Great news for citizens of India in our April 2018 immigration update!
April 4, 2018: the National Immigration Service of Panama rescinded the Authorised Visa to enter Panama as a tourist. Executive Decree 1113 establishes Indian nationals can apply for a stamped tourist visa. The Security Council of Panama does not need to review each application for a stamped visa.
As of June 1, Indian citizens may receive a multiple entry-exit visa for Panama for up to three (3) years. They must fulfill the requirements of the Consulate and Immigration Department and pass the necessary filters. For this purpose, Panama will assign employees of the Immgiration Department and the Ministry of Security to both of the Consulates in India. These additional employees will review and approve the stamped visa applications.
As mentioned, Panama has 2 Consulates in India: one in New Delhi and another in Mumbai. The contact details for Mumbai are available here: https://www.mire.gob.pa/index.php/es/asia/india/9144-mumbai. And here are the details for New Delhi: https://www.mire.gob.pa/index.php/en/india-direccion-y-horario
The costs of the stamped visa application are: US $50.00. (Payment does not guarantee that the application will be approved).
Once in Panama, it will be possible to apply for a residency permit. You still must fulfill the necessary requirements for immigration – such as economic solvency, investment options or 2nd passport application. Check the requirements before you arrive in Panama. Make sure you have all the necessary documentation with you, or plan a second trip to Panama to apply for the residency. You may want to check it out before you decide to move here.
We also have a new form available on our website, which will help us provide you with the information you need for your investment visa application.
Back in September, 2017, Panama already rescinded for Chinese citizens the requirement for Authorised Visas. Chinese citizens may now travel to Panama merely with a stamped visa also. As of last week, Panama is receiving flights directly from China into Tocumen International Airport.
Other restricted nationalities
April 2018 immigration update: other authorised visas news
For other restricted nationalities that usually require an Authorised visa, if they have residency in Europe, they do not require an Authorised Visa. However, their Schengen Visa or residency for Europe must be valid for no less than one year from the date they arrive in Panama (i.e. the visa needs to be valid for at least another year). Countries which require an Authorised Visa for Panama are those such as Cuba, Albania, Bahrein, Jordan, etc. (See the complete list here: http://www.atp.gob.pa/requisitos-de-entrada-panama).
If you have relocated to Panama, or you are thinking of retiring to Panama, then you should consider estate planning in Panama. As an estate planner, I look at how you anticipate, during your life, to manage and dispose of your estate during and after death. We consider issues of estate tax, gift tax, and income tax for the beneficiaries, as well as the costs of the transfer of the estate to the next generation. Asking the right questions is essential to make sure the estate plan works for you.
Accumulating wealth is a great accomplishment that requires skill and determination. It also requires a uniquely developed plan for your personal circumstances or that of your business. Part of our job is to outline how our clients assets should be managed and preserved throughout their life and then distributed afterward to the people or causes they love.
During your lifetime, needs and goals will change. There will be the time for saving and investment, portfolio growth, business growth and investment, and then there are considerations of retirement. During these different stages, priorities in the estate plan may change. Family situations may change. Estate plans should be updated.
The assets and their liquidity will change during these years. For some clients, business succession will need to be considered or having a golden parachute with which to leave the company. Exit strategies need to be considered. One of the most difficult parts of estate planning is family businesses and organising an orderly succession and transfer to the next generation.
One part of estate planning may include a Last Will and Testament, for assets held in your personal name. Another option is to structure the assets in entities (corporation, trust or foundation), so that probate can be avoided and the transfer can happen quickly. The estate plan should also consider issues of a Living Will (for taking medical decisions and possible mental disability). You will want to consider issues of guardianship or conservatorship.
To be effective, you need to be open with the estate planner about all the details of your life that need to be cared for.
Wills or Intestate probate
Part of this estate planning process may include writing up a Will (Last Will & Testament). A will will cover assets held in your personal name (real estate, investment accounts, bank accounts, cars, etc.).
