Panama Residency Could Be Your Best Investment

In 1977, US Congress was embroiled in a battle over the Panama Canal.

President Jimmy Carter had signed a treaty with Panama to return the canal to its sovereignty in 1999. Many, including my father, a former US Congressman, believed this was a threat to US national security interests, and that the Panamanians would run the Canal into the ground, or turn it over to a hostile foreign power.

Now, he believes giving up the canal was the best thing that could’ve happened.

It’s not just that the canal is just as well run—if not better—than it was under the US. Panamanian control over the canal has given the country the political and financial tools to turn itself into a premiere destination for foreign investment, finance… and expat living.

Panama is one of the most welcoming countries for foreigners looking to prosper. According to UN estimates, around 315,000 foreigners have settled in the country—nearly 8% of the population. That includes about 25,000 Americans. Here’s why they’ve made Panama home.

The Singapore of the West

Panama has long been one of the fastest-growing countries in the Western Hemisphere. That’s partly thanks to low taxes, sparing regulation, and free trade. It’s also a result of a decision to model the country on one that attracts tons of expats: Singapore.

Singapore is centrally located to the major economies around it. So is Panama.

By leveraging the Canal and cultivating its regional status, Panama has created a world-class haven for expats and investors. Whether you’re a businessperson looking to create an offshore company or banking setup, or a potential expat looking for a high quality lifestyle at a low cost, Panama should be high on your list.

Taxation

Panama’s tax system attracts many foreigners. It has a territorial tax system, meaning that taxes are only levied on income earned in Panama. Income generated outside of Panama, like Social Security income or capital gains, is not taxed. The maximum tax rate for local income is 25% for annual earnings over $50,000.

Corporations registered in Panama pay a flat rate of 25% corporate income tax on profits made within the country. There are no taxes on interest from Panamanian financial assets or accounts. There are no inheritance or gift taxes. There are no property taxes for residential properties used as a primary address valued under $120,000; over that is taxed at 0.5% to 0.7%. Commercial or vacation properties valued at over $250,000 pay 0.8% to 1%.

Panama also grants tax credits for taxes paid to foreign countries. Though Panama and the US don’t have a tax treaty, the IRS credits taxes you pay to Panama against your US tax obligations. (You can learn more about this here.)

This adds up to a major tax benefit for anyone living or investing in Panama, whether in a business or in real estate.

Banking and Real Estate

In 1999, Panama adopted the guidelines of the Basel Committee on Banking Supervision, the international standards group. These require all Panamanian banks to have the capital equivalent of at least 30% of total assets.

Since the country has no central bank, local banks typically exceed that requirement. This makes Panamanian banks far safer than the casino-style modus operandi of many US banks that assume they’ll be bailed out by the Fed.

The US dollar has been Panama’s official currency since 1904, so US expats don’t need to convert their money. The other official currency, the balboa, is valued 1:1 to the dollar. Prices are quoted in both, but the balboa is limited to coins.

Panamanian banks offer competitive interest rates on certain mortgages and commercial loans. Interest rates are otherwise generally identical to the US. Credit is readily available. Typically, Panamanian banks will give foreigners loans to purchase property based on the number of years before you turn 70. So if you’re 40, you can get a 30-year mortgage. If you’re 60, you can get up to 10 years.

The country’s growing economy, plus its appeal to foreigners, has created demand for residential real estate. Panama has some of the cheapest beachfront property of any nation—leading to potentially outstanding profit if renting or selling.

Panama’s Most Attractive Visas

Panama offers friendly locals, long coastlines and mountainous retreats, and a bustling capital city. There are many ways to get permanent residency in the country, all leading to the possibility of citizenship by naturalization. Given the lifestyle, business, and financial opportunities the country offers, residency could be one of the best investments you ever make. Let’s look at how to do it…

Pensionado Visa

Panama’s pensionado (pensioner) program is available to foreigners who can prove a lifetime pension of at least $1,000 per month ($1,250 for a couple). There’s no age limit, so it’s great for early retirees. On approval, you get a permanent residency visa for life, plus the same benefits as any eligible Panamanian citizen:

• 50% off entertainment (movies, concerts, sporting events, etc.)
• 30% off public transit
• 25% off airfares
• 25% off restaurants
• 15% off fast-food restaurants
• 25% off utility bills
• 15% discounts on medical procedures
• 20% discounts on prescriptions
• 50% off hotels during the week

Plus, pensionado visa recipients can import up to $10,000 worth of household goods duty-free. There are no duties on imported cars, ideal as Panamanians, like Americans, drive on the right-hand side of the road.

