INTRODUCTION The country of Panama is promoting foreign investment, and residential tourism is one of the major bets of the Government. When moving into Panama one important thing that should be considered is your financial security and your immigrant status.  In this article you will find valuable information about immigration, property acquisition and estate planning, issues that should be considered before doing any investment in the country. A. Immigration. The Panamanian government offers several visa programs that foreigners can apply for to obtain temporary or permanent residency, citizenship, passports and work permits.  Our law firm will help you figure out which type of visa program will better satisfy your personal needs.  All visa programs will require a Multiple Entry and Exit Visa for coming in and out of the republic of Panama.  Below we have listed several of the immigration visa programs available:   1. The Tourist Pensioner Visa. This program allows foreigners to obtain legal permanent residency in Panama under the condition that they are retired or pensioned.  According to the Immigration Department of Panama, there is no minimum age required to qualify.  The applicants' retirement income (or pension income) must be at least a lifetime US$500.00 per month.  For each dependent, the retirement income (or pension income) amount must be increased by US$100.00.  2. Immediate Passport Program This program allows foreigners to obtain immediate Panamanian Passport under the condition that they make a five (5) year time deposit (certificate of deposit - "CD"), at the Banco Nacional de Panama, which earns a minimum of US$750.00 per month in interest income.  The monthly interest earned on the time deposit is not taxed by the Panamanian government and can be deposited at any Panamanian licensed bank.  The immediate Passport Program offers applicants Panamanian residency for a period of five (5) years and a Panamanian Passport.   (For more information click here) 3. Person of Means Visa This visa program offers you the chance to obtain a Panamanian residency and after five (5) years of being in the country, you have the option to apply for Panamanian Citizenship. This visa is designed for those who wish to live in Panama, not being employed or starting a business, but living of their own financial means.  There are three different options for this visa category: • Invest a minimum of US$200,000 in a two (2) year time deposit (or "certificate of deposit" or "CD") at any licensed bank in Panama. • Invest a minimum of US$200,000 in a titled property (real estate) in the Republic of Panama.  • Invest a minimum of US$120,000 in a two (2) year time deposit (or "certificate of deposit" or "CD") at any licensed bank in Panama, PLUS invest a minimum of US$80,000 in a titled property in the Republic of Panama.  * Note: interest income from the time deposit or “CD” is not taxed by the Panamanian government. 4. Reforestation Visa Designed for those who wish to make long-term investments in reforestation and take advantage of tax breaks.  There must be a minimum investment of $40,000 into a duly accredited reforestation company.  This investment must be kept until final harvest (approximately 20 years).  This visa is granted provisionally for one year and after renewal it is granted permanently with the right to be issued a cedula.  Five years after obtaining the permanent visa, holders will be eligible to apply for Panamanian nationality.  5. Small Business Investor Visa This visa is for those who wish to establish a small business in Panama (note that retail businesses and some professions are reserved to Panamanians).  There must be a minimum investment of $40,00 and minimum of three permanent Panamanian employees hired.  The visa is granted provisionally for one year, and needs to be renewed three more times before it is granted permanently with the right to a “cedula” or Panamanian ID.  Five years after obtaining the permanent visa, holders will be eligible to obtain Panamanian nationality.  6. Business Investor Visa This visa is designed for those who wish to establish a business in Panama (note, though, that some retail businesses and some professions are reserved to Panamanians).  There must be a minimum investment of $150,000 and minimum of three, permanent Panamanian employees hired.  It is granted provisionally for one year and after renewal is granted permanently with the right to be issued a “cedula” or Panamanian ID.  Five years after obtaining the permanent visa, holders will be eligible to apply for Panamanian nationality.

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Purchasing property in Panama is usually done in two different stages.

Stage 1: The Promise of Sale and Purchase.
This contract is performed preliminary to the sale and purchase contract.  In this particular contract, the seller agrees to sell at an established price, the property.  The buyer agrees to buy under the same terms.  It is common that the buyer consigns a down payment to the seller to prove his commitment to the sale.  If the buyer decides not to proceed with the acquisition of the property, he will usually lose the money that was given as a down payment to guarantee the sale.  On the other hand, the seller is bound to sell the property object of the contract.

