Why you should consider acquiring a second residence in Panama and how you can do it
Obtaining a second place of residence and a second passport would be a wise thing to do in the ever-changing modern world for a number of reasons. This article puts forward some conclusive arguments in favor of acquiring a permanent residence permit in Panama and describes the optimal procedure.
Why would you need a second residence?
It may be hard to admit it but the political situation in Europe is unstable today. And political instability will always lead to economic problems arising one after another. Even such pillars of European economy as Germany, France, and Great Britain (let us take it to be a European country, for the sake of argument) are experiencing serious problems in their social spheres.
As far as the United States are concerned, many Americans are unsure of what future has in store for them. The eccentric President keeps them on the alert all the time.
However, taxes remain high both in Europe and in the USA. In addition to that, over the recent years the international tax and finance authorities have been actively campaigning against offshore jurisdictions. Their campaign is well grounded, as some such jurisdictions have indeed been known to contribute to money laundering and terrorists financing schemes. But the strict measures taken against offshores do not only lessen the threat of terrorist attacks but they also make the lives of honest business people much more difficult. Money laundering and tax evasion are truly unlawful and dangerous practices but the truth is that far from everyone used companies registered in offshore jurisdictions for these reproachable purposes in the past.
Tax burden optimization is something that any person and any business company should be allowed to pursue. This is exactly what offshore zones were used for by many international businesses before. Now registering a company in an offshore jurisdiction and/ or opening a bank account there makes no sense. It can be claimed that no offshore zones exist on this planet anymore. At least, they are unable to provide the same level of tax optimization and privacy of financial information that they used to in the past.
At the same time, not everything is prohibited by the international financial authorities. There are still several countries that are often referred to as mid-shore jurisdictions. They comply with all the international financial standards and transparency requirements but they are simultaneously able to offer considerable tax incentives to foreign investors. These are the countries you should consider first of all if you are thinking of changing your tax residence.
Several factors need to be taken into consideration when choosing what country to relocate to. Probably, the most important of them are as follows:
- Your new country of residence has to have an agreement on avoidance of double taxation with your home country.
- It should not have any CFC (Controlled Foreign Corporation) laws or similar ones.
- It should be a non-haven low-tax jurisdiction or otherwise it should apply the territorial taxation system.
- It should be possible to establish the kind of corporation in this country that would fit the types of your business activities.
- As you are going to spend a considerable amount of time in this country with your family, it should provide the conditions for a comfortable living. These include the climatic and the social conditions in the first place.
You also have to realize that it is not possible anymore to establish a ‘fake’ presence in a low-tax jurisdiction and continue living and doing business in your home country while paying less in taxes. Your native country tax authorities will not let you do it.
When thinking of changing your tax residence, you have to be prepared to changing you physical residence as well, at least for a certain period of time during the year. What is even more important, you have to establish some serious economic substance in the new country in order to show to your home country tax agency that you are stationed in that country.
Please do not think that acquiring a legal address in a country with preferential taxation will be enough to let you considerably save on taxes. What will suffice for that? You have to incorporate a business company in the new country, open a company office there, set up a bank account in a bank located there (preferably the National Bank), and/ or purchase residential accommodations large enough for your family. This will count as ‘substance’ in your new country of residence and it will permit you to acquire a tax resident status in a state where taxes are lower.
There are not too many of such states but some do exist. Quite a number of international businesspersons are obtaining tax residence in such countries as Great Britain, Monaco, Malta, Cyprus, or Panama. Here we would like to draw your attention to the Central American Republic of Panama, in particular.
Why Panama and what benefits does it offer to expatriates?
Panama is, of course, not the only option to consider when thinking of changing your domicile. There are quite a number of countries that offer residence and citizenship to foreigners in exchange for some investment into their economies. The requirements as to the amount of investment vary from country to country. For example, obtaining a Dominican passport will cost a European country citizen around US$ 120,000. An American citizen will have to bring a bit less money, while a Turkish or a Chinese citizen – considerably more.
Malta and Cyprus will also grant citizenship for investment but there you will have to make some ‘donations’ to the state budget that you can never return. Such donations can be considered as immigration fees. All in all, it will cost you about US$ 1 million to relocate to Malta and about US$ 2 million to obtain the right of abode in Cyprus. There are other countries you can look at, but relocating to a place with high living standards is generally quite expensive.
