Real Estate

Foreigners may acquire titled property in Panama, but each transaction must be analyzed through legal, registry, tax and documentary due diligence before making a decision.

The legal certainty of a real estate transaction does not depend only on the legal possibility of purchasing, but on verifying the property title, registry liens, taxes, permits, contractual conditions, payment structure and the legal vehicle used for the acquisition.

In general terms, foreigners may acquire titled properties in Panama in their own name. However, before purchasing, it is advisable to review the registry status, acquisition structure, ownership structure, applicable taxes, seller documentation and the buyer’s wealth planning objectives.

In some cases, acquisition through a Panamanian company, a Private Interest Foundation or another legal structure may be assessed, but this decision must be analyzed individually from a legal, tax, banking and wealth planning perspective.

In the case of properties under possessory rights (which do not have a registered title deed), Panamanian law requires that they be registered exclusively in the name of a Panamanian legal entity. In these cases, the foreigner may appear as a shareholder of the company, or designate a private interest foundation or trust as the holder of the shares, depending on their asset structure.

Real Estate Purchase Process in Panama

The purchase of a property in Panama may follow a formal process of review, negotiation, contract, payment and registry inscription. Below is a general description of a usual process for acquiring a property with registered title, without prejudice to the fact that each transaction must be reviewed individually:

1. Property Selection and Initial Negotiation

The process begins with the search and selection of the desired property, either through a licensed real estate agent, developer, or directly with the owner. During this stage, the buyer and seller negotiate and agree on the basic commercial terms, such as:

• Purchase price

• Form and terms of payment

• Included movable property (if applicable)

• Estimated closing date

• Special conditions (exit clauses, improvements, occupancy, etc.)

Note: Although not mandatory, it is highly recommended to document any preliminary agreement in writing, even if a formal contract has not yet been signed.

2. Hiring a Lawyer and Legal Review (Due Diligence)

It is advisable for the buyer to have independent legal review in Panama to protect their interests, review the documentation, coordinate due diligence and prepare or review the corresponding contracts.

• The attorney will perform legal due diligence, which includes:

• Verification of the title deed in the Public Registry.

• Confirmation that the property has no liens, mortgages, seizures, or other limitations.

• Review of the blueprint or topographic survey (when applicable).

• Verification of up-to-date property taxes and cadastral status.

• Confirmation of land use (zoning), easements, and permits (in the case of land or developments).

During this stage, the attorney contacts the seller or real estate agent to collect the relevant documents.

3. Signing the Promissory Purchase Agreement

Once the preliminary review is complete, the lawyer drafts a Promissory Purchase Agreement, which formally sets out the agreed terms. This agreement usually includes:

• Total price and payment method.

• Amount of the security deposit (usually 10% of the price, paid upon signing the agreement).

• Deadline for signing the final contract.

• Conditions precedent (e.g., final title validation, release of encumbrances, obtaining financing, etc.).

This contract regulates the main conditions of the transaction and serves as a legal commitment prior to the formal transfer, provided that it is properly drafted and adapted to the specific case.

4. Preparation and Signing of the Final Purchase Agreement

Once the attorney has confirmed that the title is free of encumbrances and everything is in order, the signing of the final Purchase Agreement is coordinated. This contract is signed in a public deed before a Panamanian notary.

In this phase:

• The deed signed by the buyer and seller is presented.

• The documents to be presented to the Public Registry are prepared.

• Checks or payment instructions are issued through the trust account or escrow account.

5. Payment of Price and Fees

Payment of the balance of the purchase price is normally made by:

• Bank transfer to an escrow or notary account.

• Certified checks on the closing date.

• Or, in some cases, after the title has been registered in the buyer's name (as agreed in the contract).

In addition, payments are made for:

• Real estate broker commissions.

• Attorney's legal fees.

• Closing costs (notary, transfer taxes, stamp duties).

6. Registration of the Transfer of Ownership

Once the deed of sale has been signed and payment has been made:

• The attorney files the public deed with the Public Registry of Panama.

• The Real Estate Transfer Tax (2%) and Capital Gains Tax (5%) are paid, generally by the seller.

• After the corresponding registration, the buyer may appear as the new registered owner of the property, according to the acquisition structure used and the documentation submitted. 

The registration timeline may vary depending on the documentation submitted, the registry office, the type of transaction, possible observations and the internal processing times of the Public Registry. 

Common Documentation Required:

• Copies of the buyer's and seller's passports

• Articles of incorporation and notarized power of attorney (if the buyer or seller is a company).

• Copy of the current title deed.

• Updated property tax receipt.

• Cadastral map or topographical survey (when applicable).

• Promissory contract and deed of sale.

• Certified checks for taxes and fees.

Yes, the sale of real estate in Panama is subject to various taxes and associated costs. The main ones are detailed below:

1. Real Estate Transfer Tax (2%)

• This tax is charged by the Panamanian government at the time of transfer of title.

• It is calculated on the higher of the sale price and the registered cadastral value of the property.

• It is generally paid by the seller, although it can be agreed otherwise between the parties.

2. Capital Gains Tax Advance (3%)

• This is also usually the responsibility of the seller.

• A 3% withholding is applied to the total sale value as an advance on capital gains tax.

