Gomez Tomiczek

Rights of Possession (ROP) or “Derechos Posesorios” may seem a simple way of investment...but they are not. In fact, they are more complicated if you really want to prevent a legal problem in the near future. In order to explain the difference between a property that has ROP and a property that is titled, we must first know how the Panamanian government legally creates a property.

In simple words, the land from the beginning belongs to the government of Panama. Then the government "assigns" those rights so that there is supply and demand and the land increases in value as it passes from hand to hand (buying and selling) that is where the government starts to make money from taxes. As the government of Panama is not a real estate company, nor is it dedicated to real estate activities, they have to guarantee that the land that belongs to the government are for public use and benefit, of course protected by the law.

Faites votre jeux - Get your game on.

Once I know that I want a property "without title" the first thing I must do is to have the right to "occupy" it, that is why they are called “rights of possession", because I must possess it as my own. If a person "occupies" a property but it belongs to another person, and this person does not care, because it is a "possessory" right, he can lose this right in a period of one (1) year.

Obviously, in Panama, nothing is automatic. This person who is the new unregistered owner, and just arrived and occupied the property, can approach the government and ask to be given that ROP. If there is someone who opposes, then they don't give it to him. If nobody objects, then it is theirs. The same happens if you want to title the property, that is to say, a public deed is drawn up, registered and it is known to all, that this property belongs to you. To do so, you will have to prove that you are the owner.

If you are thinking of buying ROP, keep in mind the following (as a frame of reference, remember that every case is different). You need to ask for the plan with the geographic coordinates, to define exactly where the property is located. Also, your seller has to prove that he is the "de facto" owner, that is to say, by means of a certification from the police authority stating that the seller has been living there for five (5) years, you can also ask for affidavits from the neighbors as witnesses. In addition, receipts for electricity, water and telephone expenses must be presented, as well as all other suitable documentation that may prove that this person exercises the spirit of owner over this property. This happens because, although a property has ROP, according to the law in Panama, you can lose your right when another person takes the property for himself in a "peaceful" way. Or in short, another person lives on the property for more than one (1) year and you allowed him to do so without expelling him.

The stakes are set, or not?

The law in Panama establishes that the person who has the ROP has to occupy the property, has to fence the property, has to work it, has to build on it, has to preserve nature, watch over it and protect it so that other people do not take it. There is a technical legal word for this situation and it is called "Acquisitive prescription of dominion”. That is to say, if I have a ROP and I did not exercise my right, and I allowed another person to do so, according to the law in Panama, I can lose my ROP in one (1) year, and that gives the right to another person to prove in the courts of justice in Panama that he is the legitimate owner.

Another important issue to know is that the ROP can be registered by a natural or corporate body. When the land titling process is finished, the natural person will pay a symbolic price to the public office of the government, but when it is a corporate body it can be very expensive compared to what a natural person would pay. You should also keep in mind that not all properties that have ROP can be titled, i.e. it must not be a protected area, comarca territory, private estate, administrative concession area, land assigned in use and administration, among others, as well as it must not have a conflict, or judicial/administrative litigation.

If you wish to title an island or insular territory, you must prove the occupation for more than five (5) years and the physical dominion with owner's intention, in a pacific and interrupted way, through suitable means, that is to say, certifications of the Mayor's Office (this documents by itself is not enough as a proof), affidavits of witnesses of the community or of the neighbors, photos of the land and of the constructions made on the property, plans with GPS position and detailed location, with its boundaries, measurements and neighbors, public services contracts, construction permits, among others.

Rien ne va plus - The die is cast.

In summary, buying a ROP can be cheaper compared to a property that has registered title. However, as lawyers we do not gamble, and due to our professional experience we strongly recommend buying titled properties in order to guarantee your investment in the future.

The government of Panama has created over the years more than 50 immigration categories to facilitate the immigration of foreign professionals, investors, entrepreneurs, family members, or retirees. In recent years, Panama has become a popular emigration destination. The constant economic growth, the warmth of the locals, the pleasant climate, the extensive beaches, as well as attractive investment opportunities, and the US dollar as local currency are among the many advantages that Panama offers newcomers.

The six most common residence permits in Panama, either as a part-time resident or to stay permanently in the country are:

• Retire in Panama: "Jubilado Pensionado" visa.
• The "Friendly Nations" Visa
• Especially for Italians: "Convenio Panama - Italia"
• For investors: "Golden Visa”
• Application for family reunification "Dependiente de Residente Permanente"
• Panama "Marriage Visa”

Step by step: How to get your residence permit

We have listed for you the steps to apply for a residence permit in Panama below. The individual procedures may vary in detail depending on the immigration category and the personal situation of each client:

Step #1: Choosing a lawyer and first contact: The Immigration Law in Panama requires that all applications for residence permits in the previously mentioned immigration categories must be submitted by a licensed attorney in Panama.

Step #2: Which Immigration category fits you: Together with your attorney you select which category suits you best and which are the required documents.

Step #3: Compilation of documents: Collect all necessary documents and papers required for the application. Pay attention to the validity of the various documents and take care of the necessary certifications (apostille) in time.

Step #4: Review of documents: It is best to email all documents and papers to the lawyer in Panama in advance for review in order to be sure that everything is complete and nothing is missing. At the same time, the documents can already be forwarded for translation in Panama.

Step #5: Trip to Panama: Once all documents are ready, a personal trip to Panama is necessary to complete your file and submit the application in person together with your lawyer.

Step #6: Completion of your file: Once you have arrived in Panama you will meet with your lawyer and hand over all original documents, sign the lawyer's power of attorney and any other documents necessary, make copies of your passport, fill out the immigration forms, get your health certificate and any other procedure where your personal presence is required.

Step #7: Filing your application at the immigration office: As a rule, the file must be complete and all applicants must be present in person in order to submit the application.

Step #8: Registration of the passport ("registro de pasaporte"): The registration of the passport is done in advance online by your lawyer. During the application process, all information is checked again and an immigration officer stamps the registration stamp ("sello de registro") in the passport of each applicant.

