Panama ... a Top Choice for Offshore Living and Retiring

Panama Vacation Rentals

Enjoy life without the usual cash flow worries. Panama lets you stretch your retirement dollars allowing you to enhance your present standard of living "up north" by spending about 40% of your current budget.

Some of the main reasons to consider Panama:

1. Cost of living about 40% of levels in North America
2. Excellent medical care at first class hospitals with English speaking doctors.
3. Excellent, low cost, health insurance with no age restrictions on joining. You will have a two year pre-existing condition clause and a low co-pay.
4. Easy permanent residency qualification with 5 different programs
5. Warm weather year around. No hurricanes or earthquakes. 
6. Good restaurants at 50% less than similar restaurants in North America
7. Friendly and helpful people. Many expats to meet.
8. As in the USA or Canada, low crime levels depending on location.
9. Excellent entrepreneurial and small business opportunities.
10. Sensible tax laws with low personal and corporate rates
11. In Panama you are taxed on "territorial" and NOT on world income
12. After Switzerland, Panama is the largest international banking center.
13. Panama uses the American dollar making calculations and budgeting easy.
14. Panama has enjoyed one of the highest high economic growth rates in the world for the past decade. 
15. Now is a great time to purchase a Panamanian high end house or condominium with lots of choice and good prices.  

Visit this spectacular, unspoiled, friendly Central American country and you will be amazed.

Panama has put out a welcome mat for expatriates with perhaps some of the most generous residency requirements available anywhere in the world today and its working! 

A massive expansion of the Panama Canal is in full swing with about 3-4 years of work left to complete. Panama remains in a construction boom even while most countries such as the USA continue to struggle badly in this area. A new metro system has been approved fro Panama City. A new International Airport has been approved for the Pacific Coast (about 25 minutes from Coronado). The Panama City skyline already has a "first world look and feel".  

Panama Enjoys High Ratings

As a living/retirement destination, Panama continues to receive excellent reviews from diverse expert sources.

From about 2002 to 2007, Panama was chosen as the "best offshore country in which to retire" by International Living. For 2011, Coronado Panama was selected as their third choice after Ecuador and Mexico and just ahead of Punta del Este Uruguay. Italy and France are very high on the list but ease of residency and budget considerations are high on the list of concerns.

Interestingly, the top four locations for 2011 were all Spanish speaking.

The Panama Tax Advantage

Panama is one of the EXTREMELY FEW countries in the world that has a "territorial tax policy" and does NOT tax you on your global income. In fact, income derived from sources outside of Panama are typically "tax free". 

As an American citizen living in Panama, your first  about $85,000 of active regular salary or business income is generally tax free for IRS purposes but you have to live outside the USA for at least 330 days in a single calendar year to qualify. All of your investment income and other "passive income" are still subject to American taxes.

As an American citizen, all global income must be reported to the IRS unless you renunciate your American citizenship.

As a Canadian citizen and for most Europeans, your non-Panamanian income is typically tax free without limit if you have permanent residency here and/or live outside your own country for more than 183 days in a calendar year.

The Cost of Living in Panama

One can live comfortably on about 40% of what it costs in North America on "after tax" dollars. If you are very careful you can live substantially better on one-third.

For example a 2011 budget of $2,000 per month, without any debts, allows one to live the life of a relative millionaire up North not to mention swim 365 days a year in 80 degree water.

New houses can be eligible for a 20 year tax exemption depending on value.   

Comparative House Purchase Costs

My wife and I purchased a small condo in Puerto Vallarta in early 2004. It was a cash deal because Mexican banks, in 2004, would only  lend money at 17% rates. 

In Mexico, it cost us 9% of the condo purchase price just to close including all legal expenses, bank trust fees and transfer fees.  The sales "process" took 6 months although there were some unusual problems with the ownership seller.

When we sold our Mexican property one year later to move to Panama it cost us 15% of the final selling price including a real estate commission of 8%, plus bank trust, legal fees and capital gains taxes.  Mexican property flipping is not recommended!

By way of contrast, the cost to close on our property in Coronado Panama was ONE PERCENT of the purchase price. The entire process was exceptionally well handled taking less than 6 weeks (not 6 months). 