Stage 2: The Final Contract.
This contract is done in the form of a public deed and has to be registered at the Public Registry of Panama.  Prices for registration will depend on the value of the property or on the price of the sale.  When the contract is registered, the change in the ownership of the property is done. 
As of the time of the registration, you become the owner.  By far, the safest possible way to pay the remainder of the purchase price to the seller is by an irrevocable letter of payment issued by a bank.  The bank holding the funds issues the irrevocable letter of payment to the seller and pays it as soon as it is presented with the registered public deed transferring title to the buyer. 

Please be advised that the law establishes that the seller pays the transfer tax and the buyer pays for the legal and registration costs.

C. ESTATE PLANNING
Estate planning in Panama can be done in a very simple, confidential and secure manner.
The two main instruments that are used for this purpose are corporations and private interest foundations.

PANAMANIAN CORPORATIONS.
Panama is famous for its company Law, as it is an offshore Jurisdiction.  Offshore means that the Republic of Panama would not charge taxes for income that is generated outside of the country.  Anyways, if you plan to move to Panama, you probably would not be using these advantages, but you will consider the local advantages of owning a Panamanian Corporation.

If your plan is moving there, Panamanian corporations will be needed for various purposes, as for instance, owning your business, but the main reason why foreigners, who are moving to Panama, buy corporations, is to own the property they acquire.

Having properties under corporations is very common because it has many advantages, as for instance:

1. The property will not be under the owner’s personal name, but in the name of the legal entity.  This can come handy in case of a law suit, as the property will be owned by a different person, the Panamanian Corporation.

2. Transfer of the property.  If you ever decide to transfer the property and that property is the sole asset that the company has, you will be able to sell all of the shares of the corporation, instead of selling the property per se.  The owner of the property will not have to pay the property transfer tax (approximately 2%) and the fees for the registration of the change of ownership (varies).  Please be advised that there are tax implications for the selling of shares of a Panamanian corporation. 

3. It can help to avoid paying inheritance taxes and appraisals for the property at the time of the death of the owner.

4. Anonymity.  The property will be in the name of the corporation.  For more secrecy, law firms like ours, offer the service of nominee directors.

PRIVATE INTEREST FOUNDATIONS
Panamanian Foundations and corporations make a great package for confidentiality, inheritance, and security.
Foundations are different from corporations in the sense that there will be no owners; instead there will be a beneficiary or beneficiaries who will be the ones that will dispose of the assets of the Foundation.  A Foundation may own any type of asset, as for example money, shares, property, etc.

The foundation is composed of two parts, the:

1. The Memorandum. This documents is registered in the Public Registry of Panama. 

2. The By-Laws.  In my opinion is the most interesting part of the foundation, as the Founders will be able to designate their will in a clear and pleasant form. 

In the By-Laws the Founder will establish who will be the Primary beneficiaries of the assets.  Those named will usually have complete control of all assets.  After the death of the primary beneficiaries, the second beneficiaries will be the ones to dispose of the assets, if so it is established.  The Foundation works in a similar way to a will, but the founders if wanted, could still have control of the assets of the foundation, even after their  own death.  Example: The Founder may decide to give each of his grandsons US$20,000.00 when they finish college.

Most of the time, the foundations will be the holding company to all the corporations of our clients.  Under that shield, he will have all his assets divided, and well established.  By using foundations you have confidentiality, structured wealth, low risks regarding lawsuits and avoidance of testamentary formalities.
 

For further information contact Panama Relocation Attorneys email: carlosneuman@prapanama.com Or visit: www.prapanama.com

The Panama Real Estate Report - In this eBook, American expat and self-proclaimed real estate cynic Matt Landau explores the kind of subjects most so-called “real estate experts” wouldn’t dare touch on. Which bank is the only one in Panama that doesn’t work with American affiliates and is thus the ultimate place to hide your money? How do you invest big while still maintaining a low profile on the tax radar? What about finding a broker or a lawyer?  Know which ones to trust and which ones to kick to the curb.The Panama Real Estate Report is a refreshing alternative to the monotonous Panama real estate hype.  “It’s understandable to pitch Panama as fantasy-like paradise,” Landau claims. “But what’s scary is how few people are realistic.” This report will be of great value to all - from the rookie tourist simply poking around for ideas, to the seasoned Panama investor who’ll undoubtedly discover some new tricks.