement with the seller, detailing the terms of the sale.

A deposit is usually made at this stage.

The final transaction typically takes place in a notary's office, where all parties sign the final sale documents, and the payment is completed.

Transferring funds internationally for the purchase requires adherence to both Panamanian and U.S. regulations. You'll likely need to provide documentation to your bank to comply with anti-money laundering laws and ensure a smooth transaction.

It's important to be aware of currency exchange rates and transaction fees during this process.

The closing costs and fees in Panama can vary, but generally, they include legal fees, notary fees, property transfer tax, and registration fees. These costs are typically a percentage of the property’s sale price, and it’s wise to budget for them in advance.

Regarding mortgages, American citizens can apply for mortgages in Panama, but the process differs from that in the U.S.

Panamanian banks may require more documentation, and interest rates might be higher. You would need to provide proof of income, employment history, and possibly a larger down payment compared to U.S. standards.

It's advisable to shop around and compare terms from different Panamanian banks.

Risks and potential pitfalls related to property investment in Panama

Buying residential real estate in Panama presents specific risks, some of which are unique compared to those in the U.S.

One major risk involves property title issues. In Panama, not all properties have a registered title. Some are held under a right of possession, which can be less secure than a titled property.

This is less common in the U.S., where most properties have clear, registered titles. Ensuring that a property in Panama has a clear and uncontested title is crucial, as title disputes can be complex and lengthy to resolve.

Zoning regulations in Panama can be quite different from those in the U.S.

It's essential to understand local zoning laws, which dictate land use and what types of structures can be built. These regulations may be less standardized and more subject to change than in the U.S. Verifying current zoning and any potential changes is a key step before purchasing.

Cultural and local customs can also play a role in property transactions. Understanding local norms and practices, especially in rural areas, is important.

For instance, local community agreements or understandings about land use might not be formally documented but are respected by residents. Ignoring these can lead to conflicts with neighbors or the community.

Common pitfalls for U.S. citizens include underestimating the importance of thorough due diligence, not fully understanding the legal and regulatory framework, and sometimes a reliance on verbal agreements or assurances. It's important to have all agreements documented and legally verified.

In case of property-related disputes or conflicts with neighbors or authorities, the primary mechanism for resolution is through the local court system in Panama.

The process can be different from the U.S. legal system, and sometimes slower.

International arbitration is not typically used for standard residential real estate disputes in Panama. These matters are usually handled within the Panamanian legal system.

However, for larger, more complex, or commercial property disputes involving significant foreign investment, international arbitration might be an option under certain circumstances.

Tax implications for US citizens buying property in in Panama

For American citizens owning property in Panama, understanding the tax implications is crucial.

Panama does levy property taxes, but these are typically lower compared to the U.S. The tax rate varies based on the property's registered value and its use.

A key feature in Panama's property tax system is the 'Family Tax Patrimony' exemption, which can exempt primary residences from property tax up to a certain value.

Capital gains taxes are also a consideration. In Panama, if you sell a property at a profit, there's a capital gains tax, usually around 10% of the gain.

However, if the property is your primary residence and you've lived in it for a certain period, you might be eligible for an exemption or a reduced rate.

Regarding tax treaties, the U.S. and Panama have an agreement to prevent double taxation, which can impact how you're taxed on income from the property.

For instance, if you pay property tax in Panama, you may be able to deduct it on your U.S. tax return. However, as U.S. citizens are taxed on worldwide income, any rental income or capital gains from Panamanian property must be reported to the IRS.

Property ownership in Panama also has implications for inheritance and estate planning.

Panama's laws on inheritance might differ from those in the U.S., and the process of transferring property upon the owner's death can be complex, especially for foreign nationals.

It’s crucial to have a clear estate plan that considers both Panamanian and U.S. laws. This might involve setting up a Panamanian corporation to hold the property or drafting a will that is valid in Panama.

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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.