Step #9: Temporary migration card ("carné de migración"): Once the application has been submitted, your status in Panama also changes. You are no longer considered a "tourist" but a "resident". All applicants receive an identity card from the immigration office. This card is valid for six months (enough time to process the application within this period). A photo is taken on-site for the ID card. From now on your migration ID card must be shown at passport control every time you enter or leave Panama.

Step #10: Multiply Visa ("visa multiple"): The multiple entry and exit visa is a stamp in the passport that allows you to enter and exit Panama while your residence permit application is being processed. The multiply visa is valid for six months (just like the migration ID card). The Immigration Department takes about 48 hours to issue the Multiply Visa. They will hold your passport for this period. Foreigners (with ongoing immigration proceedings) who leave Panama without having a Multiply Visa stamped in their passport, or whose Multiply Visa has expired, must pay a fine of 2,000.00 US dollars (per person) to the Immigration Department upon re-entry into Panama.

Step #11: Processing your application: Upon receipt of the application, the National Immigration Service assigns a case number to the file and transfers it internally to the responsible department in Panama City. After the application has been successfully processed by the responsible caseworker, the decision ("resolución") is reviewed by the head of the department. Then the Director of Immigration signs your resolution and the file finally moves to the Notifications Department. The processing of the application usually takes three to four months.

Step #12: Receiving your residence permit and a second trip to Panama: Once the residence permit has been approved, you will be notified by your lawyer. A second trip to Panama is required in order to undergo the notification process and obtain your new migration ID card. Upon completion of this procedure, you will be allowed to stay in the country permanently or temporarily, depending on your immigration category.

Foreigners who hold permanent residence status in Panama can also apply for a Panamanian identity card (Panama E-card or Cédula E) at the Civil Registry (Tribunal Electoral). This process is a separate procedure and is not done automatically as part of the application process. The application for the Cédula E must be submitted separately and the decision is forwarded internally by the Immigration Department to the Tribunal Electoral. Subsequently, an appointment at the Tribunal Electoral is required to verify the personal data of the applicant and to take a photo for the Cédula E. The Cédula E is not printed immediately and will be available for pick-up after approximately two to three weeks.

It is not mandatory to have a Cédula E. However, in daily life, it facilitates many administrative, legal and/or business procedures such as opening a bank account. Furthermore, the Cédula E is a prerequisite to register with the tax authorities in Panama and to apply for a personal tax number.

The process of buying real estate overseas can be complicated, time-consuming, and stressful. But it should not be like this. Read our guide below on the biggest mistakes buyers make and how you can avoid them:

Mistake #1: Location is Everything

Almost everything can be fixed, but the location, the location, the location cannot be fixed. Buy location, NOT price. When investing in real estate overseas remember to do your due diligence and pay attention to the small details that can turn your dream home into the home of your worst nightmare. Before buying try to get information from different local sources in order to be sure that the location you chose is really the right one for you.

Besides common factors such as traffic connection, security, neighborhood, distance to the nearest hospital, and infrastructures such as supermarkets, shops, and restaurants, it is important to verify the connection to basic public services. That is water, telephone, internet, electricity, and garbage collection. Which are the available providers and how reliable are their services? Are there any (regular) interruptions or connectivity problems with one of the basic services in the sector? Does the availability of one of these services vary according to the season (rainy season/dry season)?

Speaking of seasons, although Panama is a tropical country without seasons, there are sub-climates in different areas of the country. Depending on the location and time of the year there are regions that are more humid than others, in certain areas, there is a constant strong wind during the dry season, others where heavy rain falls during certain months of the year, while there are zones suffer from drought during the dry season.

Mistake #2: Not thinking about selling the house someday

Buyers often forget that they will most likely sell their home at some point. Personal circumstances can change, and eventually, you have to sell. The purchase of a home should be structured well from the beginning to avoid headaches and bad surprises in the future: What will be the taxes to pay when you sell your home? Which legal figure is the most convenient to acquire a property? If something happens to me, what is the quickest and least expensive way to transfer the house to my heirs?

Mistake #3: Falling blindly in love with a house

Just as in love relationships there are properties that are "problematic". Some details are cosmetic and can be solved in one way or another, but there are real estate options that can be called an "uncontrollable risk". Whether it's a lawsuit, a conflict of interest, or some kind of encumbrance. Unless you like to play Russian roulette, don't get distracted by the "flashy" details of a house.

Mistake #4: Trying to buy without a lawyer

Last but not least, one of the biggest mistakes we can observe in our legal practice is when buyers try to buy without an attorney. There are too many factors that cannot be calculated and making a mistake is somehow inevitable. Lack of experience combined with the desire to save “some pennies" can have serious consequences. The Laws and the legal basis in Panama are not the same as in other countries. You should not sign contracts or legal documents that were not reviewed by a trustworthy lawyer. If you have doubts about a transaction, seek advice from an experienced lawyer who will not only protect your interests during the purchase transaction, but also your wallet by avoiding problems in the future.

On December 3rd, 2020 the President of Panama announced the creation of a new type of legal entity called “Startup Company" in order to increase entrepreneurship in Panama, facilitating the formalization of companies and at the same time providing tax incentives for new startups.

How can I create a new startup company?

Two to five natural persons, of any nationality, may form a startup company in Panama. The subscribers of the articles of incorporation will be at the same time the partners and therefore the final beneficiaries of the company. Unlike other company types in Panama, this information will be publicly available. But in order to avoid the abuse of the benefits and incentives for this type of company, no natural person who was previously part of a startup company will be able to belong to another startup company.

The new startup companies are similar to the limited liability companies in Spain. The economic liability of each partner for the obligations contracted by the company will be limited to the amount of their participation made or promised. The minimum capital of the company is US$500 and can be contributed by the partners in money, goods, or services.

It is possible to transform an already existing company (as long as it has not been operating for more than three years) into a startup company, and thus take advantage of the benefits and incentives of this new figure.

Administration of the startup company

As with Spanish limited companies, startup companies will have at least one administrator. The administrator must always be one of the partners and can celebrate or carry out all the activities and contracts related to the operations of the company.