Types of Wills
There are a number of different types of wills that are acceptable in Panama, including these:
- Holographic will: the testator hand-writes their will on simple paper. They also date the will and sign it at the end (signing each page if it is more than one page long). This Will may, or may not, be inside a sealed envelope or not and is not normally witnessed. In order to be valid, this will must be presented for probate within five years of the death of the testator.
- Open will: A lawyer typically prepares this will, as a Public deed. It is written before a Public Notary and three witnesses. The Notary will then read the Will aloud before the witnesses, and the Testator confirms that the will fulfills their wishes. The original Will is kept at the Public Notary archives, a copy is handed to the person making the will.
- Closed will: like the above, this will is written on special stamped Notarial paper. The Testator signs each page and at the end. The notary and three witnesses simply witness that the Testator expressed that they are issuing a closed will. They do not read the contents thereof. The Notary then seals the will in an envelope with a deed that confirms this was done, signed by the Notary and three witnesses. The testator takes custody of their envelope. The contents of the document will only be known by the person who wrote the will. Once the person dies, the will is opened by the judge in charge of the probate proceedings.
- Immanent death: Known as an oral will, this is valid if the person is in risk of imminent death. In this case, the person expresses his/her last will before five witnesses, and this type of will is valid where the decedent dies within two months after so doing.
Nevertheless, in Panama the probate process (either testate or intestate) will require a lawyer (not simply an executor) and will go through the court system. Lawyers in Panama charge for the probate process based on the value of the assets in the estate. Their fees usually run between 10-40% of the value of the assets. While the fees established for the process run from ten to fifteen percent, these are the minimum fees charged. Clients often find that local lawyers are charging substantially more than this percentage for the probate process, so we attempt to use structuring to avoid the process.
Estate planning options
Nevertheless, you may prefer to structure your estates so as to avoid probate and the process above. Instead of holding property and investments in your personal name, you could own property through a corporation, Private interest foundation or a trust. These offer the benefit that assets do not have to be “transferred” to the beneficiaries by the court. They are managed and disbursed by the Board of Directors, Trustee or Foundation Council. Nonetheless, there may still be costs involved (such as real estate commissions on the sale of the house or property transfer taxes to the buyer). There are also annual costs associated with the entity (management, government fees).
We understand that your estate is more than simply your wealth or money. It is somehow a reflection of a life well lived. More than anything, it gives you the opportunities to live in retirement the way you envisioned living. You can provide for your family or contribute to charities or causes that are meaningful to you. Once you have achieved your financial goals, you want the freedom to choose how you will spend your life and make use of your resources, knowing that you have taken care of all the details.
We know that this process should be all-encompassing, and are experienced in asking the right questions to help you move through this process. We want to ensure that your estate plan is personalised to your particular goals.
Contact us for more information regarding how we can help you with your estate plan.
Law 66 (2017) was finally published on October 17, even though it had been approved by the Legislature almost a full month beforehand. This law introduces two impactful changes to property taxes, as well as giving property owners a moratorium until December 31, 2017. I will deal first with the Moratorium, and then will get into the details of the changes introduced by Law 66.
Moratorium (in effect already):
Effective immediately, Law 66 (2017) brought into effect a moratorium on penalties and interest due on property taxes. Property in Panama is taxed yearly, payable in 3 equal parts (April 30, August 31 and December 31 each year). Failure to pay on time automatically incurs in a 9% interest per annum, plus penalties. Many property owners opt to simply allow the tax and interest to accrue until they are ready to sell the properties, as the Tax Department has not been effective in collections. We are seeing this change with the modernisation and computarization of the Tax Department.
if you pay your property taxes each year (a single annual payment, rather than in 3 parts) before the end of February, you can receive a 10% discount on the total amount of tax due.
Apply for Moratorium:
This moratorium is easy to apply for (it must be applied for, it is not “automatic”) through the Tax Department’s online system: eTax2. Basically, you log into the property with it’s tax ID number and NIT (password or code) and then simply press the button that appears for (Moratorium). This will provide you with the total amount which is due, excluding the penalties and interest, so that you can proceed with the payment. This has to be done for EACH property individually through the system, it cannot be done through the owner’s tax ID. If you do not know your property’s tax ID or NIT, then you need to get this through the online system or set it up so that you have access to this before you can apply.