• If the seller can prove that the actual gain is lower, they can request a subsequent refund or compensation.

• In practice, this advance payment acts as a final payment in most cases.

3. Notary Fees

• All sales must be recorded in a public deed and signed before a Panamanian notary.

• Notary fees vary depending on the value of the property and the notary chosen, but typically range from USD 200 to USD 300 for standard residential properties.

• If mortgage financing is involved, the notary fee may be higher.

4. Public Registry Fees

• The purchase agreement must be registered with the Panama Public Registry for the buyer to formally acquire title to the property.

• Registration fees are calculated based on the value of the property and include:

1. Registration fees (approximately 0.25% of the value)

2. Stamp duties and additional fixed fees.

• As a general reference, registration costs can represent between 0.5% and 1% of the transaction value.

Other possible expenses:

• Certifications, stamps, translations, and legalizations if the buyer is a foreigner or the contract is signed from abroad.

• Legal fees (buyer's and/or seller's lawyer).

• Company incorporation costs, if the property is purchased through a legal entity.

• Bank or trust fees, if an escrow account is used.

It is customary in Panama for the seller to pay the 2% property transfer tax and the 3% advance payment on capital gains tax; however, in some cases, this is negotiable.

Generally, each party pays its own closing costs. For example, the seller pays its attorney to review the purchase agreement, and the buyer pays its attorney to draft the purchase agreement, perform title research, transfer title, and provide escrow services. However, in some cases, buyers and sellers negotiate special terms whereby either the buyer or seller pays all closing costs, so it really depends on the particular negotiation between the buyer and seller. 

Closing costs may vary depending on the type of transaction, property value, notary, registry, professional fees, structure used, payment method and required documentation. For this reason, they should be calculated on a case-by-case basis before signing binding commitments.

No. The law does not require a sales contract to be in Spanish in order to be legally binding. However, if a dispute arises over the transaction in a court of law in the Republic of Panama, the court will require that the contract be translated into Spanish by an official translator. When preparing sales contracts, in the case of non-Spanish-speaking parties, it is advisable to draft the original contract in Spanish and provide our clients with an official translation into English or any other language. 

Generally, sellers accept 10% as a down payment or security deposit when signing the purchase agreement. This deposit is presented as a sign of good faith on the part of the buyer, so that the seller will consider the transaction. However, the amount of the deposit will depend on the negotiation between both parties. 

The buyer may lose the down payment if:

• They withdraw from the purchase of their own accord, without a clause allowing them to do so without penalty.

• They are unable to obtain bank financing, and no suspensive clause was included in the contract making the purchase conditional on loan approval.

• They fail to meet an essential deadline (e.g., they do not sign on the closing date) without valid legal justification.

• They do not pay the remaining balance on the agreed date for personal or financial reasons.

In these cases, the contract usually stipulates that the deposit remains in the seller's possession as compensation for breach of contract.

Yes, Panama has property taxes, known as the Impuesto de Bienes Inmuebles (Real Estate Tax). This tax is levied on the ownership of properties with registered titles, and is calculated based on the cadastral value assigned by the General Revenue Directorate (DGI).

How much is paid?

Since the 2019 tax reform, the tax is applied according to a graduated and progressive system, with reduced rates for residential properties:

Residential properties (primary residence)

Cadastral Value (USD) Annual Tax Rate

Up to 120,000 0% (exempt)

120,001 – 700,000 0.5%

Over 700,000 0.7%

Practical example:

If a home has a cadastral value of $200,000:

• The first $120,000 are exempt

• The remaining $80,000 are taxed at 0.5% = $400 per year

Secondary, commercial, or investment properties

These pay slightly higher rates:

Assessed value (USD)                  Annual tax rate

Up to 30,000                                  0% (exempt)

30,001 – 250,000         0.6%

250,001 – 500,000                          0.8%

Over 500,000                                1.0%

Important notes:

• The tax is paid annually, but can be divided into three quarterly payments.

• The cadastral value does not always coincide with the market price. It is determined by the DGI and may be updated.

• In many cases, buyers use companies or foundations to manage the property, which does not affect the rates, but does affect tax management.

• If the property is mortgaged, the bank usually requires that the tax be up to date before approving the loan.

Special exemptions

• Some new (residential) projects may be exempt from property tax for up to 20 years.

• Exemptions do not apply automatically: they must be requested and recorded in the Public Registry and the DGI.

• Exemptions do not cover the land, only the construction.

The timeline for a real estate purchase in Panama may vary depending on the negotiation between the parties, legal review, payment method, existence of financing, availability of documents, notarial signing and Public Registry processing times.

Yes, Panama has a property transfer tax, which is applied when the title to real estate is transferred from one owner to another, whether through sale, donation, or another form of transfer.

What is the Real Estate Transfer Tax?

It is a tax levied by the Panamanian government when registering the transfer of ownership of a property with a registered title. It is regulated by the Panamanian Tax Code and collected by the General Revenue Directorate (DGI).

Applicable rate

The general tax rate is 2% on the higher of:

• The declared sale price, and

• The registered cadastral value of the property.

In some cases, it can be done in 2 business days if we pay an additional fee for expedited processing. However, under normal circumstances, it takes 1 to 3 weeks, depending on the volume of transactions in the Public Registry.