Panama can be found on the stretch of land which connects North and South America. Its immediate neighbours are Costa Rica and Colombia and boasts coastlines on both the Caribbean Sea and the Pacific Ocean. The country measures just 480 miles in length along the isthmus of Central America and only 110 miles wide in some areas, with parts of the country measuring even less. The country falls into the GMT-5 time zone.
Panama has nine provinces, each with their own local government and there are a total of just ten cities which are Panama City, San Miguelito, Tocumen, David, Arraijan, Colon, Las Cumbres, La Chorrera, Pacora, Santiago de Veraguas. In addition to this there are a number of ‘shires’ which are home to the local indigenous peoples, who have their own governments and are left very much to their own devices by the Panamanian authorities. The nine provinces are: Bocas del Toro, Chiriqui, Colon, Cocle, Darien, Los Santos, Herrera, Panama and Veraguas. Each province has its own governor and is divided into districts. The ‘shires’ are: Kuna Yala, Ngobe-Bugle, Kuna de Madugandi, Kuna de Wargandi and Embera. Expats are not currently able to purchase property in the shires as the areas are protected for the native inhabitants.
It is home to the Panama Canal, a major shipping route which connects the Caribbean and Atlantic with the Pacific. The canal was built between the San Blas Mountains and the Cordillera de Talamanca Mountains. The country has been a major trade route for more than 500 years. The local currency is the Balboa which is equal in value to the US dollar and due to an agreement between the US and Panama which dates back to the early part of the 20th century, the US dollar is also legal tender in Panama. There are no bank notes for the Balboa, but the country does mint coins of several denominations up to 50c.
There are many who consider Panama to be a tax haven. As the tax system is fairly light when compared to those of some other countries it can be considered to be a haven in some ways, but there are different levels of income tax to be paid.
As with many other countries, income tax in Panama is calculated on a sliding scale. Those who earn less than $11,000 will pay no income tax at all, but once they reach this point income tax is charged at 15%, then rises to 25% once you are earning in excess of $50,000. There are no special allowances for expats apart from certain exemptions on duties and property taxes, but this depends upon the type of visa you have.
If you earn money in Panama you pay tax on it in Panama, but you will not be charged tax on money you earn in other countries if you are a temporary resident. If you are a permanent resident you may not be charged tax on this money if you can prove that you have paid tax on it in the country of origin. You can be taxed on a number of different types of income in Panama including wages, bonus payments, pensions, royalties, sale of stocks and bonds and trademarks.
Visa, Residency & Immigration Laws
For those who are looking to live in Panama on a long term basis there are a number of different visas and permits that can be applied for, depending upon an individual's circumstances.
The Turista Pensionado is one of the most popular visas and is designed for those who want to retire to Panama. Those who are in receipt of a pension, either from their own government or privately, of a minimum of $900 per month can make an application for this type of visa. A pension statement will be enough evidence of this. Also note that lawyer's costs for the application are around $900-1000. This type of visa is indefinite but you will be required to provide proof of interest on an annual basis. Benefits for this type of visa include exemption from duty payments on household goods being imported into the country and exemption of duty if you need to import a car into Panama. Those who have residency with this visa cannot apply for citizenship.
Others might want to apply for a visa on the Reforestation programme which requires an investment of $40,000 (another level of investment is available at $80,000). An investor can obtain a visa not only for themselves but for a spouse and any dependent children too. The visa is renewed every year and after a period of five years an application can be made for citizenship of Panama. This may seem expensive but is a fairly popular route for obtaining citizenship of the country. An approved programme will provide a return on investment providing you can leave the money untouched for a minimum of ten years and any gains are not taxed in Panama. Both levels of investment give residency status, the larger investment after just one year. Applicants must provide a passport which is valid for a minimum of six months, a certificate from the police in your home country to declare that you do not have a criminal record, a marriage certificate if applicable, proof of investment and the relevant completed application forms. Fees are payable for each person who needs a visa.
When expats wish to purchase property in Panama, they will find that they are able to do so with few problems and that they have the same rights as Panamanian citizens. One of the few restrictions on expats buying property in Panama is that they cannot purchase land or houses that are within 10 miles of the borders of Costa Rica or Columbia. Panama is becoming a very popular place for expats, particularly retirees, and property is relatively inexpensive. The procedures for purchasing property are much the same as in many other countries.
Property in Panama falls into two categories. They are either ‘titled’ which means that you own the freehold of the property, or they are ‘right of possession’ which is similar to leasehold, in which you do not own the property outright. Right of possession properties cannot be used to raise a mortgage and will not help expats to qualify for an investment visa.
Retiring in Panama
Workers in Panama qualify for the state pension by making contributions from their salary to the social security fund. Contributions are not taxed and the amount that they can expect to receive when they retire is between 60 and 70% of their average monthly salary. The amount that is paid out will depend on the amount that has been paid in. Workers need to have made a minimum number of payments. Company pension schemes are not common, and there is no compulsory requirement for workers to have access to a company scheme. International companies that are based in Panama may offer this service though.
Workers who are in Panama but want to continue making contributions to the state pension in their home country may be able to do so. This will depend upon the arrangements between Panama and your home country and it is worth making enquiries about this, particularly if you will not qualify for the state pension in Panama.
Retirement age in Panama is normally 62 for men and 57 for women, but there is no compulsory retirement at this age and there is nothing to stop people working beyond this age if they choose to.