PANAMA GOVERNMENT AND ECONOMIC CLIMATE

Panama has what is considered by government analysts to be the most stable government in all of Central or South America. The country has had a democratic government since 1990 and it is headed up by the executive branch which is composed of a President and two Vice-Presidents, democratically elected for a five-year term by direct vote.

The Panamanian military was abolished by constitutional amendment in 1994, and the government still has a unique security arrangement with the U.S. due to the Neutrality Treaty of the Panama Canal. As a result, the risks of going back to the earlier military regime are virtually non-existent. (Source: Euromoney Report/Lehman Brothers, Feb. 26, 1999). The country has a stable government with excellent government infrastructure, pro-business government attitude and policy and a Roman law system. Moody’s has issued Panama a sovereign debt ceiling of Ba1 and Standard and Poors has assigned a default-risk rating of BB+.

Panama’s economy is one of the most stable, prosperous and most advanced in all of Central and South America. Panama is home to the second largest international distribution and trade center (free trade zone) in the world next to Hong Kong. Panama’s Colon Free Zone has over 1500 international import/export businesses operating within it, receives more than 250,000 visitors yearly, and generates exports and re-exports valued at more than U.S. $11 billion annually.

Check the differences:
When moving from one country to another, it is easy to assume that most of the rules from your home country are similar to those of the new country. This can be a costly mistake.

One assumption is that “rights of survivor ship” would apply in Panama. Not so! If you register the title of a property under more than one person’s name in Panama, it just means that each party owns a share of the total. When one co-owner dies, the property does not automatically pass to the surviving co-owner. In some instances, especially when the co-owners are not married, it will pass on to the deceased partner’s heirs. Even if your co-owner named you as the heir in their will made out in Panama, you would still need to go through probate here.

Probate Means High Legal Fees

If you or a partner dies, the property goes to probate. Probate in Panama is before a court. You will need an attorney to represent you and although there is no estate tax, attorney fees and costs will be high. This is the main reason a corporation to buy property in Panama makes sense. If the shares are properly structured, you will avoid probate altogether.

There is an added advantage to forming a corporation to buy property in Panama. If you form a sole purpose corporation to own the property, at the time of sale you could sell the shares of the corporation instead of selling the property directly. This would legally avoid transfer tax. Transfer tax is payable by the seller on every sale or transfer or real estate property. The rate is 2% of whichever is highest: the sale price or the updated value of the property. As a rule of law, the updated value is calculated at 5% per year of ownership. If the value of the property is more than $150,000.00 it makes economic sense to form a corporation to buy property in Panama. Even at lower prices, circumstances such as unmarried partners or a business partnership may make the setting up of a corporation to buy property in Panama the route to take.

Finally, some degree of confidentiality can be obtained by using a corporation to buy property in Panama, but bear in mind anonymity will require getting nominee directors for your company, and not getting a mortgage, since the banks will ask that you personally appear as a debtor in the documentation that will be of public record. In any event, the attorney assisting you in Panama should be asked to advise you and if you come from a world-wide income taxation jurisdiction, you ought to get advice from a specialist in your home country, so that you are conversant with any reporting requirements.