An interesting detail is that the new startup companies do not require a resident agent. All companies and private interest foundations in Panama must have a registered resident agent (a licensed attorney or law firm in the Republic of Panama that acts as a point of contact between the company and the national authorities). In the case of the new startup companies, the appointment of a resident agent is optional. If the startup company does not have a resident agent, the administrator must be assigned as the legal representative and contact person for the authorities. In addition, the domicile and physical address where the offices of the startup company will be located must be registered.

What are the advantages and incentives for the new startup companies?

Startup companies will be exempt from paying income tax during the first two (2) years of their operation. In addition, they do not have to pay the annual franchise tax and will be exempt from using a cash register (but they must issue electronic invoices and manage an electronic invoicing system). Additionally, the startup companies will be able to apply for a discount for up to 50% on the import taxes of the raw materials required by the company for the creation of its products, services, or innovative processes.

What kind of economic activity can be carried out with a startup company?

Startup companies may execute any legal economic activity, but may only operate within the Republic of Panama. In addition, startup companies must not be used to carry out one or more of the following activities:

1. Companies operating in one of Panama's free trade zones
2. Casinos, gaming, gambling, and similar activities
3. Developer companies, real estate agents, or brokers
4. Construction companies and contractors
5. Security transport companies
6. Pawnshops
7. Commercialization of precious metals or gems
8. Buying and selling new and used cars
9. Legal and/or accounting services (lawyers, accountants)
10. Startup companies must not be listed on the stock exchange.

There is a limit of one million US dollars gross income per fiscal year in order to qualify for the tax benefits of the startup companies. If the company's income exceeds this amount, it must transform into another type of corporate body in order to continue operating.

Curious? For more information, contact us for a free video consultation!

Some will be familiar with today’s topic: Traveling with Children. In fact, taking a car, especially when the children are young, means carrying more luggage than passenger space in the car. But things don’t get easier when taking an international flight. In the practice, it means that you will need additional legal documents, such as valid passports, certificates, and others to have a pleasant and smooth trip.

Traveling with Children: Are there any special documents I should bring? If your child does not have residency in Panama and only enters the country as a tourist there is not much to think about. You only need to have the child’s valid passport to pass the immigration control. But, it is highly recommended to bring a birth certificate (duly apostilled), just in case.  

Are there special requirements if my child is a resident of Panama? If your child has a Panamanian passport or residence permit (either temporary or permanent), you must present the child’s valid passport and residence card (immigration ID card) at the border control of Panama. Additionally, you must have a birth certificate (duly apostilled) and translated into Spanish.

What happens if I travel alone with my child and the other parent does not accompany us on the trip? If you are traveling alone with your child and the other parent does not accompany you on the trip, you require a “Permiso de Salida de Menores de Edad del País” (Permission for Minors to Leave the Country). In order to leave Panama and pass the Panamanian border control with a minor who holds a Panamanian passport or resident status in Panama the consent of both parents is required. In the event that one or both parents do not accompany the minor on the trip, the National Immigration Service of Panama requests a series of documents to protect the life and integrity of the minor. 

How can I apply for a “Permiso de Salida de Menores de Edad del País”? In the past, it was enough to present a simple authorization from the other parent, but a few years ago the National Immigration Service of Panama changed the requirements and turned the process into an online procedure:  

Step 1: Go to www.migracion.gob.pa and select the migration online icon.

Step 2: In the application option click on “Permisos de Menores”.

Step 3: Read the requirements carefully and then fill out the application. The necessary documents depend on and vary according to each family's individual situation.

Step 4: Attach the required documents, birth certificate or cédula juvenil to the online application form. Once completed, save the application number.

Step 5: Print the application and make a copy of all the documentation submitted. Take everything to a Notary Public and legalize the signature(s) on the application.

Step 6: On the day of the trip you should have all the original documents and a set of copies at hand.

What do I need if I am traveling alone with my child and the other parent is abroad? The procedure is the same as described above. In this case, you must present the original or an authenticated copy of the authorization issued abroad. The same must be duly legalized, either by means of Apostille or Authentication through a Panamanian Embassy or Consulate abroad.

Remember these requirements only apply if your child has a Panamanian passport or permanent or temporary residence permit in Panama. For foreign children with tourist status, it is not necessary to apply for any permission. Likewise, for foreign resident children, the “Permiso de Salida de Menores de Edad del País” is only required if the child is traveling with only one parent or a third person (grandparents, etc.).

 Safe traveling and enjoy your stay in Panama!

Do You Want to Expand to the LATAM Market? Consider These Three Key Factors

Due to the current situation caused by COVID-19, we can observe an explosive growth in online sales. This ongoing trend brings new business opportunities, as well as new ways to access the Latin American market (LATAM) for entrepreneurs from Europe, the United States, and Canada.

The LATAM e-commerce market is expected to grow by 29% from 2020 to 2024. 25% of online customers made their first online purchase in March of this year. The products with the highest online sales in LATAM include computers and accessories, home appliances, clothing and shoes, tools and building materials, home accessories, and furniture.

But in order to sell successfully online, you have to analyze and study the consumers, their preferences, and local tastes, as well as cultural differences. For this reason, in this week’s Blog, I have summarized three key factors to consider when expanding or starting your online business in LATAM:

1. Web Design

In the virtual world the website of any business, store, or professional service is a business card to the outside world. Just like any restaurant, hotel, dental clinic or law firm tries to create a pleasant physical space to receive their diners, guests or clients. The creation of a business web space should follow the same concept to receive its virtual clients. When creating a website for the LATAM market local consumers expect its content to be visually pleasing, fast website navigation, and preferably a chatbot that is available 24/7 to answer the most urgent questions. LATAM online consumers appreciate the ability to purchase without registering and a variety of payment methods which, of course, should ensure a safe shopping experience.

