Panama does not keep a computerized record of property ownership information. Recording of property is governed by laws of the Public Registry subdivided into the Registry of Property and the Registry of Mortgages. These must be executed by a notary of public.
Transaction information is not accurately recorded unless there is a mortgage. Deeds must be recorded in the Real Property Record.
Asociación Panameña de Corredores y Promotores de Bienes Raíces (ACOBIR)
Dirección: Ave. Morgan.
Casa 301 A. Balboa, Ancón
Panamá
0823-04184
Panama
Phone : +507 2287840
Fax : +507 2287807
e-mail : acobir@cwpanama.net
Web : www.acobir.com
The Panamanian Association of Real Estate Brokers and Developers (ACOBIR) was founded in 1973 by Jaime R. Correa, who was also its first president. ACOBIR’s members comprise the oldest and most prestigious real estate companies in the country which gives the association considerable economic strength, which is of both direct and indirect benefit to the country.
Government involvement in property rights and interests is comparable to the Mining Code where the state is considered owner of all mines but private persons may obtain the right to work them providing they can pay the tax. The Mining Code tax requires payment of surface tax and surface rentals paid annually, and royalties paid quarterly.
Confiscation of property as a punishment from the government is prohibited. The constitution guarantees the right to own and enjoy private property acquired by natural or juridical persons according to law. A property may be taken by the government with compensation for reasons of public utility or social interest defined by law.
The municipality of the deceased’s last place of residence takes the entire estate if there are no heirs. Panama does police rent control and raises in rent. People have a right to own property provided they do so abiding by the laws of Panama and a social contract where applicable.
The lessee has the right of enjoyment of leased property while under lease. They are not responsible for repairs and if repairs take more than forty days are not required to pay rent. If leased space becomes uninhabitable due to the lessor’s neglect to repair efficiently the lessee has the right to rescind the lease. Subleasing is allowed with approval of lessor unless stipulated in the lease.
The government in Panama retains certain rights in real property such as the right to levy property taxes, escheat, eminent domain and police power. There is no dower right in Panama and the estate by curtsey does not exist.
Civil legislation governs private property. The civil code establishes that it is a right of ownership to enjoy and benefit from owning property with no limitations other than those provided by law. Ownership is not an absolute right. Ownership is limited and involves obligation imposed by the social function it should fulfill.
Public property is not governed by civil legislation but by public law. Ownership of public property is considered from its aspect of social function and therefore departs from the civil code.
Foreigners may not own real property within 10 kilometers from natural borders.
Real property may be held in severalty or concurrence in Panama. Concurrent forms of ownership include corporations, partnerships, joint ventures, and trusts which operate much the same as they do in the United States.
Title & Contracts in Panama:
The Public Instrument is the form of deed used in Panama to transfer title or any interest of real property. It must be notarized by a notary of public. Every party must be present at the signing of the deed or must have a lawyer present. The notary’s protocol keeps the original copy and the parties involved receive certified copies. The deed is recorded in the Public Record.
A transfer of title to or any interest in real property must be by deed, called public instrument, which must contain a true statement of the consideration (not nominal), a true description of the property by bounds and nature of same, and if a building is conveyed the material of which constructed, the flights and the area in metric measurements. Both the grantor and the grantee must sign at the same time, with two witnesses and before a notary public. If one party is absent he must be represented by an attorney in fact. The signing of the deed takes place after the notary has read it to the parties in the presence of the witnesses. The original becomes party of the notary’s protocol, and the parties receive certified copies, which must be accepted in place of the original by any court or authority. Real property duly recorded may be described by reference only to volume, folio and number of the Real Property Record.
In order that third persons may be bound to take notice of the transfer of real property rights, the deed must be recorded in the Public Registry. The transfer of certain personal property rights is also made by deed with the same formalities.
The estate passes in the following order in the event of death: 1) descendants in equal parts; 2) ascendants in equal parts. The possessor my lose possession by abandonment, through possession by another person against the will of the former possessor if the new possession continues for the prescriptive time, transfer to another person, by the thing remaining outside commerce, and through destruction or total loss of property.