It is imperative that payment of the taxes be made before the end of the year if you want to take advantage of the cancelling/exemption from the penalties and interest which may be due.
This moratorium ends December 31, 2017.
Law 66 (2017) – the principal changes introduced:
The principal changes which are introduced by Law 66 are a reduction in property tax rates. Until this Law, Panama’s property tax was as high as 2.1% – which means that a property worth $500,000.00 could pay as much as $10,500.00 in property tax each year (almost $1,000.00 a month). Obviously, a $2,000,000 property would pay $42,000.00 a year. Under the new law, coming into effect on January 1, 2019, the maximum rate, even for commercial or industrial property is 1%, less than half the previous rate.
Primary Residence / Family Home
Until now, any home or property valued at least than $30,000.00 paid 0% property tax in Panama, and then above that taxes were due on a sliding scale, starting at 0.7%. This 0.7% is now the highest rate for a family home or primary residence (starting January 1, 2019). The $30,000.00 exemption is still recognised on all properties (as long as the total value of the property – land + improvements – remains under $30,000.00. However, over the $30,000.00, where the property (land and improvements) is worth less than $120,000.00 and is your family home (as defined by the Family Code) or primary residence (for a single person or others who don’t qualify as “family”), then you are entitled to the 0% property tax rate.
If your property is worth MORE than $120,000.00, then there are 2 brackets:
- over $120,000 but less than $700,000; and
- over $700,000.00
For a property (land and improvements) valued at less than $700,000.00 the applicable tax rate will be O.5%. Over $700,000.00 the applicable tax rate will be 0.7%. These, however, are sliding scales, which means that from $0.00 to $120,000.00 you apply the 0%, then from $120,000 to $700,000 you apply the 0.5% rate, and then whatever the value is over $700,000, you apply the 0.7% rate. See the following example:
It will be necessary to present documentation to the Tax Department certifying that this property is your family home or primary residence for this special tax rate to apply under Law 66 (2017). It will not be automatic and it will not be retroactive (if you forget to apply and then apply later).
Second residence, holiday homes, commercial & industrial properties
For those properties that do not qualify as a family home or primary residence, the tax rates are also reduced as of January 1, 2019. The applicable rates are the following:
- 0.0% – up to $30,000.00
- 0.6% – from $30,000.00 to $250,000.00
- 0.8% – from $250,000.00 to $500,000.00
- 1.0% – over $500,000.000
As explained for primary residences, this is sliding scale, so calculation is necessary for each range of values.
What about my Tax Exemption that I already have?
Law 66 (2017) also contemplates those cases (primarily new condos and homes) where they have an existing property exemption on the improvements (such as the 20-year exemption). In these cases, the properties are grandfathered into those exemptions until they expire. So, if you property exemption on the improvements is in place until 2025, the new tax rate will come into effect for you in 2025, rather than on January 1, 2019. The land (in the cases of such condos) will continue to pay the 1% rate that is applicable until such exemption expires.
Final notes: first home buyers & mortgage holders
Two more interesting notes:
- First home buyers: for the first 3 years will have an exemption on the property value up to $300,000.00 (not just $120,000.00) on their primary residency / family home. At the end of the 3 years, the usual rates will apply.
- Mortgage holders (banks, mortgage companies, trust companies) will be responsible for charging the home owner (as part of their monthly payments) their property taxes due and paying these in directly to the tax department on behalf of the property owner.
We originally wrote about this topic as Bill 509, before it had come into effect or was published.
While you don’t need a personal bank account in Panama to live here, it may lower transaction prices and make paying bills easier.
Reasons to set up a personal bank account
Many expats have differing views on whether or not you need to open a personal bank account. If you have an account in USD, it may make little difference in the bank charges. In other currencies, the bank charges could be high and might be reason enough to set up your account here.
