December 1, 2022
Steve Bolton Red Frog

Steven Bolton Discusses Panama’s Real Estate Development Laws

Steve Bolton of Red Frog Resort works in partnership with Joseph Haley of Panama as a real estate developer. In the following article, Steven Bolton, with contributions from Joe Haley, report on the real estate development laws under Panamanian law.

If a real estate developer intends to break ground on a project within Panamanian territory, they must first work in accordance with the laws and regulations set forth by the local government. This includes seeking the proper permits and continuing to report to the overseeing government bodies. Steve Bolton of Red Frog reports that these regulations are designed to protect both the developer and potential property owners and should be followed to the letter.

These regulations apply to all real estate developers, though the law does also include specific articles for tourism and commercial properties. This includes hotels, motels, cabins, time-shares, hostels, theme parks, convention centers, and more. Therefore, before breaking ground on a project, be sure to check with the relevant local authorities and become familiar with Panamanian law.

Panama Offers Special Benefits for Tourism Under Law 80

Steven Bolton of Panama says that as the Panamanian economy continues to embrace its prime geographical position in the Tropics, the country is aiming to increase its competitiveness in the global marketplace by offering a variety of benefits and incentives for foreign investors. One such incentive is Law 80, which offers special benefits for the development of tourism projects.

Steve Bolton explains that the law was enacted in 2012 in an effort to encourage direct foreign investment and spur economic growth. According to Law 80 of 2012, investments of at least $250,000 in new public lodging constructions outside the district of Panama will have the following benefits:

  • Import tax exemption on materials not produced in Panama, for 5 years, and for 10 years in equipment used exclusively for the lodging
  • Property tax exemption for 15 years
  • Docking tax exemption for 15 years
  • Income tax exemption for 15 years, for the tourism activity
  • Tax exemption for 15 years on the interests generated by the Creditors (banks or financial institutions that grant the first loan to a tourism project)
  • Capital tax exemption for 5 years

    To qualify for these benefits, Joseph Haley of Panama states that developers must invest at least $300,000 into properties classed as lodgings in urban centers, or worth $50,000 in non-urban areas.

Developers Must Stay in Constant Contact with Government Bodies

Even after developers obtain the necessary permits to break ground on a project, they must maintain constant contact with a range of government agencies that oversee operations and regulatory procedures. Steve Bolton of Red Frog reports that these organizations include but are not limited to the following:

  • MINISTERIO DE AMBIENTE (MIAMBIENTE): is responsible for ensuring that all construction projects adhere to environmental regulations. This includes ensuring that the project will not negatively impact the surrounding ecosystem in any way.
  • ATP (Panamanian Tourism Authority): The ATP is in charge of regulating the tourism industry and ensuring that all businesses operating within it are following the law. They will also provide assistance to developers hoping to break into the tourism market.
  • INGENIERIA MUNICIPAL: The Ingeniería Municipal is responsible for issuing Construction permits and occupancy permits.
  • MINISTERIO DE VIVIENDA Y ORDENAMIENTO TERRITORIAL (MIVIOT): MIVIOT is tasked with overseeing all construction projects that fall under the umbrella of “housing”. This includes both residential and commercial properties.
  • MICI (Ministry of Commerce & Industry): The MICI is the government agency responsible for promoting and regulating commerce and industry within Panama. They will provide assistance to developers hoping to break into the commercial market.
  • MEF (Ministry of Economics & Finance): The MEF is responsible for issuing tax exemptions and incentives, as well as overseeing the financial stability of the country.

With so many government agencies to keep track of, it is essential that developers have a clear plan and method of communication with each one according to Joseph Haley of Panama. This will help to avoid any delays or problems that could arise during the construction process. Additionally, developers should contact the local fire chief and municipal government to guarantee that properties are built according to local construction codes reports Steve Bolton.

Steve Bolton Panama

Making Sense of the Finer Details

Steve Bolton of Red Frog says that Panama’s property development laws are quite complex and include a wide range of tax benefits, right-offs, and exemptions depending on the exact purpose and operations of a business. To understand the finer details of the nation’s entire real estate development code, it’s best to seek the support of a professional legal adviser.

The Takeaway

Overall, Steve Bolton reports that Panama’s real estate development laws are designed to protect both developers and property owners while also promoting economic growth. To ensure a project stays on track and in compliance, developers must maintain constant communication with the many government agencies that oversee construction. Additionally, developers should seek the help of a professional legal adviser to ensure they are taking full advantage of available benefits and incentives.

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