The country is renowned for its light tax burden. If you qualify for Panama's pensionado program (a "retiree" may be as young as 18 years of age), you are entitled to a one-time exemption of duties on the importation of household goods (up to $10,000), and an exemption every two years of duties on the importation or local purchase of a car.

If you buy or build a new house, you won't pay property taxes for up to 20 years, nor will you pay taxes on foreign-earned income. In 1994, Panama passed Law No. 8--the most modern and comprehensive law for the promotion of tourism investment in Latin America and the Caribbean. Since the law was enacted, dozens of the world's largest hotel chains have swept in to take advantage, including Marriott, Radisson, Holiday Inn, Sheraton, and Intercontinental.

But Panama's attractive tourism investment laws are not just for big business. With a minimum investment of $50,000 anywhere in Panama's interior, you can benefit from:

• A 20-year exemption of any import taxes due on materials, furniture, equipment, and vehicles
• A 20-year exemption on real estate taxes for all assets of the enterprise
• Exemption from any tax levied for the use of airports and piers
• Accelerated depreciation for real estate assets of 10% per year.

The investment amount does not include the price of the land. And for projects in the metropolitan area, the minimum investment requirement is $300,000.

Income Tax

Personal income tax in Panama is based on a sliding scale, ranging from a minimum of 7% after the first $9,000 to a maximum rate of 27%. For temporary residents, the tax is only applied to Panamanian-sourced income.

Transfer Tax

Real estate transfer taxes in Panama are paid by the seller, and are 2% of either the updated registered value of the property or the sale price--whichever is higher. The updated value is the registered value, plus 5% per annum of ownership. If the property is bought by a corporation, it is customary for the shares of the company to be sold (instead of the property), thus eliminating the need to pay transfer tax.

Inheritance Tax

Inheritance taxes in Panama have been completely abolished. Despite this, taxes on gifts (inter vivos) of properties located in Panama are in effect, and the rate depends on the degree of relationship between the donor and the donee. This does not apply to property owned anywhere outside Panama.

Rental Income Tax

If you receive rental return on your property, you will be liable for income tax up to a maximum of 27% (on returns greater than $250,000). However, if you invest in one of the special "tourism zones," you may be exempt from income tax for 15 years.

Property Tax

Properties with a registered value of $30,000 or lower do not pay property tax. For properties of a higher value, they pay as follows: 1.75% from $30,000 to $50,000; 1.95% from $50,000 to $75,000; and 2.1% over any property value above $75,000. If you buy or build a residential property in Panama, you may be exempt from property tax for up to 20 years if the construction permit is issued by Sept. 1, 2006, and the occupancy permit issued and improvements registered by Sept. 1, 2007. On houses or apartments where the construction permit is issued after Sept. 1, 2006, the following exemptions will apply:

• Value up to $100,000: 15-year exemption
• Value from $100,000 to $250,000: 10-year exemption
• Value over $250,000: 5-year exemption.

The exemption is transferable during the exemption period to any new buyer. The land itself is not exempted, and would continue to incur property tax if its value is above $30,000.

Capital Gains Tax

Capital gains should be included in the annual tax return, and are taxed at whatever level the individual is being assessed for income tax. Unless you have owned the property for a minimum of two years and are not in the business of selling and buying property, you may choose to pay a flat 10% of the gross profit