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New Law To Boost Panama's Real Estate Sector

by Leroy Baker, Tax-News.com, New York

12 November 2007


Panama's real estate sector is poised for an "unprecedented boost" as a result of a new law recently passed by the country's National Assembly giving multinational companies performing certain tasks a significant tax break, according to company specialising in investment property in Panama.

The Knightsbridge Investment Group says that the new rules, known as 'Law 41', are designed to encourage the establishment of multinational companies in Panama, and give exemption to multinationals from the payment of income tax in the Republic of Panama for all services provided to any entity domiciled outside Panama. In addition, the legislstion allows licensed corporations to hire trusted foreign employees to fill management positions in the company, authorizing them to work and reside in Panama, which could spell an influx of international professionals moving to the jurisdiction.

While years of economic and political stability, a healthy tourist industry, and the expansion of the country's greatest economic asset, the Panama Canal, have underpinned the country's real estate market, Knightsbridge Investment Group has suggested that Law 41 will give the country's real estate sector an "unprecedented boost".

HP and Caterpillar are just two of the first to announce new offices in Panama City, with Proctor and Gamble also rumored to be relocating a significant part of its Latin American business to Panama, Knightsbridge claims.

Residential sales prices have been increasing, particularly in prime locations, but Knightsbridge says that another interesting trend has been those related to Class A office space. Vacancy rates for Class A office space are already down from 30% last year to 3%, meaning that today there is virtually no available Class A space in Panama City. In addition, with Class A office space in such demand, lease rates have increased by approximately 20% over the past year, the company stated.

"Average lease rates for Class A are $16-$20 per m2 per month with total occupancy costs at $22.74 per m2 per month (below those in the region including Costa Rica, Dominican Republic, Bahamas, Uruguay, Caracas, Bogota, Mexico City, Buenos Aires, Sao Paulo, and Rio de Janeiro) giving ample space for growth and also allowing for multinationals moving to Panama" announced Alan Morrison, Vice President of Knightsbridge Investment Group, Panama City

"In addition, current sales prices are favorable, with the average sale price at $2,200 per m2. With these prices and Law 41 providing the final impetus for Multinational Corporations to relocate to Panama, the time is right for those looking to make an investment in real estate in Panama," Morrison concluded.


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