Property Taxes:
The tax laws are found in the Fiscal Code of 1961 and amendments thereof. Scale (tariff) of taxes on real property is as follows: (a) 1.40% on any amount exceeding US$10,000 on assessed value of property to be taxed and up to US$20,000; (b) 1.75% on assessed value in excess of US$20,000 up to US$50,000: (c) 1.95% on assessed value in excess of US$50,000 up to US$75,000; (d) 2.10% on assessed value over and above US$75,000. (Art, 766 of Fiscal Code). For purpose of taxation, rural real estate is valued at a minimum of US$30 per hectare. (Law 63 of 1961). Income tax is imposed on income from any source within the Republic of Panama. Income tax is paid on a progressive percentage scale up to maximum of 30% on any income of natural persons in excess of $200,000. No tax is paid on income of a natural person which does not exceed $3,000. General deduction of $800 is allowed to each person, and of $1,600 on joint tax return of husband and wife. Income tax on corporations is paid on a progressive scale averaging 30% with a maximum of 45% on income in excess of $500,000. This maximum will be reduced gradually to 34% in fiscal year 1994. Dividends distributed by corporations deriving income from activities within Republic of Panama pay 10% tax which is withheld at source. Branches of foreign juridical persons must withhold 10% on their local taxable income, after deducting therefrom income tax payable in Panama. When shares are issued to bearer, then 20% tax is applied and also withheld source. The following incomes are not considered as sources in Panama and, hence, not subject to the tax: (a) income derived by a Panama office invoicing at a higher price merchandise moving exclusively between foreign ports; (b) income of the Panama office managing foreign operations; (c) dividends paid out of income not produced within the territory of Panama. Certain kinds of income are not subject to tax, more important being interest on Government bonds, on savings accounts and time deposits with banks operating within and outside Republic. There is no Capital Gain Tax as such; but profits obtained in sale of bonds, stocks, or other securities (with certain exceptions) are subject to income tax. Gains in sale of real estate are considered income, but computed on a separate basis.
Law No. 22 of Dec. 30. 1985 has eliminated estate tax.
Law No. 22 of Dec. 30. 1985 has exempted from Gift Tax following: (a) Gifts of not more than $ 1,000; (b) gifts of real estate or titles, securities or shares of stock made in favor of spouse or relatives within first degree of consanguinity; (c) transfer in trust of real estate or titles, securities or shares of stock when cestui que trust is spouse or relative within first degree of consanguinity; (d) gifts to state, its autonomous institutions, municipalities and association of municipalities; (e) gifts to foster or organized institutions for social welfare and to education establishments constituted or to be constituted in accordance with Panamanian laws; or institutions or legal persons constituted exclusively for eleemosynary, educational or social welfare purposes; (f) homestead properties: (g) gifts in favor of persons unable to earn living by reason of physical or mental disability when such disability has been recognized by ruling of court and gift does not exceed $5,000; (h) acts referred to in Art. 35 of Law by reason of physical or mental disability when such disability has been recognized by ruling of court and gift does not exceed $5,000; (h) acts referred to in Art. 35 of Law No. 1 of Jan. 5, 1984; (i) all other gifts when so provided in special laws. There is an excise tax on refining and use of all motor fuel.
Tax established on the sale of carbonated drinks and over syrups and concentrates utilized in production of carbonated drinks. Cigarette Tax.-Tax is levied on national production, and foreign made is subject to custom duty. Corporate Tax.-All Panama corporations must pay B/150 annual franchise tax within three succeeding months after date of registration and, thereafter, within three months after anniversary date of their registration. Beer Tax.-Tax per liter is levied on production of beer. Liquor Tax.-Taxes are levied on production of any potable liquids containing alcohol, amount being based on alcoholic content of beverages. Education Tax.-Compulsory contributions for educational purposes are tax deductible. Employers contribute 1.25%, employees 0.75%, levied on their wages, and independent taxpayers 2% of net income. License tax is imposed on net worth at flat rate of 1%; maximum tax is $20,000. See topic Licenses. Sales Tax.-5% sales tax on transfer of ownership, lease and use of corporeal movable property, including importation of such goods. Among items exempted are transfers of goods mortis causa, donations; transfers in marriage Settlement, contributions of partition of community property: transfer of negotiable instruments and stock
For the purpose of taxation, rural real estate is valued at a minimum of US$30 per hectare.
