Inheritance tax and inheritance law in Panama

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The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Panama: what restrictions there are and whether making a will is advisable.


Inheritance is not taxed in Panam√°. The inheritance taxes (impuesto sobre donaciones) were abolished as of 26 December 2002.


What inheritance laws apply in Panama ?

Inheritance is governed by the main residence of the deceased.

The principal law which applies to inheritance issues in Panama is the Civil Code, Third Book, Titles I to V, articles 628 to 938. This applies to everyone who owns property in Panama, both nationals and foreigners, regardless of the religion, nationality, or place of residence of the deceased.

According to the Civil Code, the law that applies to inheritance issues is that of the main and permanent residence of the deceased, i.e., where a person lives, has his permanent business/work place, and where his family lives. The place of residence does not change, unless the person declares the change before a public authority.

Civil courts deal with inheritance issues. Depending on the amount of the estate, it may be cognized by a municipal civil court (up to US$4,999), or by a circuit civil court (from US$5,000). Inheritance cases typically take from 8 to 12 months, with no extra time required for a non-resident foreigner´s property.

No reserved portion in Panama

In Panama, there is no reserved portion. The testator can freely leave all his property in his will, as he chooses.

In the absence of a will, the distribution of the estate is established by law. The surviving spouse inherits the same proportion as the children of the deceased. In the absence of children, the surviving spouse inherits the same proportion as the parents of the deceased.

It is advisable to male a local will

It is normal in Panama to formally make a will, but recently, more and more people have been using private interest foundations to protect their assets, and to make sure inheritors receive them after the founder´s death.

Private interest foundations are constituted for the protection of assets. They have no shareholders, and the founder does not acquire such rights in connection with the assets. The goods of the foundation cannot be seized, confiscated or subject to any action or preventive measures; they are not subject to taxes, contributions, rates, burdens, or tributes of any kind, except for the payment of the annual tax fee. If the applicable law in the founder´s domicile does not oppose the foundation, then the foundation or any of the acts made by the founder cannot be revoked.

It is advisable for a foreigner who owns property in Panama to make a local will to lower the cost, since inheritance proceedings are dealt with in Panama and documents must be submitted.

If a will is made abroad, it must be authenticated, legalized and translated for filing in Panama, thus increasing the cost.

Property may be gifted during the lifetime of the owner

Property in Panama can be freely given by the owner to anyone prior to his/her death, but property mortgaged in favour of a bank or entity cannot be gifted.

Under the Family Code, such a gift is open to challenge after death, by the spouse only, to recover assets given by his spouse to a third party. Such action is time barred in four years. The way to avoid such a challenge is to obtain authorization from the spouse when giving the property, so that the gift is not challenged later.

The courts look to the title deed to determine ownership

Ownership of real property under Panamanian law is based on the title deed. Courts look at the title deed and either the will, or the legal rules of inheritance, to distribute real property. Determining the pre-death ownership of property between spouses is therefore not an issue.

If real property, or part of it, goes on death to a child or children under legal age, or to others not legally adult, a guardian may be appointed in the will. The Family Code establishes parental rights under which parents are the primary guardians of their child; however any other person may be appointed as guardians in the will.