2. Marketing and Customer Interaction

The typical LATAM online consumer is young and likes technology. 85% of the population in LATAM is an active user of social networks, the most popular being Whatsapp, Facebook, Youtube, Instagram, and Twitter. This is why network marketing campaigns and constant interaction with customers are key in the online expansion into the LATAM market. The communication methods preferred by consumers are email (57%), text messages (27%), via a business' own mobile app (26%), Facebook (23%), Whatsapp (10%), and Instagram (10%).

3. Seasons and Shopping Campaigns

Let's be honest, we're all bargain hunters. The typical LATAM consumer loves bargains. It's very common to wait for a special campaign or sale to make purchases. In the retail sector, 78% of sales are made for Christmas, 68% for Black Friday, 58% for Cyber Monday, 53% for Mother's Day, and 52% for Valentine's Day. Other special occasions for smart spenders are Children's Day, Father's Day and Back to School.

Before launching a new business or expanding your existing company into the Latin American market, remember to study and analyze the preferences of your market and your future customers. Although LATAM is a large market with a lot of potentials, it is necessary to fragment the various regions taking into account that there are cultural and traditional differences along with specific local characteristics and challenges.

When making a trip from your country of origin to Panama, each traveler or family traveling together has a limit of cash that they can take with them which is $9,999.99. If you travel with cash exceeding $10,000, and you do not duly declare it at Customs, the total amount of money can be taken away. This modality is called "Commission of a Customs Fraud Crime" or even smuggling.

The reason is mainly that by not declaring the "extra" amount of money, the customs authorities assume that the intention is to harm the tax interests of the country or even to use that money for illegal purposes. Therefore, the sworn statement that is signed to confirm the amounts is a legal document, and the declaration of "false" facts is a crime. In addition to that, if you cannot prove the origin of the funds to the authorities, for example through an income tax return, bank account, or some other means that prove the origin of the money and the use that will be given to it, the respective authority will automatically think that money is supposed to be used for illegal purposes.

Many times language barriers prevent us from explaining ourselves easily. If the origin of the funds is not confirmed, the customs authorities will confiscate the total amount of the money and in addition to that, they may initiate a criminal investigation. By not declaring the origin of the funds at customs, you may have legal problems and even be prevented by the competent authority from leaving the country, until the investigation is completed.

Do not sign if you do not understand what you are signing

In Panama the customs declaration is made by using a form under oath of the traveler, at the moment of your entrance to the territory of Panama (the airport). I personally received that form at one time in English, sometimes in Spanish. Please do not sign if you do not understand what you are signing. It is a binding legal document and no matter how simple the form looks, the problems behind not understanding what you are signing are bigger than they seem. If you don't understand the language, please ask the flight attendant to give you one that you can understand, and if you don't speak English either, ask for help at customs when you arrive at the airport.

In our practice we have seen cases where clients traveled with different currencies and had not noticed that the total amount of cash exceeded ten thousand dollars and not understanding what they signed or thinking that the limit applies per person and not per family, the money was confiscated.

Do you want to know what the government of Panama does with the money confiscated in Customs every year? 

I don't think you're going to like it, but I'll tell you. The Law in Panama stipulates that all the money collected by travelers who did not declare their money in Customs, a part of it will be distributed among all the Customs officers at the national level, as a bonus for their work – as some kind of war booty (...); the rest of the money will be distributed among other institutions in Panama, as money for their operations budget.

The authority confiscates quickly, but when they have to return the money the process is very slow and nerve-racking. It must be proven to the customs judge that the money is not illegal, and there was never any intention of violating the customs law, but to make investments in the country, that you have a connection with Panama (not as a tourist, but as a resident or potential resident in the country), maybe even a business, and that you pay your taxes in Panama. 

Remember, that "ignorance of the law does not exempt from responsibility". 

So, keep learning and informing yourself, and in case of any doubt ask your trusted lawyer, who will surely be happy to help you.

 Have a nice trip and safe travel! 

Moving to Panama

Do you want to move to Panama and want to take your household goods with you? The good news, domestic goods can be imported duty-free. But first of all, what are household goods, according to the Panama Customs authorities? The term household goods can refer to the bed, the washing machine, the dryer, the dishes, the dining room table, the sofa, overall the furniture and accessories of the home. The goods must be used and be seen used. Construction equipment, commercial tools/equipment, motorcycles, trailers, new items, and other non-domestic goods will be taxed.

What documents do I need?

For the process of importing your household goods, you need your passport, your Panama migration ID card (carné de migración), a copy of the Bill of Lading, and a packing list. This means a detailed list of the articles of domestic or personal use that you wish to introduce to the country (in English or Spanish) must be presented prior to the date of arrival of the shipment. Additionally, invoices for newly purchased household goods or non-domestic goods are required, if applicable.

What is the procedure to import my household goods to Panama?

Importing your household goods to Panama can be a headache for many, but it can be done efficiently, as long as you choose a reliable and experienced international moving company and a reputable customs broker. In general, the process takes between 5 and 10 working days in order to liquidate the household goods. Additional charges may apply for equipment holds, container usage (depending on the shipping company), or deposit and storage at the customs authority's facilities depending on the duration for customs clearance.

When the container with your goods arrives in Panama, you must be in the country. All shipments will be personally inspected at the port of entry. We suggest that you pay for the revision in residence due to the congestion of shipments in the fiscal precinct. This in-residence inspection has an additional cost.

All shipments entering Panama by sea, land, or air are fumigated at the port and/or airport of entry. Fumigation is a pest control treatment. This procedure may cause a delay in the delivery of the shipment.

How much do I have to pay?

The final cost of importing your household goods depends on what is in the container (household goods, tools, machinery, valuables, etc.). Non-domestic goods will usually be taxed at about 20% of the resale value.

Get different offers from moving companies and compare prices and services included. Some have paid much more than they were originally quoted, due to unexpected additional fees. Get a price with door-to-door delivery and make sure there are no extra charges.

Should I bring my car to Panama?

According to our professional experience, it is generally not cheaper to bring your car to Panama. The process of customs clearance and vehicle registration in Panama is long, and there are likely to be delayed. The import taxes on your car are approximately 27 to 30 percent of the CIF value. In fact, you will probably be able to buy a car in Panama at a lower price and with less hassle.