Another reason for setting up a personal bank account in Panama is to apply for the friendly nations visa. One requirement is that you have a personal account with no less than a mid-four figure balance. You should deposit at least USD$5,000 in the account, then. The friendly nations visa will provide you with permanent residency, It also provides a work permit (depending on which application you make). And it allows you to eventually naturalize as a Panamanian (if having a second passport is your goal).
Paying bills online: many of the banks will allow you to pay bills online, although this is not for all utilities companies. Some still requirement payment at their office or through an approved intermediary. You can also pay your personal taxes online through some banks (such as income tax or property taxes).
Requirements: personal bank account
The requirements vary slightly from bank to bank. Nonetheless, the general requirements are the same:
- Complete the bank account application forms, all of them
- Your passport (the bank will make its own copy)
- 2nd ID – such as driver’s license
- Professional reference letter – such as from a lawyer / accountant / company you have done work with
- Banking reference – they are looking for proof of a banking relationship of more than 2-3 years
- If you don’t have a “bank account” but have a credit union account, this will usually work
- They may accept an investment account letter instead of a “bank”
- Minimum opening deposit: $1,000.00 (some banks do require less)
- Minimum balance:
- checking: usually somewhere between $250.00 to $1,000.00
- savings: usually somewhere between $500.00 to $1,000.00
The forms ask for proof of source of funds: the bank is interested in knowing how you support yourself financially and where they should expect to receive income from.
If you are applying for your friendly nations visa through our office, we would be happy to accompany you to the bank for your initial interview.
Choosing a bank:
Consider the following when choosing where to apply for your personal bank account:
- Where you live and branches that you have close by
- Online banking – which ones have their website in English
- What online banking services do they offer?
- Do you / your friend / the company you work for already have a relationship with the bank?
- Expat opinions regarding customer service – you will be able to find complaints against every bank, but some are worse than others
- What is their online security platform? Will you need a widget in order to pay bills and make transfers?
- Number of ATM machines available in your area of town if you like to get cash out
For more information, do not hesitate to contact our office for assistance.
Property Taxes: Types
When you are thinking about retiring, the last thing you want to deal with are the details. But the devil is in the details, and one of the details you need to clearly understand is property taxes in Panama. There are a number of property taxes in Panama, but the principal ones that you need to be aware of are:
- Annual property tax
- land tax
- improvements tax – or tax exemptions
- Transfer Tax (2%)
- Capital Gains Tax
Annual Property Taxes – Land Tax & Improvements
Whether you own an apartment or a house, you need to know what taxes are going to be charged by the Panamanian DGI (Dirección General de Ingresos) each year. We recommend that before you buy, you ask the sellers for the tax statements so that you can see the history of what they have paid each year. You should also ask what is tax exempt and when the tax exemption runs out. As I said above, the annual property tax has two parts:
- land tax
- improvements tax or tax exemption
The land tax
There is a difference between owning a condo and owning a house. The property taxes are the following:
- Condominium: you will pay 1% of your proportional value of the land under the building. Say the land is worth $1,000,000 and there are 84 apartments in the building: you are responsible for $11,904.76 in land value. Your 1% per annum is: $119.05. Whatever the value of your assigned piece of the land, your tax rate will always be 1%.
- House – land taxes: This is a little more complicated! The first $30,000.00 in value is exempt from taxes. Then the following rates apply:
- 1.75% = $30,000 < and up to $50,000.00
- 1,95% = $50,000 < and up to $75,000.00
- 2.1% anything over $75,000.00
- So, if the land value of your property is $85,000.00 you will pay: $0.00 on the value between $0.00 to $30,000.00; 1.75% on $20,000.00; 1.95% on $25,000 and 2.1% on $10,000.00. Which is about $1,050.00 per annum in property taxes.
What you need to look out for is cases, which I have seen, where the previous owner, in order to get a reduction in 2005 or so on their capital gains tax, did a property appraisal and pushed the value of the land up over $250,000.00, and at these rates, the property taxes each year are about $4,500.00! This means that you will pay in April, August & December about $1,500.00 in property taxes.
