By Uglobal Staff
To those looking for a second residency, Panama is kind of like the girl or guy next door – close by, familiar, and easy to like.
The Central American nation has been successful for years drawing Americans and other Westerners due to its proximity, friendliness, high standard of living at a reasonable cost, growing economy, use of English and the U.S. dollar, political stability, favorable tax laws, and an easy-to-obtain residency visa with a potential path to citizenship.
In 2012, the country made its residency requirements even easier and has often been called one of the best deals for second residency.
“Honestly, as someone who travels all around the world, I like Panama. Everyone likes Panama,” said Andrew Henderson, founder of Nomad Capitalist. “They’ve got a very open visa policy, which I like.”
Because of all its charms, the country has been heavily marketed, especially to Americans, to the point of overhype, Henderson cautioned.
“There are plenty of countries around the world where you can invest $5,000, set up a company, or buy a cheap property and get residence and in many cases citizenship within five years,” he said.
But Panama, especially for U.S. and Canadian citizens, is pretty well-known, Henderson said. “No one views it as problematic,” he said. The nonstop flights from major North American cities and the dollar mean that it doesn’t seem too foreign, he added.
“International investors are increasingly looking at Panama due to its consistent economic growth and political stability,” said Andrea Cooper, senior investment adviser for Panama Equity Real Estate in Panama City. “The ease of doing business in Panama is another reason why this country attracts so much direct foreign investment.”
Panama ranked No. 2 after Chile in the 2016-17 Global Competitiveness Report by the World Economic Forum.
Other benefits of residency include: access to all the nation’s international banks; foreign-earned income, foreign-earned capital gains, and Panama bank interest income are not taxed; favorable incorporation laws; relatively low cost of living and real estate; a government friendly to foreign investors and retirees; updated and expanded infrastructure and transportation system; high-speed internet and telecommunication services; top-notch health services and medical care, including a hospital affiliated with Johns Hopkins Medicine International; no need to live or maintain a home in Panama; and dual citizenship allowed.
However, even Panama’s officials noticed its welcoming policies were a little too welcoming. The government made some changes recently, in particular to its work permit policies and its banking requirements, that pull back a little from the former arms-wide-open stance.
Immigration requirements change frequently. Those considering Panamanian residency should update themselves as part of a thorough review with an immigration attorney.
First, though, what makes Panama so appealing is that for those from the United States, Canada, and about 50 other countries, a residency visa is easy to obtain.
The Friendly Nations Visa requires a deposit of $5,000 in a Panama bank account; a letter stating the applicant is working for a Panama company in a professional capacity, owns a Panama company, or is a director or major shareholder of one; an authenticated criminal history background; a Panama doctor’s examination report; and nonrefundable fees of $1,050.
Dependents include a spouse and children up to 18, or 25 if they are full-time students, disabled relatives, and dependent parents.
Immigration officials issue temporary residency cards valid for one year and, when the applicant is approved, issue a permanent residency card. The foreigner can apply for a work permit and, after five years, a naturalized Panama citizenship and passport.
“I personally consider this the best program for most of my clients, as it is the quickest way to obtain residency and is a relatively straightforward procedure,” said Panama Equity Real Estate’s Cooper. The application process is quick and efficient, she said, and the main drawback for those who qualify is that opening a bank account in Panama can be time consuming.
“I can say that the major drawback of Panama is that only people from ‘friendly nations’ are being approved. If you’re not from a top 50 country, it is difficult to get a visa,” said Christian Reeves with PremierOffshore.com.
Those from countries not on the Friendly Nations list must apply under one of Panama’s other programs:
The Panama Reforestation Visa allows foreigners to invest at least $80,000 in government-certified reforestation projects in return for a permanent residency visa. Reforestation involves planting mahogany and teak trees in the rainforest to replace those cut down for lumber.
The visa is sometimes called Panama’s Green Investment Visa because of its benefits to the environment. The investment pays off over the years as trees are periodically thinned for lumber. Investors don’t have to be farmers; companies that sell the parcels handle maintenance. The government estimates an $80,000 investment can produce a 2 percent annual return of $370,586 in 20 years. U.S. investors can use IRA funds to purchase a reforestation parcel.
