Panama's Tax Breaks and Booming Economy
(http://www.panama-guide.com/)Those thinking of investing in the Republic of Panama had two pieces of encouraging news recently. Influential international auditors, Deloitte Touche Tohmatus, published a report which predicted that the Panamanian economy will experience strong growth in 2008, the highest of all the Latin American countries. In addition, the Panamanian government has reinstated the 20-year tax exemption for foreign property buyers in Panama, which expired last year. Prospective investors in Panama, particularly those looking to escape the failing U.S. economy, will be encouraged by the new economic report which was compiled jointly by Panamanian advisory and financial services company, Indesa, and Deloitte Touche Tohmatus. The report predicts healthy GDP growth for Panama in 2008 with the economy expected to increase by between 7% and 8%. Analysts believe that the dynamic economy, with its range of important private and public investment projects planned for 2008, will help to offset the negative ripples from the U.S. economy. The biggest plus for the Panamanian economy is the massive expansion of the Panama Canal, approved in a referendum in 2006 and due for completion in 2014. (more)
Editor's Comment: All of the "chicken little" guys who have been crowing that the Panamanian economy is going to come crashing down due to the slowdown have been (as predicted) proven wrong. Let me say that again - they were wrong, and I was right. We are now in the final fiscal quarter of 2008 and the Panamanian economy is still popping along nicely, full speed ahead. And also as predicted buyers have snatched up all 40,000 new apartment units that are being built and prices continue to rise, simply because demand continues to outstrip supply. New European buyers, lured to Panama thanks to the shirking value of the dollar against the Euro, have more than made up for the slack of buyers from the US. And, all of the fundamental economic elements (primarily low cost relative to prices in the US or Europe) that created the Panamanian surge remain in place. There is an element of inflation, bought on primarily from external factors such as higher costs for fuel and some raw materials such as steel. Even factoring that in, Panama continues on full rock and roll mode, exactly as predicted.
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The Panama government has decided to restore the property tax exemption on all new construction with building permits issued before December 31st 2009. The decision was made to encourage Panama's booming property market to continue in the same vein. James Gonzalez, Market Analyst at Obelisk, says, 'Panama is a stable environment and it is perennially popular with retirees from the U.S. who are attracted by the mild climate and low cost of living. Now that the government has reinstated the 20 year tax exemption for foreign buyers, the market will continue to boom.'
Resale properties are also exempt from property tax, with the 20 year exemption starting in the year the property was built. This means real savings for those buying off-plan or resale property or building their own property in Panama and is proof that the government is keen to encourage foreign investment with tax incentives. The Heritage Foundation supports this in its Index of Economic Freedom, noting that Panama's investment climate is superior to those of its neighbors, with most sectors open to foreign investment.
Panama's property market has been booming for around 5 years and this looks set to continue thanks to huge investor interest from the U.S. Rental yields are impressive, especially in Panama City where they reach just over 11% on small units of 190 square meters, according to Global Property Guide.
With a favorable investment climate, tax breaks for foreign buyers, a booming economy and property market, Panama has the perfect property investment climate.
