Considering moving to Panama? This country offers more than just a strategic location and a strong economy. Panama is a prime destination for expatriates and investors, thanks to its stable political climate and friendly policies. This article covers the investor visa types and their requirements, the advantages of investing in Panama, key sectors, and the possible challenges investors may face here.
Why invest in Panama?
Strategic location
Panama is a bridge between North and South America. Its geographical position and the Panama Canal, connecting the Atlantic and Pacific oceans, make it a global trade hub. Due to its strategic location, many international companies maintain offices in the country.
Political and economic stability
Panama is one of the safest countries in the region. It has enjoyed relative political stability since the end of the Noriega dictatorship in 1989. The country is a constitutional republic with a democratically elected government. The Panamanian currency, the Balboa, is pegged to the U.S. dollar at a 1:1 ratio, reducing currency fluctuations risk. The GDP has seen steady growth over the last decades, except during the pandemic.
Investor-friendly policies
Panama's government encourages foreign investment with favorable tax policies, tax-free zones, and various investor visa programs. Investing in the country, starting a company and establishing financial facilities here offer many benefits.
Expats' life satisfaction
One of Panama's defining characteristics is its vibrant expat community, with people from around the world calling this country home. It is a great place to live in. Expats are happy with their affordable housing, a pleasant climate and a good work-life balance. Safety is another key factor that expats appreciate. Additionally, a varied social scene and cultural offerings contribute to Panama's fun life. The local people are known for their friendly nature and positive attitude.
Investor Visa Programs in Panama
Friendly Nations visa program
The Friendly Nations visa program includes 50 countries and grants a simplified immigration process. Applicants receive temporary resident status for two years. After this period, residents can apply for permanent residency.
Citizens of eligible countries can pursue residency in the following cases:
- They have a work contract with a company based in Panama;
- They purchase real estate for over USD 200,000;
- They open a fixed-term deposit account of over USD 200,000 in a Panamanian bank for at least two years.
Foreigners should verify the Friendly Nations visa applicability for their nationality. This decree provides the current list of eligible nations. Check for up-to-date information.
Qualified Investor visa program
The Qualified Investor visa program may be suitable for foreigners not eligible for the Friendly Nations visa. The investment options are:
- Real estate investment: USD 300,000, with property held for a minimum of five years
- Panamanian stock market investment: USD 500,000 in national securities through a local licensed brokerage firm, with a five-year commitment
- Fixed-term deposit: USD 750,000 in a Panamanian bank for a period of five years
This type of visa grants permanent residency in the country. After five years, residents can apply for Panamanian citizenship.
Macro-Business Investor program
Foreigners wishing to establish a company in Panama can opt for the Macro-Business Investor visa. This program requires:
- The investment of USD 160,000 per applicant, who must be a shareholder in the company;
- An additional investment of USD 2,000 per dependent;
- The company's Commercial Operation Permit;
- A payroll of at least five Panamanian employees.
Reforestation Investor visa program
This visa requires investing in reforestation or forest plantation projects authorized by the Ministry of Environment of Panama. The investment may be personal or through a legal entity. The Reforestation Investor program provides two options:
- Investment of USD 100,00: two-year residency with an option to apply for permanent residency afterward,
- Investment of USD 350,000: immediate permanent residency.
Foreigners must maintain investments for five years. Otherwise, the authorities will revoke permanent residency status. An additional investment of USD 2,000 per dependent is necessary, if applicable.
General requirements for all investment visas in Panama
To apply for an investor visa in Panama, you are generally required to produce the following documents:
- Valid passport (at least six months) with an apostilled or authenticated copy;
- Criminal record certificate from the country of origin, apostilled or authenticated;
- Proof of funds (evidence that the funds have been legally acquired and transferred);
- Health certificate issued by a licensed Panamanian doctor;
- Application fees (vary by visa type).
Dependents, such as spouses, parents and children under 18 (or under 25 if full-time students), require additional fees and documentation.
Visa-specific requirements and investment amounts vary. For more information about each visa type, consult Panama's National Migration Service. Finding the best residency option can be challenging. Local attorneys are helpful in this and other matters related to immigration processes.
Key investment sectors in Panama
Real estate
The real estate market is one of the key sectors of the Panamanian economy. A steady growth, alongside the booming construction industry, was a prominent feature of the sector. However, a downtrend happened before COVID-19, the latter making things worse. Nevertheless, the pandemic stagnation is over; the market is back on track. Local real estate brokers can help you navigate the trends and select the best option for your needs.
Choosing the right location for your investment is crucial. Commercial real estate in Panama City is experiencing a slight decline due to excess supply. Residential properties, on the other hand, are in demand.
