Panama is one of the most popular safe havens and offers a variety of fast and affordable programs for settlement through investment. As a unique example, Panama has a territorial tax system in which Panamanian tax citizens and companies only have to pay taxes on their income earned in Panama. Panama does not tax the worldwide income of its tax citizens.

This is a continuation of the series on Flag Theory.

Country Facts

Article Fact
Population 3.9 million
English proficiency Moderate
Languages Spanish
Capital City Panama City
GDP/PPP USD 22,788

Estimates of cost of living

Items Monthly expenses
Single Student 979 USD
Digital Nomad 1,352 USD
Single retired person USD 1,925
Retired couple USD 2,560
Single entrepreneur USD 2,379
Entrepreneur with family of 4 USD 4,482

Pros and Cons

Advantages Disadvantages
Possibly great growth in the future Certain inflation, price controls
Good choice for 2nd residence Relatively dangerous (at least in certain parts of the country)
Good banking jurisdiction Economy relies on the USD, hence higher prices than before
Access to "western" amenities  
Good place for structuring business in Latin America  

Waves beach
Photo by Austin Neill / Unsplash

Panama - an introduction

The changes in recent years are remarkable. Despite the extremely negative coverage of the Panama Papers by "anti-liberalism activists" who have little idea of how the global economy actually works, Panama is still an absolutely reputable country to structure your business if you are doing business in Latin America.

Even due to latest regulator changes there are still affordable programs for settlement through investment. In addition, the cost of living in Panama is still very reasonable, which is another big plus. The country is also a much more progressive place to live today than it was in the early 2000s.
One reason Panama is currently more expensive is the currency is pegged to the US dollar. The country benefits from the peg, but this has resulted in inflation. So prices for real estate and the cost of living in general have gone up a lot. (But by Western standards they are still quite affordable).

Panama remains deeply pro-business. Revenue from the canal is also a primary source of income for the country and, along with tourism, are a cornerstone of the economic system.

Permanent Residency by Investment

In 2020, Panama has created a special way to obtain permanent residency by investing in the country's economy. The conditions for investors are set forth in Executive Decree No. 722, dated Oct. 15, 2020.

The investment options include four options: two options involving the purchase of real estate, the purchase of shares on the Panamanian Stock Exchange and the establishment of a term deposit with a local bank. The money for the investment must come from foreign sources. Individuals and legal entities can transfer money for the investment.

In 2022, the minimum investment amount increases by an option for the purchase of real estate without encumbrances, such as mortgages.

Option Amount of investment until October 15, 2022 Amount of investment as of October 16, 2022
Buy unencumbered property USD 300,000 USD 500,000
Purchase of real estate under a preliminary purchase agreement for an object whose construction has not yet begun USD 500,000 USD 500,000
Purchase of shares on the Panama Stock Exchange USD 500,000 USD 500,000
Opening a time deposit with a bank USD 500,000 USD 500,000

The duration of ownership of the investment is 5 years. In the first five years after receiving the permanent residence permit, the investor undergoes an inspection by the Migration Service of Panama once a year. The investor confirms to own real estate, shares or a deposit. If the investor sells the real estate, returns the shares or liquidates the deposit in the bank before the end of the period, the residence permit will be revoked.

It is not required to live in Panama before or after obtaining a permanent residence permit. However, in order to keep the residence permit, the investor must spend at least one day in the country every two years. If the investor flies to another country and has a connection to Panama, the time of the connection counts as one day spent in the country.

Other options

There are currently 8 different residency programs in Panama - let's take a closer look at two more options:

  1. Friendly Nations Visa: Citizens of most European countries as well as Hong Kong, Taiwan, Canada, Australia, the United States and some Central and South American countries can apply for a Friendly Nations Visa. Previously, the friendly nation visa was the primary option. Due to legislative changes (Executive Decree No. 197) that will take effect on August 5, 2021, Panama's Friendly Nation Residency Program will grant a temporary residence permit for two years, after which the applicant may apply for a permanent residence permit. The economic activity requirement is now limited to two options: First, employment in Panama with a legal Panama Corporation with a formal employment contract and work permit. Second, purchase of a property with a minimum value of US$200,000 (bank financing is allowed).
    To apply for this program, a bank deposit must be made and a professional or economic activity must be carried out in Panama. Activities may include employment, investment, or management of a Panamanian business. Applicants (family members may also be admitted) are granted permanent residency and may apply for citizenship after 5 years.
  2. Pensionado Program: Retirees who receive a monthly pension from a foreign government, private company or international organization are eligible for this program. Applicants must also provide a health certificate and a document stating that they did not have a criminal record in their last place of residence. Once the residency permit is issued, the status is protected in case of future changes in the law. A possible disadvantage of this program is that the applicant cannot apply for Panamanian citizenship.


  1. Change of tax residence: A person can become a tax resident of Panama if he/she stays in the country for more than 183 days/year. A permanent residence permit allows legal residence in Panama for such a long period of time. On the other hand, a legal entity automatically becomes a tax resident if its head office is registered in the country.
    The advantage of Panama's territorial tax system, which means that tax residents of the country only pay taxes on income earned in the country. World income in Panama is tax free. Tax residents are also not required to submit reports to the Panama Tax Authority on income and dividends from sources outside the country. There is also no tax on interest on USD deposits in Panamanian banks. Finally, foreign capital transferred to Panama for investment or business purposes is not taxed. There is also no tax on the withdrawal of capital from Panama.
  2. Applicants for Citizenship: Permanent residents may apply for Panamanian citizenship after five years. Applicants must also pass a test in Spanish language, history and geography of Panama to obtain citizenship. The Panamanian passport allows travel without a visa to 142 countries, including the Schengen area, the United Kingdom, Hong Kong and Singapore.
  3. Return on investment: Investors who buy real estate to obtain permanent residence can rent out properties. The return for renting real estate in Panama is 7-8% per year. After five years, the investor can sell the property and repay the investment. Real estate prices in Panama increase by an average of 4% per year. The return on USD deposits at the bank is between 2% and 4% per year.
Photo by Philip Melanson / Unsplash

Final Thoughts

Improve your quality of life!

Lastly Panama is not only a safe haven and offers a variety of fast and affordable programs for settlement through investment.

Residing in Panama offers a great Plan B strategy (compared to major western and international cities) and is an excellent option for retirement.
English is widely spoken. The standard of living is high - Panama City is comparable to cities like Miami - but much cheaper. Retirees also receive substantial discounts on activities, restaurants, airline tickets, and movie theaters, and medical care is excellent. The country is close to the United States - only a three-hour flight from Miami, and Tocumen International Airport is an international hub connecting the Americas, the Caribbean and Europe.

Finally, the weather is excellent year-round. Most days are sunny. And you can choose to spend them in the more temperate highlands with the eternal spring weather around the volcano, or down by the Pacific or Caribbean Oceans.

For your stay

The website and the information contained therein are not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained on this website do not constitute investment advice.