Improvements Tax or Tax Exemptions
The other part of the equation in calculating your property taxes is the tax on the improvements. There are many properties that have a 20-year tax exemption on the improvements, and so for now you only have to pay the land taxes. But the questions to consider are:
- Are the improvements exempt?
- If so, when the tax exemption expire?
- What is the tax rate after the exemption expires?
So, if you purchased an apartment in a building that was built in 1996, the 20-year tax exemption would already have ended and you would need to pay property taxes on the land and the apartment itself. That is why you find so many people prefer the new buildings, even though the older buildings are much more spacious and possibly better construction (depending on the building and the year of construction).
Sale of a Property: taxes due
When you go to sell a property, there are 2 taxes which need to be paid:
- Land transfer tax
- Capital Gainst tax
Land Transfer Tax:
The land transfer tax is based on 2% of the higher of the two values:
- the tax basis value in the DGI system
- the sale price value
The Tax Department always wins – they will collect on the higher value!
Capital Gains Tax:
The 2nd tax payable at the time of the sale is the Capital Gains Tax: 10% of the value of the gain.
BUT… and as everyone says, when you see the word “but” just ignore everything you heard before the word: the tax department requires you to prepay an estimated 3% tax on the value of the sale to cover your capital gains tax.
- Your purchase price: $270,000.00
- Your sale price: $320,000.00
- Your gain: $50,000.00
- 10% of the gain: $5,000.00
- 3% value of the sale: $9,600.00
At the time of the sale, you will pay the tax department $9,600.00 in Capital Gains Tax. As you look at this, you might think “that’s unfair!”, but your only option is to ensure that your lawyer does the paperwork right and requests a refund of the overpayment of the capital gains tax! This process is some 3-4 years long – and some clients simply walk away. The Tax Department pockets the difference.
On the other hand, if you made a large gain, there is a box that you can tick, stating that this is your “final return” on the transaction, and that is the complete amount of capital gains tax that you owe. You should review these numbers carefully with your realtor or the lawyer that is handling the closing for you.
For more information regarding your property purchase or sale in Panama, please contact Joan Villanueva in our office.
Other Property Tax issues:
There are more issues to consider regarding property taxes, such as filing your Declaration of Improvements (if you just finished building a house on a lot), presenting a request for a tax exemption (if the builder did not request the exemption from the tax department), and other similar issues, but we will deal with them in another article.
Panama Maid: a guide & FAQ
So, I have a maid / nanny / housekeeper (yes all-in-one) and I’ve been living back in Panama for a little over 20 years now. I get lots of questions about do’s and don’ts: since most of our maids, nannies and housekeepers are not from Panama. They are from Nicaragua, Colombia, Jamaica, Dominican Republic and some even from Venezuela. Some of the things that I am going to mention will not apply to your Panama maid, although most of them will. I have tried to organize this as a guide from the start of the relationship to ending it. I hope that works for you! Throughout, I have used the term “maid” to cover nanny/ housekeeper / cleaning lady, since it’s the shortest word.
And one more thing – I’m telling you the legally compliant way. Do as I say, not as
I do (well, your Panamanian neighbor does)! They mean well, but they won’t get caught.
hiring process – live-in versus travelling – referrals & agencies – contracts – social security – immigration status – labor law – trial period – remuneration – working hours – holidays – décimo – healthcare – maternity – termination – firing
The process for finding a maid in Panama can be daunting, especially if you have young children and will be leaving them to be cared for. With older children, at least you know they can talk to you and tell you what is going on: but with young ones it is somewhat scary.
The first step is to work out “what do I need?”. Take into account what your kids’ needs are (if applicable), what you want the maid to take care of, and your working hours:
- Do you want her to cook? Oh, and when you ask if she can cook – make sure you ask what kind of cooking she does? You may not want just rice and beans!
- Will she clean?
- Does she need to do the heavy cleaning, like spring cleaning? Windows?
- Is child care involved?
- What time does your child need to be ready for school or the bus?
- Are you able to get home from work at the same time every day?
- What about your social life? Do you need a baby-sitter on weeknights?
- Working late?
- Does she iron? If she does, what are her conditions? Some maids iron as part of the job, some charge “per shirt” or a weekly additional amount for ironing.