Our Panamanian house could have been financed at 70% for 25 years at mortgage rates equal to those in the USA. However, for any mortgage term that extends beyond your 70th birthday you need to take out a Panamanian life insurance policy in an amount equal to the outstanding loan. As a Panamanian "pensionado" you can even receive a discount on your house mortgage interest rate as well as free legal fees. Cash was a better idea.

During the period 2006 to 2010 there was never a housing crisis or "bubble" in Panama even remotely similar to that in the USA although there was some over-building and some big condo projects cancelled or put on "hold".

The Panama Canal

The Americans completed construction of the Panama Canal about 100 years ago and retained possession of a 10 mile strip of Panamanian territory called the "canal zone" until the end of 1999 at which time, the "canal zone" "reverted" to Panamanian control.

The $5.25 billion "Third Lock" canal project began in October 2006. The improved Canal will be able to accommodate the largest cargo ships with 8000+ shipping containers on board permitting a low cost flow of trade. The World Bank has funded a significant portion of the construction costs.

Panama and the Web

Four of the five major global transoceanic fiber optic companies run their lines through the Panama Canal making Panama an excellent choice for a major ecommerce internet business. Most home internet services are are now 4 meg ADSL systems.

Banking and Money Laundering in Panama

It remains a relatively difficult task to open a simple bank account in Panama. Banks are very methodical and will check every detail. The Panamanian banking system is very sophisticated and scrupulously applies the "know your customer" guidelines to the hilt.

With new trade agreements being signed or negotiated with the USA and Canada, there is much more transparency required. Panama's reputation as a money laundering center (what some people called "wash, dry and fold") has faded dramatically as have corporations and trusts that can avoid IRS scrutiny particularly with the new American HIRE legislation. 

Crime in Panama

Violent crime rates in Panama are definitely higher than in the USA or Canada. As in North America, however, they remain highly concentrated in specific areas such as the "red zone" districts in Panama City and Colon. Panama has the disadvantage of being geographically between cocaine producing Colombia and cocaine consuming USA. The vast majority of violent crime occurs in the 16 to 27 male age group during the hours of 9 PM and 3 AM, for persons active in drugs and prostitution, and living in a red zone.   

As an expat or tourist you may be seen as a "target of opportunity"; you should take the same precautiona, particularly at night, as you would in any major North American city.

Petty crime also exists as it does in almost every country of the world. Every once in a while Panama experiences a short lived "crime wave" often perpetrated by a single gang in a specific area.

The New Johns' Hopkins Hospital

The state-of-the-art "Johns' Hopkins" Hospital opened in late 2006 in downtown Panama City in the Punta Pacifico area. This was their  their first "off-shore" franchise. This hospital chain is ranked #1 in the USA.

There are also 4 other high quality hospitals in Panama City typically affiliated with an American hospital chain. A triple heart bypass might cost $20,000  to $25,000 in Panama City compared to about $125,000 to $150,000 in the USA. Cheaper than your present copay and with excellent quality of care in immaculate facilities.

Panama City Skyline

The Panama City skyline resembles New York's "downtown" area. It is six times more dense in terms of ritzy high rises than the skylines of either Montreal or Miami with at least 250 significant commercial or residential "skyscrapers" (and counting) in a concentrated downtown area with several towers over 100 floors.

Construction incidentally is the number one employment sector. The new Trump Tower has 2500 workers on site every day and as of mid 2011 the finishing touches are being put to this incredible building.

Panama Residency Conditions

Panama has some of the best residency conditions in the world for people wishing to retire or start a new business. If you can prove an "arm's length" pension income of USD$1000 per month you meet the financial conditions. There still remain some medical and police record conditions but unless you are a convicted felon these are rather easy.

If you purchase a house for $300,000 you can gain residency as a "financially solvent" person. There are other several residency options including setting up a business, investing in a teak reforestation project ($80K), and investing sufficient money in a bank to provide the required pension income of $1000 per month. 

The total legal costs for a couple to become "pensionados" are generally in the range of $1500 to $2000. This is a one time expense and residency lasts forever with no restrictions on time spent in Panama.