Moving to Panama, however, is more affordable. With some of its immigration programs, you will have to invest US$ 30,000 to US$ 40,000 into the country economy, and that will already make you eligible for applying for permanent residence permit in Panama.
If you still think of Panama as a third-world country, you have to reconsider this view. All the wars between drug barons, poverty, social instability, etc. are long gone and forgotten. Today Panama offers a pleasant lifestyle and its living standards are comparable to those that residents of Western Europe and North America are used to.
At the same time, Panama remains a developing country even though its economy and social security are improving at a fast and stable pace. To enhance these improvements the country needs foreign investments. Thus, the Panamanian Government invents some legislative instruments that make the country attractive to potential investors.
For instance, you will find that the business environment is very comfortable in Panama indeed. This includes not only preferential taxation systems but also the ease of business company registration in the country and the guaranteed security of the foreign residents’ assets in Panama.
The Republic of Panama is a country with a stable political situation and an economy that has been steadily growing over the last ten years. Thanks to the Panama Canal, a strong banking sector, and the support of the USA, Panama is now a leading country in the Caribbean basin and Latin America as a whole. By offering preferential taxation conditions to foreign investors, Panama attracts large capital from abroad.
Even the ‘Panama Papers’ scandal that was aimed at spoiling Panama’s international reputation did not do much harm anyway. Investments still keep flowing into the country as many business want to take advantage of the incentives that Panama offers. The state authorities respect the international laws and fulfill all the financial transparency requirements. Panama is off all the ‘black lists’ and it is not under any sanctions.
Confidentiality of financial information and effective asset protection in Panama
When registering a business company in Panama, you become a tax resident of the country. The assets that you locate in Panama are not accessible to your home country government agencies (in case they want to take something away from you). The Panamanian corporate laws provide for the confidentiality of the personal data of the business owner. The name of the company owner can be revealed only by the decision of a Panamanian court of law.
Tax incentives in Panama
Many countries levy taxes on their citizens wherever they make an income. Panama, in its turn, applies the territorial taxation system. A citizen or resident of this country is only taxed if he or she makes an income on the territory of Panama while any profits derived from abroad are not taxable. In January 2019, a new property tax law was passed that increased the untaxable real estate worth from US$ 30,000 to US$ 120,000. The passage of this law has served and one more tax incentive that is attracting a growing number of foreigners to Panama. More people want to buy real property in the country, both commercial and residential.
Residency in Panama as a fallback option
Acquiring a Panama permanent residence permit is a wise decision in case some political, economic, or social troubles arise in your home country. No national state is unfortunately invulnerable to their occurrences in the modern world.
Panama resident: a legitimate legal status
Having a permanent residence permit in Panama is having a secure legal status that will simplify opening a personal or a corporate bank account in Panama or purchasing real estate there. Residency in this country will also give you access to international finances and secure your civil rights in Panama.
High quality medical services at affordable prices
The Panamanian healthcare system is one of the most advanced such systems in Latin America, and medical assistance is accessible to anyone. The level of medical services in Panama is as high as that in the United States and many European countries. The vast majority of Panamanian doctors studied medicine in the USA and Canada. Most of the hospitals in Panama cooperate with respectable medical institutions of the USA and many work under the sponsorship of such institutions.
The most open immigration policy
Unlike most other countries, Panama offers a number of immigration programs. The Government is interested in attracting foreign capital to the country and it offers many routes that you can take in order to legally penetrate into Panama.
It will be pleasing to know that immigrating to Panama does not require a million-dollar investment. With some immigration programs, a few thousand dollars will suffice to acquire a legal resident status in the country. Below please find a short list of Panama visa programs that look especially inviting. The required investment sum and form are indicated for each of these programs.
- Economic Investor visa. This visa program leads to permanent residency in Panama on investment of US$ 300,000 into the country’s economy. The investment can be made by putting money into a bank account or by purchasing real estate in Panama.
- Business Investor visa. This visa program leads to permanent residency in Panama on investment of US$ 160,000. You can make this investment by establishing a business company in Panama.
