What Could Go Wrong? The Risks of Buying Property in Panama 

It’s important to understand the risk of buying a property in Panama to ensure a secure investment. However, navigating the complexities of the Panamanian real estate market requires careful planning and understanding of local laws and regulations. 

This article explores the Risks of Buying Property in Panama  and considerations of purchasing property in Panama, from tax exemptions and foundation ownership to legal and corporate implications.

Property Tax Exemptions

Expats buying property in Panama should be cautious of risks like hidden costs and legal issues. Understanding tax exemptions, especially for non-new constructions, is crucial. Risks include changes in tax laws and overlooking property issues due to focusing on tax benefits. It’s important to research thoroughly, understand tax exemption criteria, and seek legal advice to avoid unexpected liabilities and ensure a secure investment in Panama’s real estate market.

In Panama, the tax exemption landscape for property buyers, particularly expatriates retiring in the country, is quite favorable, especially for those interested in purchasing beachfront condos. The tax exemptions are categorized mainly into three types: 

  • exemptions for new constructions
  • improvements on existing properties
  • properties used for specific purposes like tourism

New Construction Tax Advantages in Panama Real Estate

Among these, the most popular with expatriates are the exemptions for new constructions, which can last up to 20 years. This category is especially appealing for those buying new beachfront condos, as it significantly reduces the cost of ownership.

The specific terms of these exemptions can vary, depending on factors such as the property’s location, type, and value, making it essential for buyers to gain a clear understanding to maximize their benefits.

Homes for Sale in Panama with Tax Benefits

For expatriates purchasing an already constructed property in Panama, where the exemption for new constructions doesn’t apply, there are still beneficial tax exemptions to consider.

One notable exemption is the transfer tax exemption on real estate sales, which can significantly reduce the upfront costs of purchasing a property. Additionally, properties over a certain age may qualify for reduced property taxes, which can offer long-term financial benefits.

Another important exemption to explore is the “improvements tax exemption,” applicable to properties that have undergone significant renovations or upgrades. This exemption can be particularly advantageous for expats who buy older properties and plan to invest in refurbishments, as it offers a tax break on the enhanced value of the property.

Foundation Ownership for Retirement Properties

For retirees considering Panama for their retirement home, owning property through a foundation can offer significant advantages. This legal structure provides enhanced privacy and asset protection, allowing individuals to manage their properties more securely. 

It also facilitates estate planning, ensuring a smoother transition of assets to beneficiaries. However, it’s vital to comprehend the implications and requirements of setting up a foundation in Panama to ensure it aligns with your retirement goals.

Avoiding unexpected expense

When purchasing property in Panama, it’s vital to take steps to avoid unexpected costs that can strain your budget. These unforeseen expenses often stem from overlooked maintenance issues, legal fees, or property tax adjustments. 

A thorough inspection of the property, a clear understanding of the purchase agreement, and awareness of the local real estate tax laws can help mitigate these risks. Engaging with a reputable real estate agent and a knowledgeable attorney can also provide insights into potential hidden costs. 

Additionally, understanding the market and the area where you’re buying can prevent overpaying for the property. Preparing for these unexpected costs ensures a smoother transaction and helps maintain your financial stability.

Identifying Hidden Costs

Hidden costs in real estate transactions can include unexpected repairs, unpaid taxes, or additional legal fees. To identify these potential expenses, conduct a comprehensive property inspection and review the legal status of the property, including any outstanding obligations. 

Consulting with a local real estate expert can also uncover costs related to the area or type of property you are considering. Being aware of these hidden costs upfront can save you from future financial headaches and contribute to a more secure property investment.

Hold money in escrow

Utilizing an escrow service during the property buying process in Panama is a smart way to protect your funds. Escrow acts as a neutral third party that securely holds the money until all parts of the purchase agreement are fulfilled, including property inspections, legal checks, and the transfer of ownership. This service ensures that your investment

Buying Property Through a Corporation vs. Personal Name

In Panama, buying property can be done either through a corporation or in one’s personal name. Each method has its own legal and financial implications, affecting liability, taxes, and estate planning. Deciding the best approach depends on individual circumstances, investment goals, and the potential for asset protection and tax optimization.

Advantages of Corporate Ownership

Corporate ownership of property in Panama offers significant advantages, especially for foreign investors. It provides anonymity, limiting personal liability in legal matters. Corporations can also offer easier transfer of ownership shares, simplifying the process of selling or bequeathing the property. Additionally, corporate structures can be beneficial for tax planning, potentially providing fiscal advantages such as deductions and varied tax obligations.