Many investors scout Panama provinces for ideal investment opportunities. Some prefer purchasing land to develop or hold, anticipating appreciation. For those seeking turnkey properties, many options are available across the country. Popular areas include Coronado, Chame, El Valle de Antón, Altos de María, the Azuero Peninsula, Bocas del Toro and Boquete.
Logistics and shipping
The Panama Canal is an important tourist attraction and the most profitable component of the Panamanian economy. This global trade hub makes up a big part of the country's GDP and labor market. Over 14,000 ships pass through the Canal annually.
Another key feature of the local economy is its free trade zones. These zones allow for tax-free activities, such as manufacturing, assembly, logistic and high-tech services, scientific research centers and higher education institutions, environmental services and goods processing.
Given Panama's importance to international commerce, investing in ports, warehousing and transportation offers strong potential for expansion and returns.
Tourism and hospitality
Panama's stunning landscapes, biodiversity and rich culture attract millions of tourists annually. The tourism sector offers many opportunities in lodging (from boutique hotels to eco-lodges and hostels), transportation, food services and niche travel offerings.
Renewable energy
Panama's constant economic growth highlights the need for a reliable, clean energy source. The government provides incentives for investments in solar, wind and hydroelectric projects.
Technology and startups
Panama has a strong technology sector. Some major international tech companies have established operations in the country. The local digital sphere presents a wealth of possibilities. Additionally, Panama explores opportunities in the global semiconductor industry.
Advantages of investing in Panama
Fiscal benefits
Panama has favorable tax policies, particularly for businesses, expats and retirees. The country operates a territorial tax system.
Income tax
Individuals and companies only pay taxes on income earned within Panama according to the following scale:
- Up to USD 11,000 annually: 0% tax;
- USD 11,001 to USD 50,000: 15% tax;
- Over USD 50,000: 25% tax.
Good to know:
Non-residents pay a flat 15% on Panamanian-sourced income.
Corporate tax
Corporations pay 25% of their revenue earned in Panama. Profits gained outside the country are exempt from corporate taxes. Additionally, the tourism and renewable energy sectors offer significant tax breaks.
VAT (Sales Tax)
Panama's sales tax, known as ITBMS (Impuesto de Transferencia de Bienes Muebles y Servicios), is 7%. Certain goods and services (e.g., alcohol, tobacco) have higher rates.
Property taxes
Properties valued above USD 30,000 are taxed between 0.5% and 1%, depending on the property's value. Additionally, properties may benefit from tax exemption for 5 to 20 years, with the variation again based on the property's value.
Import duties
These taxes, including customs duties and other import fees, depend on the local availability of the goods and the cost of insurance and freight (CIF) charged to the importer. Consult with legal advisers for assistance with the import process.
Free trade zones
Free trade zones in Panama offer businesses exemptions from import/export duties, VAT and income taxes. The main special economic zones are Panama Pacífico, the Colón Free Zone and the City of Knowledge.
Double taxation treaties
At the moment, the following countries have signed tax treaties with Panama to avoid double taxation: Barbados, South Korea, Qatar, Mexico, United Arab Emirates, Spain, France, Portugal, Luxembourg, Netherlands, Ireland, Israel, Italy, Singapore, Czech Republic, United Kingdom and Vietnam.
Foreigners need to understand their home country's definition of a 'non-resident' for tax purposes.
Free trade agreements
Panama has signed several free trade agreements (FTAs) that eliminate tariffs and other trade barriers. These agreements encourage economic growth by promoting global commerce and investment. Panama has FTAs with the United States, Canada, Singapore and some Latin American and Caribbean countries, among others.
Possible challenges for foreign investors in Panama
Panama is a land of opportunities, but investors should be aware of potential challenges.
The country's bureaucratic processes often disturb foreigners who are used to quick procedures in other parts of the world. Panama is known for its slow pace of life. The culture of its institutions, without doubt, reflects this fact. Procedures may differ from those in your home country. Be patient and provide all necessary documentation.
For non-Spanish-speaking investors, the language barrier can be another complication. However, advancements in modern technology help navigate foreign languages. Hiring a bilingual advisor can also simplify the matters.
Managing local staff can be a challenge for those seeking to run a business in Panama. At times, locals exhibit poor work ethics. Also, Panama's Ministry of Labor tends to protect employees rather than employers in disputes. On the other hand, the country's English-speaking workforce makes running a business here easier.
Working with advisors, such as lawyers and accountants, and conducting thorough research can help mitigate these challenges.
Takeaway
With its strategic location, safety, political stability and growing economy, Panama offers a favorable environment for international investors. Panamanian tax policies promote foreign investment and economic expansion by keeping domestic taxes relatively low. Welcoming immigration processes also facilitate relocation to the country. Understanding the market dynamics and available incentives is essential. Advice from local experts can help navigate business, immigration and fiscal matters with ease.
Useful links:
Panama's National Migration Service
General Directorate of Revenue (Direction General de Ingresos)
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
