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Mortgages
Real Estate Financing in Mexico,
Latin America and the Caribbean
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Buying Real Estate in Panama
Legalities and OwnershipBuying real estate in Panama is quite risk free
for foreigners. Panamanian foreign investor protection laws ensure that the
standard rights of ownership are given to the foreign buyers.
After
deciding on a property, the buyer must go for a preliminary contract called the
Promise to Buy and Sell (Promesa de Compra y Venta). Both the seller
and the buyer must sign the contract. Upon signing of the contract, the buyer
has to pay a deposit or down payment (arras) of about 10% of the purchase value.
Signing of the preliminary contract makes the agreement legally binding and if
the buyer fails to honor the contract, other than exemptions specified within
the contract, his or her deposit is forfeited. On the other hand, if the seller
fails to abide by the contract he or she will have to pay back double the amount
of the deposit/down payment.
Once the preliminary contract has been
signed, the next step is to obtain a Non-Encumbrance Certificate and a
certificate of good standing (paz y salvos) from the general Cadastral
office (Catastro). The certificate of good standing proves that all the
taxes and service bills have been paid and it is up to date.
After the
procurement of above two certificates, the lawyer of the real estate agent
prepares the sale agreement (minuta). This agreement needs to be stamped by a
lawyer in Panama before the agreement can be executed in a public deed.
The next major step is to pay the transfer tax, if not exempted under
the law, at the Ministry of Economics and Finance (Ministerio de Economia y
Finanzas).
The notary (notario) then notarizes the sale
agreement and prepares the public deed (escritura). It is mandatory that all
transfers of property are notarized and signed by both the seller and the buyer
in the presence of the notary. The Public Deed is then filed and recorded at the
Public Registry Office in the name of the buyer and lastly a copy of the
recorded deed is filed at the Cadastral Office to record the new owner for tax
purposes.
Financial MattersThe costs involved (as of this writing) are as
follows:
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The Non-Encumbrance Certificate from the Public Registry Office
costs $30 USD. |
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The certificate of good standing can be procured by making a payment of $5
USD. |
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Transfer tax, if payable, is 2% of the transaction value or the cadastral
value whichever is higher. |
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The cost of notarizing the sale agreement comes to be about $100. |
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Registration fee is 0.25% of the value of the
property. |
There is no property tax on properties
with a registered value of $ 30,000 or less. However, the property tax rates
increase progressively as the value of the property increases. For properties
between $ 30,000 and $ 50,000 the tax is 1.75 %, it rises to 1.95% for
properties between $50,000 and $75,000. Properties above $75,000 are taxable at
a rate of 2.1%.
The amount of loan to value available from the local
banks is nearly 65% of the purchase price or the estimated value whichever is
less. Loans can be had on an interest rate of 6.75% per annum adjustable at
banks’ will. Amortization period is generally for five (5) years which can be
renewed for one additional term of five years at the discretion of the bank. The
maximum period of amortization will depend on the borrowers’ age and outside
worth. The entire legal and registration expenses involved in the loan process
are to be borne by the borrower. Banks in Panama charge a commission of 1.5% of
the amount of the loan payable at the time of loan drawdown. The payment of
monthly installments of the loan is to be done through the savings account and
the minimum balance of the account must be equal to three monthly installments.
Other Important IssuesProperties bought or built for residential
purposes in Panama and that have been built with the construction permit issued
prior to 1st September, 2006 and an occupancy permit issued and improvements
registered by 1st September, 2006 may be exempted from property tax for a period
of 20 years. For all constructions permits issued after Sept. 1, 2006 the
following exemptions will apply:
For Value up to $100,000 the exemption
would be 15 years.
For Value from $100,000 to $250,000 the exemption would
be 10 years.
For Value over $250,000 an exemption of 5 years is permissible.
The exemption referred to above is transferable during the exemption
period to any new buyer.
Property lying up to 22 meters of the high tide
mark can be purchased. However, the area within the limit of 10 meters from the
high tide mark has been classified as beachfront area and cannot be purchased
under any circumstances.
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