Are there any goods that cannot be imported?

There are some items that can only be imported if they are in limited quantities, have the appropriate additional documentation and the shipper has paid all required duties and taxes. Among them are food, alcoholic beverages, jewelry and coins (gold bullions), leather goods and living plants (it is not advisable to include plants in any shipment). There are also prohibited items like ammunition, firearms, drugs, and narcotics.

All shipments of household goods that bring in wood furniture or any other wood items are subject to a Quarantine Import Permit that must be applied for before the shipment reaches Panama. Restrictions also apply to the use of wooden packing materials such as barrels, crates, lift-vans, and pallets. The wood must be treated and sealed. Any wood packaging that is not properly marked may cause extra charges and delays.

Plan B

Instead of shipping your complete household, you can also consider sending only some boxes with certain items that are important to you. You can even check the possibility of bringing extra luggage on the plane. Keep in mind that many rentals and properties for sale in Panama come fully furnished. So before making a decision, find out what is available in Panama and what the costs are. This will help you decide what to bring with you and what to buy new in Panama.

The President of Panama created a new Golden Visa for Panama to encourage foreign investment in the country. Unlike the existing immigration categories, this new permanent residence permit has four important advantages:

1. VIP counter for the reception and analysis of the Golden Visa.

2. Processing of the application in a maximum period of 30 working days.

3. Option of presenting the application without personal presence in Panama.

4. One-time application with the right to permanent residence permit and E-card (“cédula”).

How is the new Golden Visa different from other existing investor visas?

Something very interesting about this application is the fact that it can be presented by a Panamanian lawyer without the personal presence of the applicant. Until now, in order to apply for a residence permit in Panama under the different immigration categories, it was mandatory to personally appear with your lawyer before the immigration offices. However, for the new Golden Visa, the National Immigration Service of Panama will be creating a special department to receive these applications, like a VIP counter. Additionally, the government is required to process the application in a maximum period of 30 working days.

Therefore, the applications may be submitted through an attorney, before the applicant and his or her dependents travel to Panama. Once the applicants arrive in Panama they must comply with the normal passport registration process in order to receive their migration ID card.

It is innovative that such legal procedures can be managed remotely, without being physically present in Panama. We hope that this type of positive change will be replicated for other categories and processes as well.

Unlike the other existing investor categories, the Golden Visa offers the opportunity to obtain permanent residency in Panama with a one-time application, conditioned to the investment being maintained for a minimum period of five years (which will be verified annually by the government). If the investment ceases to exist before the fulfillment of this term, it will result in the cancellation of the permanent residency granted.

What are the requirements to qualify as a Golden Visa investor?

In addition to the basic requirements such as police record, health certificate, government expenses among others, proof of an investment made in Panama with funds from a foreign source is required.

There are three investment categories for the Golden Visa:

1. 1.Real Estate Investment
2. 2.Investments made through a Panamanian brokerage house
3. 3.Investment in fixed deposits (CD) with a Panamanian bank.

The minimum investment in real estate must be USD$300,000 (free of liens). If the property has a higher value, the surplus may be financed through a mortgage loan granted by a bank or financial institution in Panama. After two years (i.e. from November 2022) the required minimum amount for real estate investment increases to USD$500,000.

Besides the purchase of a real estate property there are other investment options in order to qualify for the Panama Golden Visa, for example:

1. Real estate investment through a sales promise for USD$500,000 made through a trust deposit managed by a bank or trustee in Panama;
2. Investments made through a brokerage house in Panama for a minimum amount of USD$500,000;
3. Investment in a fixed deposit (CD) with a Panamanian bank for a minimum amount of USD$750,000. This deposit must be free of any encumbrances.

Promising investment opportunities for a Plan B

Housing trends are changing. The experience due to the current situation takes people away from city centers, in search of unique spaces, but meeting basic needs such as access to fresh water, electricity, and fast internet connection (to be able to work remotely). Although Panama City is a dynamic and modern city, much of the interior of Panama remains quiet and unexploited.

But it is not only the location that will influence investors’ decisions when purchasing overseas. The second important point to consider is residence. In order to stay a significant amount of time in a country or move to a part-time or second home abroad, a residence permit is required. When countries began to close their borders, tourists were the first group to be blocked. But in the case of Panama, foreign residents were allowed to enter at all times. Now for the first time, the opportunity was created to obtain a permanent residence permit remotely through an attorney.

Opportunities arise from crises. Panama is considered a "safe haven” in the region. Despite the immediate economic contraction, Panama continues to be the strongest economic power in Latin America and the outlook for recovery (according to the risk rating agency Moody's) is positive (BAA1). Real estate investors are well advised to follow the development in the country closely, as the new price environment together with the appropriate strategy, creates space for very interesting investment opportunities.

The death of a loved one takes many people by surprise. Besides the emotional burden and grief, one suddenly has to deal with legal, financial and administrative procedures, especially if the deceased did not have his/her assets organized. Everyday life can very quickly confront us with situations in which it is absolutely necessary to consult a legal expert. Knowledge edge in legal matters helps you to make an informed decision and protect not only your investment and assets, but also your family, heirs and loved ones.

Two case studies from our legal practice regarding inheritance law in Panama.

Let's make an analysis of two "figurative" case studies with their respective pseudonyms: Due to unpredictable circumstances, Michael Bauer arrives at the hospital in critical condition. He and his wife Carola moved from Canada to Chiriqui over three years ago. While the doctors try to establish his health status, Michael asks his lawyer to prepare the necessary documents to leave "everything in order”, and transfer his share of the family home located in an exclusive residential area in Boquete to his wife.

I have a will, why do I need a foundation?

Michael never wanted to create a foundation to protect his family's assets because he felt it was "too expensive" and an "unnecessary" expense. Unfortunately, Michael passes away before he could sign the legal papers. He leaves a vehicle (worth $10,000), his share of the house (worth $300,000 in total) in Boquete and a savings account at a local bank.

