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Panama Tourism Investment Encouraged with Law 481

Panama tourism investment

Zach Welty

As more and more visitors flock to Panama each year, the nation’s government has been increasingly intentional about encouraging Panama tourism investment.  Panama is a country that welcomes foreigners, whether for the short or the long term.  Its hassle-free visa options have made it a haven for expats.  Its business-friendly tax laws have made it a great opportunity for investors.

Now with its recent piece of legislation, Law 481, Panama is creating a win-win for everyone.  Law 481 is a bill that is designed to create incentives for those who wish to invest in tourism operations in specific areas, namely those outside of Panama City.  As tourism developments crop up in remote areas, there are many groups who stand to benefit.

Obviously, the news is great for tourists who will have many more lodging and recreation options.  It’s also a huge benefit for property owners who will likely see substantial property value increases from the presence of nearby amenities.  The same is true for expats, who will enjoy many more conveniences and services brought about by the increase in tourist activity.

But the real benefit is for the savvy investor who can take advantage of the unprecedented incentives offered by Law 481.  We’ll get into the details of the benefits the law offers to investors.  But first a little bit about what prompted Panama’s government to offer such advantages.

The Situation

Panama has been targeting tourists for quite a few years now.  In addition to incentives like these, they have also launched ad campaigns, and invested heavily in infrastructure.  Improvements such as airport expansions, better roads, new utilities, and other enhancements have continued to make the country a more attractive destination for tourists.

And the government’s efforts have worked!  Panama saw over 2 million international visitors in 2011, up 16.1% from 2010 and contributing $1.9 billion in foreign revenue.  The number of tourists in 2012 is estimated to be around 2.2 million.  The tourism industry received investments of $405 million in 2011 and an estimated $842 million in 2012.  Panama City and its bustling tourist attractions have been compared to destinations such as Miami, Singapore, and Dubai.

Historically, Panama City is the country’s main hub for tourism.  It draws tourists of all kinds and markets itself as an ideal location for conferences and business meetings.  However in recent years the number of travelers who come to Panama seeking beach getaways and adventure tourism in the interior is on the rise.  As is the number of business travelers who are deciding to extend their stay and venture outside Panama City.

The Solution

Law 481 is essentially the government’s answer to ensuring that the country can keep up with the demands of its tourists.  This initiative offers incentives for the construction and operation of tourist lodging facilities outside of Panama City with a minimum $250,000 investment.  Hotels under construction in Panama City, with a minimum $8 million investment, can also qualify for benefits.

The Incentives for Panama Toursim Investment

Here are the specific incentives offered to those who invest in tourist accommodations that meet the criteria:

  • 20 year tax exoneration for materials, equipment, and vehicles used in construction

  • no import tax of vehicles used for ecotourism

  • 20 year tax exemption for real property used for tourism*

  • no taxes or assessments on the operation’s capital

  • no fees for use of piers, airports, and heliports owned by the operation

  • no income tax on interest earned by investors

  • 10% depreciation allowable on real property, excluding the land

*For operations in designated areas near historic landmarks, this period is 10 years.  However, any improvements on the land are tax free for 30 years.

Projects near historic landmarks can also enjoy income tax exoneration on their profits for a period of 5 years.  After that, they can deduct any losses they experienced as expenses and can claim them for 3 years after they were sustained.

Additional perks apply for projects in designated Special Tourism Zones.  While most other incentives apply only to lodging, eligible operations in these zones can include convention centers, theme parks, zoos, marinas, and research and cultural centers.  These types of businesses are eligible for income tax exemption for a period of 15 years.  Investors can also enjoy no taxes for 20 years on interest earned on their investments.

The Opportunities

So, exactly what types of projects qualify for the incentives?  Well, other than the previously mentioned operations in Special Tourism Zones, the law focuses on lodging facilities.  This could mean anything from a world-class hotel on the beach with all the amenities, to a campsite in the jungle with nothing but rough plumbing.  It includes cabins, family-run hostels (sort of like a bed & breakfast), individual units in larger buildings used as tourist accommodations, and even time-shares.

Just about any type of housing qualifies, as long as it is used for tourism.  And these operations may also include the tourist activities carried on by the project.  Think beach-side bungalows at a resort that offers some of the world’s best sport fishing.  Or a rustic lodge designed to serve as a stop on a week-long jungle exploration.  The possibilities are endless.

If you’re thinking of taking advantage of the government’s offer to invest in tourism, you’ll want to consult an attorney to help you iron out the details.  A Panamanian lawyer can guide you through the ins and outs of buying property, starting a corporation, navigating immigration laws, etc.

Panama tourism investment

Panama Guide

The Designated Areas

Here is a little more information on the Special Tourism Sites and the activities and adventure they offer.

  1. La Amistad – Located in Chiriqui and Bocas del Toro provinces, this area is home to two national parks and is a prime spot for ecotourism.  It also includes the mountain haven of Boquete, which is home to many expats.

  2. Bastimentos – This area, located in Bocas del Toro province, boasts one of the country’s largest marine parks.  It is home to beautiful beaches and is an ideal spot for diving or ecotourism.

  3. Arco Seco – This region contains the coastal areas of Herrera and Los Santos, which are rich in Panamanian cultural events and traditions.

  4. Farallon – Situated in the Panama and Cocle provinces, this area contains beaches and the Anton Valley.

  5. Metropolitan – This section includes Panama City and the natural parks surrounding it.  It is a hub for business activities, as well as historical and cultural attractions.

  6. Portobelo – Located in Colon, Portobelo has beaches and reefs.  It also contains a national park, as well as some historic ruins.

  7. San Blas – This area is home to a series of islands and contains gorgeous beaches and reefs for diving.

  8. Archipelago de Las Perlas – These islands are also home to beautiful beaches and reefs.  In addition it is home to world-class sport fishing.

  9. Darien – This remote region includes a national park and many more opportunities for ecotourism.  It is also home to several indigenous people groups and ripe with culture.

If one of these areas speaks to you, we’d encourage you to dig a little deeper.  Find out if an investment in Panama tourism is right for you.

Panama tourism investment

Rita Willeart

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One thought on “Panama Tourism Investment Encouraged with Law 481

  1. 1

    What happens after the 20 year exemption is up?

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