Panama fails in its ability to report income or property owning due to its lack of an automated system for property income and property transactions. For tax purposes it is easy to conceal information from the government. Concealment and putting properties under fraudulent names is illegally practiced to avoid taxation. Panama also does not have a means for tracking an individual’s or corporation’s total property or income for tax purposes. And thus the transfer of property into trusts and settlements is hard to track.
Scale (tariff) of taxes on real property is as follows: (a) 1.40% on any amount exceeding US$10,000 on assessed value of property to be taxed and up to US$20,000; (b) 1.75% on assessed value in excess of US$20,000 up to US$50,000: (c) 1.95% on assessed value in excess of US$50,000 up to US$75,000; (d) 2.10% on assessed value over and above US$75,000. (Art, 766 of Fiscal Code).
For purpose of taxation, rural real estate is valued at a minimum of US$30 per hectare. (Law 63 of 1961).
Income tax is imposed on income from any source within the Republic of Panama. Income tax is paid on a progressive percentage scale up to maximum of 30% on any income of natural persons in excess of $200,000. No tax is paid on income of a natural person which does not exceed $3,000. General deduction of $800 is allowed to each person, and of $1,600 on joint tax return of husband and wife.
Income tax on corporations is paid on a progressive scale averaging 30% with a maximum of 45% on income in excess of $500,000. This maximum will be reduced gradually to 34% in fiscal year 1994.
Mortgages are executed through a notary of public. Foreign mortgages are recognized only if notarized by a notary of public. All parties must be present at the signing of a mortgage. The are no restrictions to mortgage property in regard to real property and real property rights. Interest allowed is fixed by the Ministry of Commerce and Industries.
When the creditor holds the first mortgage the payment and proceeds of the sale of a property in foreclosure goes to them plus costs of legal representation. Third parties get the surplus remaining from the sale. If a person can not meet his debts he may file for bankruptcy. If the property is under mortgage the property is reverted back to the mortgagor.
Mortgages must be executed before a notary public in the form of a public instrument and recorded in Public Registry. Their date and effect are counted only from date of recording same. Mortgages made in a foreign country on property in Panama are valid if recorded in Public Registry. Each party to a mortgage must appear in person before a notary public. The instrument must describe property in detail.
The unrestricted right to mortgage property extends only to real property and real property rights. The following property, with restrictions may be mortgaged: (1) A building on the soil of another, if done without prejudice to the owner of the land; (2) the right to receive usufruct if the mortgage is canceled when the thing, cause of the usufruct, terminates without will of the owner, but upon an involuntary event; (3) property already mortgaged if the mortgage is subject to prior mortgagors’ rights: (4) railroads, tramways, channels, electric plants or any public utility if they are attached to land; (5) property belonging to wards if done according to the law: (6) property in litigation if the complaint has been previously recorded. The following property cannot be mortgaged: (1) future rents and crops, if separated from the land producing the same; (2) personal property placed in buildings if not mortgaged with the building; (3) national and municipal obligations or obligations or shares of banks or companies of any nature; (4) real rights to be acquired in the future, if they are not properly inscribed; (5) servitudes or easements if not mortgaged with dominant property; (6) use of dwelling; (7) mines without final title of concession, in spite of the fact that they are in own land. (C.C. 1566-1621).
Loan types include: conditional mortgages; legal effects; voluntary mortgages; legal mortgages; those secured by government obligations and bonds, loans with antichretic security, collateral credit, and chattel mortgages. Mortgage loans may not be made for more than 60% of the commercial value of the property in the judgment of National Bank. Panama has additional financing sources other than banks including pawn shops, natural or juridical persons, insurance companies, cooperatives, mutual companies and savings and loan associations.
Administaror