There is a formal will signed before a Notary Public in Panama, declaring his wife Carola as the sole heir. She feels alone in Panama and wants to sell everything fast in order to return to Canada. However, two long years go by before she is able to transfer the title of the car and her deceased husband’s share of the house in Boquete to her name, and finally put the property and vehicle up for sale. But what happened? And, how could they have avoided this situation?

Inheritance Law in Panama and its pitfalls

The delay in the inheritance procedure is due to the legal basis in Panama. If the deceased had assets within Panama, in his own personal name, regardless of whether or not he has a will, a probate proceeding must be completed. In order to do so, it is necessary to hire a lawyer and to file a probate lawsuit (tested if there is a will, or intestate if there is no will, which in practice is almost the same procedure) before a judge in Panama.

Courts and Judges

Your file must go through different stages and hands in the court and once all the formalities are completed the judge will make a decision and assign the final beneficiary(ies). Legal procedures in Panamanian courts take their time, and even under the best conditions, it will take at least two years until your heirs have the right to transfer your assets to their names, so that they can finally sell them. In the meantime, they will have to pay for expenses, lawyer's fees (15% of the total inherited assets according to the minimum lawyer's fee in Panama), among others.

Being Prepared…

On the other hand, our second “figurative” case study is the case of Max Mueller. He has been a part-time resident of Panama for five years. Max has been traveling back and forth between Panama and Germany, but now it is too exhausting, his health is not good. Mr. Mueller owns a piece of land in Las Lajas (with a value of 40,000US$) in the name of a foundation, and a personal savings account at a local bank. On his last trip, he spoke with the bank official and filled out a form to leave his son Robert as the final beneficiary of the account. His lawyer has an original copy of his foundation's by-laws that declare Robert as the secondary beneficiary and secondary protector of the foundation.

A foundation does not die

After Max passes away in Germany, his son Robert contacts his father's lawyer in Panama. He sends him his father's death certificate, duly apostilled, and a few weeks later he travels to Panama. Since the foundation (which is a legal entity) is the owner of the land in the Public Registry of Panama and the duration of the foundation is perpetual, no lawsuit, process or legal procedure has to be filed.

Robert now, in his role as universal beneficiary and protector of the foundation, leaves a signed mandate for the sale of the land, and immediately hires the service of a local real estate broker to sell the property. Before returning to Germany, he goes to the local branch of his father’s bank, complies with the internal procedure and can access the funds in the account.

Create your individual estate plan

A Panamanian Private Interest Foundation (PIF) can ensure that after your death, your estate passes to your chosen beneficiaries without any stressful complications, delays, or litigation. For legal purposes, the assets of a PIF constitute a separate estate from the assets of its founder and the beneficiaries. Just as in a will, the foundation's private by-laws govern the conditions of the PIF. It can be established how the assets will be distributed, and who has control over the administration of the foundation's assets.

It is not required that the Founder be a resident in Panama, and with the telematics, originated due to the Covid-19 pandemic, Panama made an effort so that lawyers can create corporations and FIPs without the need for their clients to appear before a Notary Public. The commercial registry of the legal entity is filed electronically, making the registration process more expeditious.

Knowledge edge makes the difference

Carola is hopeful that the title to the house in Boquete will be transferred to her name soon, so that the property can be put up for sale. She has already traveled many times to Panama and sometimes she feels tired and exhausted due to so much protocol, stress and expenses.

Robert received a message from the broker a few weeks ago. There is an interested party who wants to buy the land in Las Lajas. The down payment has been already made and the deal will be closed this week. In a few more days he will receive the funds from the sale in his bank account in Germany.

UPDATE: The cost for the rapid test at Tocumen Airport is US$50.00. Three stations have been set up in Terminal 1 (prior to passport control) to perform the rapid test. The results are available in approximately 20 to 30 minutes. 

How to Keep Your Panama Visa as a Part-Time Resident

With the current restrictions implemented on international air traffic, border closures, and controls due to COVID-19 it is difficult for many temporary, part-time or permanent residents in Panama to travel to Panama and thus maintain their current permanent residency status. Most foreign residents in Panama know the golden rule of "having to travel to Panama every two years to maintain your resident status". But are there any exceptions to that rule?

Can I lose my residency in Panama? The answer is, "Yes."

In fact, the law establishes a list of reasons that may cause the loss or denial of residency in Panama. Some of the most important are the following:

1. Have been convicted of committing a fraudulent crime or tax fraud.
2. Have a criminal or police record in your country of origin or perform criminal acts within Panama.
3. Having been absent for more than two (2) years from the national territory, unless such absence is justified and authorized by the Director of the National Immigration Service.

What are the consequences if, due to the current circumstances, I cannot travel to Panama in order to maintain my status as a resident?

The Law stipulates that there must be a reason for the absence. It is presumed that a global pandemic is a sufficient reason to justify the absence since the National Immigration Service of Panama has suspended all terms for the time being.

Are there any legal procedures to recover my residency if it is canceled?

If the National Immigration Service decides to cancel your residency in Panama (remembering that in our country nothing happens automatically), there are legal procedures to request the reactivation of your status as a resident, in case you have been out of Panama for a period of more than two (2) years and up to a maximum of six (6) years. To get your permanent residency back, you must meet the following requirements:

1. Copy of the resolution that granted the permanent residency or in its defect a copy of the migration ID card issued by the National Immigration Service of Panama.
2. Copy of your passport and of the registration stamp.
3. Copy of your Cedula (E-card), duly authenticated by the Tribunal Electoral.
4. Sworn Affidavit before a Notary Public in Panama, stating the reasons for your absence.

You will have a term of 30 working days to present the petition for recovery of your residency, starting on the day you re-enter Panama. The request must be filed by a licensed immigration lawyer in Panama.

What happens if I can not travel to Panama for more than six years?

Foreigners who have remained more than six (6) years outside of Panama and whose residency has been canceled by the National Immigration Service will lose their status permanently and must start a completely new immigration procedure in accordance with current regulations at that time.

There is one exception to the golden rule...

If you are an Italian citizen and obtained your residency in Panama under the "Panama - Italy Treaty" Visa, you will not lose your status. This is a special cause protected by the Law.

