Real Estate in Panama has become an increasingly interesting area of commerce in the economy, even though there is a worldwide financial crisis. The construction sector, as well as the commercialization of properties for personal or commercial use, has been in a positive trend since many years back now. Under this scenario, buyers are often confronted with different situations at the moment of purchasing a property, situations that commonly go beyond the commercial aspect of the transaction. For this reason, the lawyers has to counsel their clients along all the different phases of the transaction, including the establishment of the proper structure for the acquisition of the asset allowing for an adequate asset protection and tax planning. Below you will find many of the phase and steps that should be followed and in which we intervene to successfully formalize the transaction:
• Title search of the real property/immoveable (due diligence process): Before signing any agreement or contract it is always recommended to conduct a title search of the property and a search of the corporation, if the process will be formalized through the acquisition of the shares of a corporation owning the land.
• Analysis of the proper acquisition structure: Natural versus Juridical person
• Negotiation and signing of Promise to Sale and Purchase Agreement
- Purchase price and payment conditions
- Delivery date
- Causes for termination
- Penal clause
- Otros (extracosts, contract assignment, guaranties)
• Tax impact: Aplicable taxes
- Real Property Transfer Tax (2%)
- Capital Gains tax on the transfer of securities, moveables and immoveables (10%)
- Real Property Tax (exoneration)
• Title Insurance – if requested by client -
• Execution of Public Deed containing Sale Purchase Contract and filing at Public Registry
• Exoneration from Real Property Tax (if applicable) at Finance and Economy Department
• Escrow Account services (custody of funds for payment to seller)
Other general considerations that shall be taken into account:
a. All Purchase agreements as well as Assignment agreements, private agreements and Stock Purchase Agreements, shall include or incorporate specific information on the property being acquired, such as apartment/house number, the area, number of parking spaces and its location, delivery date, purchase price and possible variation due to increase in the area or construction costs, penalty clauses in the event of default (for seller and buyer) and guarantees.
• Title search of the real property/immoveable (due diligence process): Before signing any agreement or contract it is always recommended to conduct a title search of the property and a search of the corporation, if the process will be formalized through the acquisition of the shares of a corporation owning the land.
• Analysis of the proper acquisition structure: Natural versus Juridical person
• Negotiation and signing of Promise to Sale and Purchase Agreement
- Purchase price and payment conditions
- Delivery date
- Causes for termination
- Penal clause
- Otros (extracosts, contract assignment, guaranties)
• Tax impact: Aplicable taxes
- Real Property Transfer Tax (2%)
- Capital Gains tax on the transfer of securities, moveables and immoveables (10%)
- Real Property Tax (exoneration)
• Title Insurance – if requested by client -
• Execution of Public Deed containing Sale Purchase Contract and filing at Public Registry
• Exoneration from Real Property Tax (if applicable) at Finance and Economy Department
• Escrow Account services (custody of funds for payment to seller)
Other general considerations that shall be taken into account:
a. All Purchase agreements as well as Assignment agreements, private agreements and Stock Purchase Agreements, shall include or incorporate specific information on the property being acquired, such as apartment/house number, the area, number of parking spaces and its location, delivery date, purchase price and possible variation due to increase in the area or construction costs, penalty clauses in the event of default (for seller and buyer) and guarantees.
b. Publicity made available by seller through brochures of the project, direct communications, newspaper or magazine ads, among others, which includes different aspects, benefits or characteristics of the project become by law and obligation of the seller and are deem to be part of the purchase agreement.
c. If the purchase of the property includes certain equipment (stove, refrigerator, air conditioners, etc), said circumstance shall be specifically included in the Purchase Agreement, and buyer shall request that seller delivers invoices and manufacturer guarantees of said equipment.
d. Contracts in English language are not recordable at the Public Registry if they are not accompanied by a Spanish translation.
