Derecho Posesorio (Right of Posession)

The before hand only applies to those who directly own the title to their property, however in Panama some people occupy and use property through what is locally called a Derecho Posesorio, what translates to a Right of Possession (ROP). This applies to land is owned directly by the National Government or a Municipal City Government, but said body granted an individual a right to possess and occupy said land. These types of titles aren’t reflected in the public registry, and in order to verify the title holder you must verify directly with the respective Municipality or Land Administration office (ANATI as it’s known in Panama). The ROP can be sold or transferred, but ownership still will ultimately land with the state, so commercial investment can be limiting and obtaining a mortgage on the land is legally impossible until it is officially titled to the owners name, which can be a lengthy process.

Taxes, taxes, taxes…

When a property is stold, there are two taxes paid, a property transfer tax, that is 2% of the properties registered value or its sell price (whichever is higher) and a capital gains tax, that is 3% of the sell price or 10% the real profits which is the difference of the sale price, the value of the property, and the expenses for the transaction.

In regards to the annual property tax it can range from 0 to 1% depending on the property value, in normal cases, and if the property is registered as Family Asset or a Main home.

The tax rate per value goes as follows:

Regular property tax
Price range	tax rate
0 to $30,000.00	0.00 %
$30,001.00 to $250,000.00	0.60 %
$250,001.00 to $500,000.00	0.80 %
$500,001.00 and above	1.00 %
Main home tax
Price range	tax rate
0 to $120,000.00	0.00 %
$120,001.00 to $700,000.00	0.50 %
$700,001.00 and above	0.70 %

Where to sue or complain?

If in a real estate purchase, you feel you’re being unfairly, the path to protect your rights can depend on the amount and situation. If you are purchasing a property from a developer and the amounts you’ve paid (be it: down payments, legal fees, etc) are under $5,000.00, you can file a complaint against the ACODECO (Panama’s consumer defense authority) they’ll be able to advise you on whether the developer is acting in accordance to the law, can mediate an agreement to resolve the conflict or if need be sanction the company into complying with the law or a refund depending on the case, this process is at no cost and doesn’t require an attorney. If you are purchasing real estate from an individual or if the amount paid to a developer is above $5,000.00, the route to reclaim your rights would be a civil law suit through an attorney, if mediation isn’t possible.

Immigration and Residency Benefits from Real Estate Purchases

In Panama owning real estate (depending on the property value) can give you access to a number of different permanent residence categories:

1. Friendly Nations Residence Permit: If you’re a citizen of one of the listed friendly nations (see Essay on Friendly Nations Residence), your eligible to this category if you own Real Estate in Panama valued at $200,000.00. The property can be finance through a mortgage from a bank with license to operate in Panama’s. In this category you must first apply to a 2 year provisional residency, before being eligible to apply to the permanent status.
2. Qualified Investor Residence Permit: Regardless of your nationality of origin, you may apply to this category if you’re purchasing a property valued at $500,000.00, which can also be financed by a bank in Panama. This category offers Permanent Residency without needing to go through a provisional phase and immigration must decide on your process within 30 days of applying, instead of the 6 months time frame that applies to nearly all other categories. The category also has the perk that you can apply with a promise to purchase contract, however you are obliged to follow through with the purchase in order to be approved, and in either case you must maintain the investment for at least 5 years.
3. Economic Solvency Residence Permit: In order to apply to this category, you must have purchased a property worth $300,000.00, however it cannot be financed and must be free of encumbrances (mortgages, leans and similars). If you also have a fixed rate deposit account in a Panamanian bank, the amount of the property may be lower, so long as the combined amount of investment is $300,000.00 or more. In this category you must also apply for a 2 year provisional residence before being eligible for to apply for the Permanent Residency.
4. Jubilado Pensionado: Although the main requirement is to receive a lifetime pension of above $1,000.00 a month, having a real estate property in Panama worth more than $100,000.00 reduces the needed pension amount to $750.00 a month. In this category you also apply for the permanent residency directly without having to go through the 2 year provisional phase first.

Airbnb as an investment option in Panama?

In Panama legislation to specifically regulate AirBnBs are still in the oven, this doesn’t mean you can’t profit from your investment through this option, but you should know where the law limits you. Do to laws that “protect” local hotel and tourism businesses, short term rentals (less than 45 days) are prohibited within the limits of the District of Panama (most of Panama city). Outside of the said area you should be fine renting out your vacation home when not in country, however if you are considering using your property as a consistent source of income (e.g. you build several rooms for rent, offer additional services, etc.) you should look into getting a business license and other legal measures.