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Below is are extensive answers to common questions
regarding investing and retiring in Panama. The information
provided is graciously done so by Paradise4Boomers.com,
a comprehensive online resource for navigating the legal and
economic advantages of the hottest tropical paradise retirement
spots in the Caribbean and Latin America.
Your future depends on the decisions you make today. Make the right decision:
contact Paradise4Boomers.com today.
Sit back, relax and leave us your worries; we will take care of the rest.
SECTION 2:
TAX RELATED
QUESTIONS FOR REAL ESTATE IN PANAMA
Click on a question below to jump to the answer:
Q: Are there property
taxes in Panama? If so,
how much?
Q: Are there property title transfer taxes in Panama?
Q: Are there capital gains taxes on the purchase
and sale of real estate property in Panama?
Q: Is there a way to minimize capital gains taxes
on property sales in Panama?
Q: Is there self-employment tax for real estate investors
in Panama?
Q: Are there any inheritance taxes in Panama, whereby
the Panamanian government would keep a certain percentage
of my beneficiaries' inheritance?
Q: If I am a US citizen, can I apply a 1031 exchange
to buying property in Panama, thus deferring my US capital
gains taxes?
Q: If I wanted to buy and flip (sell) my Panama property,
what sources should I use to advertise my property to find
a buyer in Panama?
Q: Are there property taxes
in Panama? If so, how much?
A: Property taxes are only levied
on properties that have a registered value of US $30,000 or
more (registered value is the value stated on the public deed
that is registered at the Public Registry). The maximum annual
property tax is 2.1% for any property valued above $75,000.
Possession Rights properties do not incur property taxes, since
the property technically belongs to the government of Panama.
For further information please contact us at Paradise4boomers.com.
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Q:
Are there property title transfer taxes in Panama?
A: Yes.
The government of Panama charges 2% of either the updated registered
property value or the sales price --- whichever is higher.
This is why most sophisticated investors utilize Panama corporations
to hold ownership to property, so that when they sell the property,
they simply sell the shares of the corporation as a whole,
thereby avoiding a title transfer, and avoiding the 2% title
transfer tax.
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Q: Are there capital gains taxes on the purchase
and sale of real estate property in Panama?
A: Yes, there are
Short-Term and Long-Term Capital Gains tax rates in Panama.
The rate also differs between individuals and corporations.
See our section on Panama Taxes for more information. The capital
gains tax is triggered upon the transfer of the title at the
Public Registry.
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Q: Is there a way to minimize capital
gains taxes on property
sales in Panama?
A: The most common strategy that people use
in Panama is to hold property in the name of a Panama corporation;
and, instead of transferring the property to the buyer’s name
upon the sale, the shares of the corporation are sold as a
whole to the buyer. Since corporations shares are "bearer
shares" and they are not
registered, there is no record of the sale. Upon the sale of
the shares, the new owner simply changes the board of directors/officers
to take control of the corporation.
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Q: Is there self-employment
tax for real estate investors in Panama?
A: There are no "self-employment" taxes
for real estate investors in Panama. However, local real estate
investors are taxed on their income the same way any other
person would be taxed on locally generated income, and they
are required to file annual tax declarations. Please note that
income taxes on real estate purchases and sales can generally
be avoided through certain structuring techniques using Panamanian
corporations and private interest foundations.
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Q: Are there
any inheritance taxes in Panama, whereby the Panamanian government
would keep a certain percentage of my beneficiaries' inheritance?
A:
No. Inheritance taxes have been completely abolished in Panama.
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Q:
If I am a US citizen, can I apply a 1031 exchange to buying property
in Panama, thus deferring my US capital gains taxes?
A: This
is a question for a US tax attorney or US CPA. At Paradise4boomers.com
our experts can answer your questions in details about US tax
laws. As preliminary information, please note that a client
looking to relinquish a U.S. Property and purchase a replacement
property in Panama, and then the 1031 Exchange would fail,
because foreign property is not considered to be "Like-Kind" to
U.S. property under the IRS code. However, if the client is
relinquishing foreign property, then an exchange into the Panama
property might be possible. Of course, a tax-deferred exchange
would only make sense in that situation if the client would
be subject to U.S. Capital Gains tax liability for the relinquished
property transfer because only U.S. taxes be deferred using
Section 1031."
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Q: If I wanted to buy and flip (sell) my Panama
property, what sources should I use to advertise my property
to find a buyer in Panama?
A: If you are seeking a local Panamanian
buyer, you can advertise in the local newspapers, such as La
Prensa, La Critica, and Panama America. If you are seeking
a foreign buyer, we can assist you in placing a print advertising
in Panama Real Estate Magazines or on the internet on websites
like ours at www.paradise4boomers.com. At Paradise4boomers.com,
we assist our clients with the sale of their property. We count
on a large portfolio of local and foreign clients, looking
for good investments and properties around the world. Contact
us for additional details.
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