Legal Implications

The legal implications of buying property through a corporation as opposed to in one’s personal name in Panama are substantial. Corporate ownership can facilitate asset management, provide enhanced privacy, and offer a layer of legal protection against personal liabilities. However, it also requires compliance with corporate governance, including annual fees and tax filings. Personal ownership is simpler but exposes the owner to direct legal and financial responsibilities related to the property.

Dissolving Corporation after Property Sale

Dissolving a corporation in Panama after selling its property is a process that involves several legal and administrative steps. Initially, the corporation must ensure all outstanding liabilities, such as taxes and service fees, are settled to avoid complications. 

The sale of the property often prompts the dissolution if the corporation was established solely to hold that asset. The board of directors must formally agree to dissolve the corporation, a decision that should be documented in the corporate minutes. Following this:

  • Settle Outstanding Liabilities: Ensure all taxes, service fees, and other debts are paid to avoid legal complications.
  • Board Approval: Hold a formal meeting where the board of directors agrees to dissolve the corporation, documenting the decision in the corporate minutes.
  • File Dissolution Notice: Submit a notice of dissolution to the Panamanian Public Registry to officially start the process and notify creditors.
  • Settle Debts and Distribute Assets: Pay off any remaining debts and distribute the leftover assets to the shareholders, if applicable.
  • Obtain Certificate of Dissolution: After completing all steps and settling debts, secure a certificate of dissolution from the Public Registry, confirming the corporation is legally dissolved.

Discrepancy Between Listed and Actual Property Values

When buying property in Panama, discrepancies between the listed and actual property values can arise, potentially leading to significant financial and legal ramifications. This discrepancy often occurs due to a misrepresentation of the property’s size, location, or condition, which can affect the buyer’s perception and the property’s market value. 

Buyers need to conduct thorough due diligence, including a professional property appraisal, to verify the accuracy of the listed information and assess the real value. Such discrepancies can lead to disputes over the sale price, impact mortgage and financing arrangements, and affect property tax assessments. 

It is crucial to rectify any discrepancies before finalizing the purchase to ensure fair dealing and prevent future legal issues.

Impact on Taxes and Legal Concerns

Discrepancies between the listed and actual property values in Panama can significantly impact taxes and lead to legal concerns. If the actual value is higher than listed, it may result in higher property taxes and stamp duties. 

Conversely, a lower actual value can affect the resale value and investment return. Legally, these discrepancies can cause disputes in sales contracts, leading to potential litigation or renegotiation of terms. 

It’s vital for buyers to accurately establish property values to avoid unexpected tax liabilities and legal challenges.

Legal and Tax Considerations on Panama Beachfront Condos

Purchasing a beachfront condo in Panama comes with specific legal and tax considerations that buyers must navigate carefully. Legally, foreign buyers are generally afforded the same property rights as Panamanian citizens, but understanding local regulations and restrictions, especially those governing coastal properties, is crucial. 

Tax-wise, buyers should be aware of property taxes, transfer taxes, and any applicable exemptions. Beachfront properties may also be subject to additional regulations or fees due to their location. Due diligence, including a thorough review of the property’s title and zoning laws, is essential to ensure compliance and avoid future disputes or liabilities. 

Furthermore, considering the potential for rental income, buyers should understand the tax implications of leasing their property. Consulting with real estate experts and legal advisors familiar with Panamanian property law is vital to navigate these complexities successfully.

Understanding Costs Associated with Property Transactions

The costs involved in property transactions in Panama extend beyond the purchase price. Buyers of beachfront condos must account for legal fees, real estate agent commissions, property registration, and transfer taxes.

 Additionally, ongoing costs such as maintenance fees, utilities, and property taxes should be considered in the financial planning. Understanding these costs upfront can help buyers budget effectively and avoid unexpected expenses.

Choosing Legal Support for Property and Residency Issues

Securing knowledgeable legal support is crucial for navigating the complexities of buying beachfront property in Panama, especially for expatriates. A lawyer specializing in Panamanian real estate and immigration law can provide invaluable guidance on property transactions, residency applications, and tax compliance. 

They can also assist in resolving any legal issues that arise, ensuring a smoother process for purchasing property and establishing residency. Choosing a lawyer with a good track record and experience in dealing with foreign buyers can greatly facilitate the acquisition and residency process.


Investing in property in Panama requires thorough research, careful planning, and the right legal advice. Understanding the nuances of the Panamanian property market, from tax exemptions to legal frameworks, can help you make informed decisions and secure a successful investment.

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