Friendly Nations Visa

Officially the “Permanent Residence for Nationals of Specific Countries” program, this option is commonly referred to as the Friendly Nations Visa. It’s available to citizens of the US, Canada, the UK, Australia, and many others. Applicants must do one of the following to qualify:

1. Invest $200,000 in real estate. The property may be held in your name or via a Panamanian corporation or foundation.

2. Open a three-year fixed term deposit account in a bank in Panama. You would need to deposit a minimum of $200,000 but there’s no requirement to spend those funds on real estate or other investments.

3. Show evidence that you require permanent residency for work purposes. You’ll need an employment letter and work contract from a Panamanian company with a business license.

The Friendly Nations residency program requires two applications. After submitting your first application, you may remain in the country until it is approved (or denied, which is very rare for US and Canadian citizens). If you plan to leave Panama your attorney should ensure you have a multiple-entry permit.

Once your first application is approved, you’ll receive a two-year provisional visa, and at the end of that, you can apply for the permanent visa. Unlike the pensionado visa, the Friendly Nations Visa grants temporary residency. After five years as a permanent resident, you can apply for Panamanian citizenship.

Investor Visa

This visa lets you engage in professional and economic activities, set up businesses, and work in Panama. There are three ways to qualify:

• Invest $500,000 in Panamanian real estate free of liens, including properties under construction
• Purchase $500,000 stock in a Panamanian company
• Deposit $750,000 in a Panamanian bank

The advantage of this visa is that it gives you immediate residency rights, with no provisional visa in between.

Professional Foreigner Visa

Unlike the Friendly Nations Visa, which is limited to citizens of specific countries, the Professional Foreigner Visa is open to nationals of all countries.

The main requirement: you have a degree from a university in a career or field that is not restricted to Panamanians only. Like the Friendly Nations Visa, the Professional Foreigner Visa involves several stages.

1. On showing official proof of your degree and a clean police record, you get a provisional two-year visa that allows you to get a work permit as well.

2. After those two years, as long as you’ve paid into Panamanian Social Security for at least nine months, you get permanent residency and a Panamanian ID.

If you’re applying alone, the Professional Foreigner Visa doesn’t require you to have a bank account. But if you have dependents, you do need an account, and to prove that you are employed and can provide income for them.

You can travel in and out of the country while your application is in process, as long as you have a multiple entry visa.

Telework Visa

Although there’s nothing to stop you from applying for a Telework Visa if you come from one of Panama’s “friendly countries,” it’s primarily aimed at people from countries who don’t qualify for that route or lack the resources to meet investment requirements. The visa is valid for nine months and can be renewed once.

Since Panama has a territorial tax system, you won’t owe any income tax on your foreign earnings. As with other digital nomad visas, you’re restricted to working for non-Panamanian companies or clients. Here’s what you need:

• Proof of income from a foreign source of more than $3,000 per month (or $4,000 per month per family)
• Proof of health insurance
• Letter from a foreign employer, or evidence of ownership of your own foreign business or freelance contracts
• Good faith affidavit showing you aren’t intending to work locally (known as a “Sworn Affidavit of Non-Acceptance of an Offer of a Job or Service in the national territory”)

Panama Welcomes You

Friendly—if self-interested—foreigners helped Panama become independent of Colombia in the 19th century. First the French, then Americans, helped to build its crown jewel, the Panama Canal. And despite the initial reluctance of people like my father, the country has leveraged its sovereignty over the Canal into a status as the Western Hemisphere’s premiere financial and business hub outside the United States.

But Panama is open to much more than just foreign money. As the list of available visas above shows, it’s perfectly happy to let outsiders—including tens of thousands of Americans and Canadians—join their ranks.

You could be one of them.