The teak residency program is popular, said Nomad’s Henderson.
The Self Economic Solvency Visa requires a $300,000 investment in a certificate of deposit, real estate, or a combination of the two.
The Panama Agriculture Investor Visa confers temporary residency (two years and renewable) on those who invest at least $60,000 in Panama aquaculture or agriculture. It is not a path to permanent residency or Panama citizenship.
The Panama Pensionado Visa is for middle-income foreigners who wish to retire in Panama on a set pension, annuity, or retirement fund. Anyone over 18 qualifies if he or she can guarantee a lifetime monthly income of at least $1,000. Spouses can combine their income to qualify; dependents must each receive $250 monthly.
This program has its perks, said Cooper.
“Pensionados enjoy exoneration on importation of household items (a one-time benefit when moving to Panama) plus exoneration on vehicle import taxes every two years. They also receive significant discounts in restaurants, cultural events, hotel stays, airfare, medical services, prescription medications, and public utilities (water and electricity),” she said.
All these visas require an additional investment ranging from $500 to $2,000 for family members.
Legal costs and government fees range from about $3,500-$5,000, depending on the complexity of the case and the pricing of the law firm handling it, Cooper said.
Older North Americans typically opt for the Pensionado program to take advantage of the discounts and exonerations, Cooper said. In recent years, she has seen an influx of younger immigrants from South American countries on the Friendly Nations list, particularly Brazilians.
“I personally have many Brazilian clients who are very concerned about the rising rates of violent crime in Brazil and lack of economic opportunities in their country,” Cooper said. Likewise, the dire political and economic situation in Venezuela has prompted wealthy Venezuelans to enter under the Investor visa program, while those with dual citizenship qualify under the Friendly Nations Visa.
Cooper said there’s also been a huge influx in Asian immigrants from South Korea, Japan, Taiwan, and Singapore as companies from those nations are increasingly investing in the Panamanian economy and establishing regional headquarters there.
Henderson sees many Chinese interested in Panama, as well as Americans and Canadians.
Permanent residents of Panama are entitled to apply for citizenship after five years. A Panamanian passport allows visa-free travel to almost all of Europe, as well as the Americas south of the United States.
But just because they can apply for citizenship in five years doesn’t mean they will get it in five years, cautioned Henderson.
“I know people who’ve lived in Panama for a lot longer than five years who don’t have their passports,” he said.
PremierOffshore.com’s Reeves recommends investors pursuing citizenship visit Panama at least once a year to keep up appearances, then in the fifth year, spend more time there, becoming a part of the community.
Panama’s popularity as a retirement and banking destination has prompted some recent corrective actions by the government.
After U.S. allegations of money laundering in 2016, a major bank was shuttered. A month later, the Panama Papers were released, shining a light on many illegal uses of offshore corporations and offshore bank accounts.
As a result, people living and working abroad can no longer open a business bank account in Panama. A Panama corporation must now have a business permit and physical office, and be operating in the country to get a bank account in Panama. Likewise, only those with residency permits are now allowed to open personal bank accounts.
Also, the government is cracking down on people living in the country without a residency permit. Those living in Panama, making multiple visits to the country in a year, or spending more than 60 days there over a 12-month period must get a visa.
Another change, as of February 2017, means that work permits for Friendly Nations Visa holders are no longer fast-tracked. They must now have an employment contract with a Panamanian company and be enrolled in the local payroll system.
Most professions in Panama – doctors, lawyers, accountants, etc. – are restricted to citizens, as are retail businesses. Those with Internet-based businesses are in good stead.
Some advisers who have clients considering foreign residency warn that Panama might continue to tighten its immigration policies.
“We generally tell our clients who are interested in pursuing the Friendly Nations Visa route to apply as soon as possible so that they can obtain this status before the government modifies the program any further or possibly eliminates it altogether,” Cooper said.