- Reforestation visa program. This visa program leads to permanent residency in Panama if you invest US$ 80,000 into purchasing at least five hectares of land where you will grow teak trees.
- Friendly nations visa program. Citizens of fifty national states are especially welcome to Panama. They are entitled to a Panamanian residency if they put US$ 5,000 into a bank account and engage in some economic activity in the country.
- Pensionado visa program. This immigration program does not require any initial investment at all. The program applicant will only have to show that he or she has a stable monthly income of at least US$ 1,000. A state pension would be a guaranteed source of such income, hence the name of the visa program.
You can find detailed information about these immigration programs on our site.
It is simple to retain the permanent resident status in Panama
Many national states that offer immigration programs require that the immigrant spend a set period of time in the country in order to retain his or her resident status. Paraguay or Nicaragua, for instance, require that those holding permanent residence permits stay inside the country for minimum 180 days a year. Since recently, Turkey wants legal immigrants to spend nine month out of twelve in the country if they want to keep their permanent resident status.
Panama, on the contrary, makes it easy for foreigners to retain their permanent residence permits. The country’s legislation does not specify any set time period that a legal resident must stay in the country in order to retain his or her residence permit. According to Panamanian lawyers, it will suffice to come to the country for a few days once every two years to remain a legal resident of Panama. As of now, the Panamanian authorities do not check how much time legal foreign residents spend in the country.
Those holding a Panama permanent residence permit can leave and enter the country freely. At the same time, Thailand, for example, will require that a foreign resident obtain both an exit and an entry permit every time he or she travels out of Thailand and back.
Another advantage of Panama over some other countries is that it does not require the knowledge of Spanish from legal immigrants. Spanish is the national language in Panama and it is widely spoken in the streets. English is often used in the spheres of business and finances.
The possibility to acquire full citizenship of Panama
After holding the permanent residence permit for five years, the immigrant to Panama has the right to initiate the process of obtaining full Panamanian citizenship and a passport. He or she will have to file an official application for citizenship to the immigration authorities. Weighing all ‘pros’ and ‘contras’, many foreigners choose to take this opportunity and obtain a second citizenship in Panama. For many of them this decision is correct from the political point of view.
It has to be stressed, however, that the Republic of Panama only grants foreigners the right to apply for citizenship but it does not guarantee that citizenship will be granted to every applicant. Every application is considered individually by the authorities and these can accept or reject the application. The immigration agency officers will want to ascertain that the applicant ‘belongs’ in Panama, that he or she has integrated well enough into the country’s society and economy. In case the application is rejected, it is possible to apply for citizenship in a year’s time.
It also has to be noted that the Republic of Panama does not allow having dual citizenship. When you become a citizen of this country, you have to make an oath of renunciation of your home country (or any other) citizenship. But this is only a formality as an oath given to a foreign government will have no legal force at all for your home country authorities. Thus, you do to have to give up your previous citizenship if you want to acquire that of Panama.
Many Americans, for example, become Panamanian citizens without forsaking their US passports. The passport of Panama gives visa-free access to over 130 countries including the EU and Schengen zone states.
If you do not mind moving to Latin America, you have to know that Panama is the safest country in this region. The numerous US citizens residing in Panama note that they feel safer there than they do in some big cities at home.
Finally, Panama is a country where summer lasts 365 days a year. The country’s tropical climate is quite humid and some may find it a bit uncomfortable. But what you have to do is visit Panama as a tourist and see for yourself how it feels there. We invite you to take a familiarization trip to the country. On your visit to Panama, you will find different terrain types that the country has. Beautiful sandy beaches, tropical islands off the Atlantic and the Pacific coasts, and exotic mountain areas with a cooler climate. Those who prefer residing in big cities will certainly appreciate the splendor of the country capital – Panama City.
Panama welcomes you to establish your second home in this warm and friendly country.
If you have any questions pertaining to moving to, or visiting Panama, please request our consultation via email: [email protected] and we will get back to you promptly. Our representatives in Panama will have all the latest news and only trustworthy information. We will gladly advise you on acquiring permanent residency in Panama, registering a business company in the country, or opening an account in a Panamanian bank. We provide only top-quality services.