Panama: Still an Easy Second Residency

Greetings from Panama City, Panama. As I write these words, I’m looking down from my hotel window to the bustling Calle Ricardo Arias, in Panama City’s business district.

Judging by the view, you could be forgiven for thinking that you were in Miami. The skyline is ultra-modern, the people walking on the sidewalk are well-dressed, and the taxi drivers are constantly honking their horns.

We’ve long maintained that a second residency is one of the easiest ways to internationalize yourself and a key Plan B strategy if conditions deteriorate in the country where you spend the most time.

And Panama is one of the easiest second residencies to get. I’ve been a Panamanian resident since 2013, and I’ve been able to keep it for a decade, even though I spend only a few days every year or two in the country. The fact that you can maintain legal residency here even if you spend most of your time somewhere else is one of the most valuable aspects of Panamanian immigration law. But if there’s a SHTF moment at home, you have the legal right to permanently relocate to Panama and spend as much time here as you want.

There’s also a lot more to like about Panama. For instance, it has first-class medical care available at a significantly lower cost than the United States. The country has an extensive network of private hospitals staffed by physicians trained in the United States, Canada, and Europe. Two of them are accredited by the prestigious Joint Commission International, which identifies, measures, and shares best practices for medical care worldwide.

While Panama’s physical infrastructure outside its major cities isn’t always up to North American standards, it’s greatly improved in recent years. For instance, the Pan American Highway, the country’s main highway, is being progressively upgraded. The country’s namesake canal, which was recently expanded in another mammoth infrastructure project, gives the government a stable funding mechanism. And Panama City’s Metro subway system, which began service in 2014, has 29 stations citywide and has significantly reduced its near-legendary traffic congestion.

Panama has used the US dollar as its circulating currency for more than a century, trading at a 1:1 rate against the country’s official currency, the balboa. In practice, the only balboas you’ll see are in your change. All paper currency and bank deposits are in dollars.

The fact that Panama is dollarized has numerous benefits, especially against a loss of value of the local currency. Another benefit is that it’s relatively easy to borrow money if you want to buy property and need a mortgage, although interest rates are higher than in the United States.

We’ll be the first to admit that Panama City’s hot, humid climate isn’t for everyone. But journey to the western highlands and you can enjoy spring-like weather year-round in popular expat havens like Boquete. What’s more, the cost of living is around 30% less than you’d typically pay in the United States.

While numerous options exist for a temporary residency permit in Panama, there are only two ways to obtain immediate permanent residency: the pensionado visa and the qualified investor visa.

  1. Pensionado (pensioner) visa. Acquiring this status requires that you demonstrate proof of pension or annuity income of $1,000 or more monthly. For each additional dependent on your application (e.g., your spouse), you must show an additional pension or annuity income of $250 per month. Married couples can pool their income to meet the $1,205 per month threshold. And if your retirement income is more than $1,000 per month but less than $1,250, you can deposit $2,000 in a local account per additional dependent. And you don’t necessarily need to be a “retiree” to be eligible for this visa; anyone 18 years or older can apply if they can satisfy the income requirements.

  2. Qualified investor visa. This option requires a real estate investment of $500,000 in Panama. Alternatively, you can invest $500,000 in stocks on the Panama stock exchange or $750,000 in a bank CD. With this visa, you can bring your spouse (opposite-sex only), and unmarried children under the age of 25 who are financially dependent on you. The investment must be held for at least five years.

Your visa choice largely depends on how much time you plan to spend in Panama. If you want to live more or less full-time in the country, the pensionado visa is probably a better choice if you qualify for it. There’s a one-time import duty exemption for up to $25,000 in imported household goods. As well, pensionados are entitled to a wide range of discounts for transportation, medical care, and entertainment. The Panamanian embassy in Washington, D.C. has the full list of benefits (and qualification requirements) at this link.

The qualified investor visa is in concept like the popular golden visa programs in Europe. But it doesn’t offer the same tax benefits or discounts as the pensionado option. For these reasons, we believe the pensionado option is best for most clients.

After five years of legal residency, you can apply for Panamanian citizenship and a passport which offers visa-free access, or access with minimal visa formalities, to 144 countries. Physical presence in the country for most of this period is required, as is proof of integration in Panama and Spanish language proficiency. One drawback is that Panama doesn’t allow dual citizenship, although this prohibition isn’t stringently enforced.

No country is perfect, and Panama also has its faults. We’re not fans of the Panamanian banking system, for instance. In our experience, they all have terrible customer service. Yet if Panama is your principal residence, you might have trouble holding a bank account anywhere else – especially in the European Union.

The reason is that busybodies in Europe’s high-tax countries don’t like the fact that Panama doesn’t tax personal income that originates outside the country. Thus, the Council of the European Union has placed Panama on a blacklist, stating that the country “has a harmful foreign-source income exemption regime and has not resolved this issue yet.”

Still, weighing the pros and cons, we believe Panama is a great choice to establish a second residency. It’s easy to qualify, especially if you have a pension, and the cost of living is relatively low, especially outside Panama City. And the people are some of the friendliest you’ll encounter, anywhere.

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