Bella Italia!

Traveling to Panama soon? Download our check list regarding the new entry requirements. 

INFO SHEET VIAJAR A PANAMA_OCT 2020 ENGLISH.pdf

Dear Jacqueline,

the International Airport of Tocumen will install three (3) control points inside the passenger's terminal to perform the rapid tests (if applicable). The cost of the rapid tests has not been determined with the Ministry of Health yet. It also has not been defined whether Tocumen Airport or the Ministry of Health will be the responsible authority for contracting the laboratories that will be installed within the terminal area to analyze the rapid tests.

Safe travel, Abel 

Dear Christine, 

Traveling to Panama: New Entry Requirements

Starting October 12th Panama is reopening for international visitors, reactivating international flights, tourist activities, hotels, and more. At the same time, there are new entry regulations and COVID-19 precautions that all travelers must comply with upon arrival in Panama.

Upon arrival to the country every national, resident or foreigner must present a negative PCR Test Certificate or antigen, no older than 48 hours. By complying with this measure established by the Ministry of Health of Panama, the traveler will be able to enter the country without having to fulfill any type of mandatory quarantine.

If the traveler upon arrival in Panama City, does not carry a PCR Test Certificate or antigen the person will be required to perform a rapid test at the international Tocumen airport (prior to passport control).

Depending on the result of the rapid test, the following measures will be applied:

1. If the result of the rapid test is negative, the traveler is exempt from any mandatory quarantine.
2. If the PCR test is positive, the person must be placed in mandatory isolation in a hotel hospital designated by the Ministry of Health. After 7 days, another test will be performed. If the result is positive, the 14-day quarantine must be completed. If the result of the second test is negative, the quarantine is terminated. The failure to comply with the established provisions will be sanctioned by the competent authorities.

These measures established by the Ministry of Health of Panama will come into effect as of October 12, 2020 and will be in force until December 31, 2020, with the possibility of extending them.

Marriage On The Test Bench: The Marriage Interview When Applying For Family Reunification In Panama

The real estate market in Panama (as in the world) is changing. In our practice, we can observe an increase in the purchases and sales of properties in the country for this year. Below we would like to inform future buyers and sellers about legal changes regarding ESCROW services in Panama.

What is an ESCROW?

An ESCROW is a custody service, where a neutral third party offers (through a binding legal contract) to hold funds or assets until the other parties fulfill certain duties and obligations. Upon completion of the transaction, the ESCROW agent releases the funds according to the instructions received previously.

In addition to delivering the funds to the seller once the closing has been completed, the ESCROW agent can pay the real estate broker's commission, attorney's fees, taxes caused by the transaction or due, unpaid utility bills, and other fees and payments required to close the transaction. Having a neutral third party holding the funds and pay all outstanding accounts at closing protects both the buyer and the seller.   

The buyer does not have a bank account in Panama. Can an attorney receive the funds and hold them as an ESCROW agent until the transaction is closed?

In the past, lawyers and law firms in Panama used to provide this type of ESCROW service for real estate transactions. The lawyer received the buyer's funds in a bank account in Panama and kept them until the buyer was registered as the new owner of the property at the Public Registry.

However, in the year 2017, Law 21 was created in Panama, which "establishes the rules for the regulation and supervision of trustees and the trust business" in Panama. In practice, this means that any individual, company, real estate broker, lawyer, or law firm that receives funds as part of an "ESCROW service" must have a trust license registered with the Superintendency of Banks of Panama. Otherwise, at the time of receiving the funds in the bank account (especially if the funds are wired from abroad), they will be rejected by the bank and returned to their origin.

To avoid unnecessary delays in your sales transaction with the risk of losing a potential buyer or  promising investment opportunity, please consult with your attorney about the available options for the legal custody of funds in Panama.

Read more...

Panama Accounts: Despite Pandemic Restrictions the Liquidity of Panamanian Banking System Remains

The risk rating agency Fitch Ratings expects a reduction in the profitability of banks in Panama for this year as well as next year as a consequence of the current situation caused by COVID-19. However, the agency states in its latest report that liquidity levels are adequate and deposits have increased.

The contraction of the economy, business losses due to no sales this year, rising unemployment and lower credit growth will put pressure on the profitability of the banking system in Panama due to lower business volumes and increased spending on provisions. Banks have offered relief to their customers while their costs remain. The latest available data from Panama's Superintendency of Banks, which is from the end of June, already reflects this trend.

In The Midst Of The Crisis, Deposits Have Continued To Grow.

A new report from Panama's Superintendency of Banks (SBP) reveals a higher growth in deposits of Panamanian and foreign private banks, and a lower credit impulse. This behavior is interpreted as a sign of confidence in the Panamanian banking system. These factors favor the liquidity conditions of Panamanian banks. Deposits continue to be the main source of financing for Panamanian banks and support the financial stability of the marketplace.

In turn, the SBP highlights that Panamanian banks comply in more than "double" the regulatory requirements in terms of liquidity, which allows them to face the maturities in the short and medium term. "Deposits are safe because the assets are healthy", says Gustavo Villa, general secretary of the SBP.

Panama's international banking center is composed of 75 institutions. The main banks in Panama with their respective ratings according to the risk rating agency Fitch are

• Banco General (BBB+ / June 2020)
• Banesco (Panama) (BBB+ / May 2020)
• Banco Nacional de Panamá (BBB / April 2020)
• BLADEX - Banco Latinoamericano de Comercio Exterior  (BBB / June 2020)
• Multibank, Inc. (BBB- / May 2020)
• Global Bank (BBB- / June 2020)
• Credicorp Bank (BBB- / June 2020)
• MMG Bank Corporation (BBB- / June 2020)
• Banistmo (BBB- / June 2020)
• BAC International (BBB- / May 2020)
• Bancolombia (Panama) (BBB- / June 2020).

A gradual consolidation process among the smaller banks is expected. Smaller banks in Panama will find it more difficult to cope with a competitive market and absorb increased compliance costs associated with anti-money laundering standards, while profitability is under pressure from the pandemic.

