How to Invest in Real Estate in Panama: 5 Key Tips

Before investing in real estate in Panama, it's essential to understand the legal and fiscal aspects that will affect your investment. Here's a breakdown of the two main taxes you'll likely have to pay:

Property Tax (IBI)

The IBI is an annual tax that is calculated based on the registered value of the property. In Panama, properties worth less than $120,000 are exempt from this tax. However, for higher-value properties, tax rates range from 0.5% to 0.7%. It's important to work with a tax advisor to ensure that you're complying with all regulations.

Real Estate Transfer Tax (ITBI)

The ITBI is a tax applicable to the purchase and sale of property. This tax is equivalent to 2% of the greater value between the sales price or the value registered with the Directorate General of Revenue (DGI). It is essential to properly structure the sales contract to avoid additional problems.

• Advice: Contact us at Limitless Legal for a legal audit before signing any contract.

Many investors underestimate the costs associated with real estate transactions in Panama, beyond taxes. One of the most common costs is the real estate agent's commission. In the Panamanian market, this is usually in the range of 3% to 5% of the sale value of the property, paid by the seller.

Other costs include:

• Legal Fees: They usually represent between 1% and 2% of the price of the property.
• Notary fees: The costs of notarizing a purchase range from $300 to $500.
• Property registration: This administrative procedure costs between $100 and $400, depending on the value of the property.

One of the great advantages of the Panamanian real estate market is its accessibility for foreign investors. In general terms, any foreigner can acquire property with the same rights as a Panamanian citizen. However, there are certain important limitations:

• Foreigners cannot acquire properties located less than 10 km from the country's borders.
• If you plan to invest in agricultural or rural properties, research specific local restrictions.

At Limitless Legal, we can help you understand and navigate these legal limitations.

If you are buying a property for the first time in Panama, there are several options available to you:

Bank mortgages:

Banks offer financing of up to 80% of the value of the property for residents and up to 70% for foreigners. Interest rates are competitive, especially if you qualify under the Preferential Interests Act, which lowers interest rates for lower-value homes.

Documentation needed to apply:

• Copy of your passport or identity card.
• Proof of income (tax returns or wage receipts)
• Bank and commercial reference.

Investing in real estate isn't just a matter of buying a property, but also of planning how to maximize your return on investment. Here are some key tips to achieve this:

• Strategic location: Opt for properties in areas with high demand, such as Panama City, Boquete or Coronado.
• Smart renovations: Small cosmetic improvements can increase the resale value of the property.
• Short-term rent: Take advantage of platforms like Airbnb to earn additional income while your property appreciates.

With our legal services, we can ensure that every step of your investment is backed by strong contracts and expert advice.