On March 14th, 2018, in a matter of minutes, the public announcement regarding the closing down of the law firm, which played a leading role in the well-known "Panama Papers", is being published worldwide. The law firm Mossack Fonseca & Co., Bufete MF & Co. or Grupo Mossack & Fonseca has closed its activities on the 30th of April, 2018, in all of its branch offices around the world, including its head quarter in Panama City. In Panama, the "offshore" incorporation and financial business sector is an important pillar for the national economy, and sustains almost 50% of the service sector.

What are the consequences for the affected clients?

Change of Resident Agent

According to Article No. 2 of Law No. 32 of February 26th, 1927 all corporate bodies in Panama must have, mandatorily, a registered agent or resident agent in Panama; which can be a law firm or a practicing lawyer that represents the corporate body in Panama. If the corporation is left without resident agent (due to the resignation thereof), it will only have a period of 90 days to appoint and register a new resident agent in the Mercantile Section of the Public Registry of Panama. Otherwise, the Panamanian government will proceed to fine the affected corporation and will inactivate its status through official order.

Inactive Corporations

In September 2017, by means of the Resolution No. 201-5612, the process for the inactivation of corporations due to arrearage in payment of the mandatory annual franchise tax for more than three (3) consecutive years has been approved. In the past, after ten (10) years of not paying the annual franchise tax, the affected corporations were dissolved by official order. With the change of this legal base, thousands of corporations in Panama are currently "inactivated" by the tax collector office (DGI for its acronym in Spanish), which also affects their status in the Mercantile Section of the Public Registry, often without knowledge of the owners (foreign shareholders) of said corporations.

For the reactivation of an inactivated corporation, a fine of one thousand US Dollars (USD$1,000.00) must be paid to the competent authority (additionally to the payment of the pending franchise tax plus interests), and the reinstatement of the corporation must be requested formally at the Panamanian tax collector office. Later on, the tax collector office must inform the Public Registry of the re-activation of the corporation, which will then reset the original status.

Illegal Use of "Offshore" Corporations

The incorporation of an "offshore" corporation does not constitute an illegality in itself, since the crime depends on the purposes for which it was created. Such as defrauding the treasury, money laundry, drug trafficking or other criminal intentions being the leading objective of the "offshore" corporation, where the main characters involved prefer to hide in the shadows. Although an "offshore" corporation offers greater autonomy to manage a business, it does not grant the right to commit crimes. It is for that reason that the Panamanian government has established certain transparency laws, binding for financial and non-financial individuals, including lawyers and accountants, obligating these professionals to report any suspicious activity or any potential tax evasion to the competent authority.

Transparency in Legal Proceedings

It is for that reason, that each case must be considered individually, in order to assure that the objective of the "offshore" corporation complies with the established rules and regulations in order to guarantee its ethical and legal operation at all time. The creation of an "offshore" corporate body may help to reduce its tax burden in a meaningful manner. But this does not mean that the tax laws in the country of origin may be or can be fully avoided. Trying to hide money from the tax system in the country of origin is deemed as an unlawful use of an "offshore" corporation.

Elimination of the "Offshore" Type Corporation

Through Resolution No. 201-1254 issued by the tax collector office of Panama (DGI) and published in the Official Gazette on the 9th of March 2018, the categorization of corporations has been restructured. From now on Panamanian corporations will be categorized by the fact that their income derivates from a Panamanian source, or not, with the purpose of establishing their tax obligations in Panama and abroad.

Corporations that derivate their income from a Panamanian source (as low as its percentage may be), will be determined as "type A", and are obligated to file an annual income tax return (ISR for its acronym in Spanish) or an Income Affidavit with the Panamanian tax office.

Those corporations that are only incorporated for the purpose of ownership of a certain asset or real estate property ("holding"), that do not conduct any business, nor derivate any income from a Panamanian source, or if their income is derived 100% from a foreign source ("offshore"), are considered "type B", and therefore, are not obligated to file an annual income tax return with the Panamanian authorities nor declare their income, since these corporations are currently tax-exempted.

The "E-tax" System and Income Tax Return in Panama

It is important to mention that those corporations that did not declare the origin of their income at the time of their registration, must do it now, by updating their information in the "e-tax" system, in order to avoid that the tax collector office in Panama will fine them for not submitting the annual income tax return on time.

Gomez Tomiczek International Group

Private Interest Foundations in Panama constitute an alternative to Offshore Corporations or Companies and to Limited Liability Companies, because they are meant to provide asset protection, playing an important role, similar to that of a Trust. For this reason Foundations directly compete with Trusts as a vehicle for wealth and estate management, permitting separation of assets between the founder and the beneficiaries, but without necessarily losing control of such assets, as it happens in Trusts.

A Private Interest Foundation is the combination between a corporation and a will. In general, a foundation has some similarities with companies; once registered in the Public Registry of Panama, the assets of this legal entity are maintained separated from the incorporators, considering that they are created to maintain the confidentiality of the owners of the mentioned assets. 

Foundations differ from corporations in relation to the presence of an owner or the need to issue share certificates (corporations). Unlike a Corporation, a Private Interest Foundation can be created as a living will tool.

A big advantage of Foundations is their irrevocable nature, which allows them to continue operating for many generations, establishing certain provisions for their operation in the by-laws. In case the intervenients no longer wish to continue the Foundation, they can provide for its dissolution. In contrast, testaments are only intended for a single and particular event.

Feel free to email us if you have any further questions. We will be pleased to assist you and guide you through the process of incorporation of your Private Interest Foundation in Panama and any related services.

www.gomitom.com

GOMEZ TOMICZEK is a full service, intercultural law firm located at the Plaza San Francisco in Alto Boquete. We are specialists in the fields of migration law and relocation services, corporate and commercial law, financial consulting and wealth protection, real estate and investment. Consults available by appointment in English, Spanish, and German.

Please contact us using the following information:

GOMEZ TOMICZEK
Plaza San Francisco, Office #23
Boquete, Chirqui Province
Panama

(+507) 730-9313 / cel (+507) 6575-4414

www.gomitom.com
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