- Does she understand the symbols on the clothes tags, for washing the clothes? (Yes – because if she doesn’t, you need to teach her!)
- Will she walk the dog?
- Do you have a cat or dog? I had a maid that was allergic to cats – she was awesome, but we had to part ways. Lesson learned: always ask about allergies!
What to look for:
My experiences have varied over the years: my cleaning lady has been with me almost 20 years. She is not awesome at cleaning, but she is reliable and trustworthy. That is priceless. When I got more staff for my home, she only stayed cleaning my office: but she has keys to the place.
I had a fabulous housekeeper for years that was more of a PA than a housekeeper, but then her husband fell ill. I lost my wife that day! I loved having a wife! She took care of the dry-cleaning (dropping it off and picking it up), she organised painters, plumbers, air-conditioning maintenance. she watched the cooking channel and then bought groceries according to what she was going to try cooking. Irreplaceable! Of course, I didn’t know I had a wife until I no longer had her as my housekeeper. I now know: I need a wife, not a housekeeper!
Live-in versus Travelling
A Panamanian maid will probably not want to live in, as her family is “close” and she wants to live with them. But remember the traffic and commute times when you consider live-in versus someone travelling. For them to arrive at 7.00 a.m. each morning, what time will they have to leave home? What time will they leave to get home every afternoon or evening?
It is easier to get a young foreign girl (by young I mean 22 – 29) to live in, but this also has possible setbacks. My experience with younger maids has been great at the beginning (1-2 years), but then they get a boyfriend and want to settle down. Then they no longer want to live-in. And I need a live-in at this moment of my life. When I was single, and even when I was married without a child, having a maid that arrived in the morning and then left mid-afternoon was fine (say 7 am to 3 pm).
With a child, all of that changes. I am a working mom. Sometimes I work till 7.00, or other times I get home early and I take my work home with me: I am there, but I’m not “there”. I am studying part time. I volunteer many hours at Church and some fundraisers for charities. So now I have a 40-something year old live-in maid. She doesn’t run as fast as a younger girl (and so if little miss almost-4 takes off running, I have to run!). On the other hand, she cooks well, she is happy to live in, and she is loving and sweet. Okay, I admit it! She coddles my little girl!
The Práctica: Professional Services or Employee?
Many consider that the práctica (the new-born nurse that you might get for your first month, 3 months or 6 months) is professional services, rather than an employee. As professional services, she is not entitled to receive: holiday pay, décimo, or liquidation at the end of the period that she was hired for. As an employee for a contract for a specified period of time, she is entitled to all those things. Personally, I view the práctica as an employee on a short-term contract. I know that many disagree with me on this, as it increases the cost (by about 40% if you did social security, etc.). If she has her own Social Security and she is paying in as an “independiente” that changes the picture – and I would agree that she is professional services. But the 2-pronged rule in employment law is:
- is she economically dependent? Yes – she is only working for you those months
- is she subject to your instructions and telling her how you want the job done? I believe so – I doubt she’s looking after your newborn without you “supervising” how you want it done. It may be true that she knows more than you and is providing you with an education while she is at it, but I view the fact that she has to work X hours and be at your home and do it “your way” as meaning that you are in charge, rather than her.
The cleaning lady:
There was a time I just had someone come in twice a week for cleaning! She wasn’t considered to be an “employee”, but rather providing professional services. You will pay a little more for this, but then most of the things that I mention in the article – you can ignore! If she’s working 2 days a week, she is not an employee. The fine line is whether she works 3 days a week: if you provide at least half of her income, she is considered to be economically dependent upon you! Is she working 4 days a week for someone else? If she loses that job, then you are her primary source of income and she has “economic dependence”.
Referrals & Agencies:
My first choice is always referrals: from a friend, a family member of another maid that I know, or from other mothers. All of my maids have come referred from a friend or their maid. But there are other sources: Facebook groups – I like Panama Mamas. Expats in Panama is another one, but it caters to more general questions. There are also placement agencies, such as Agencia domestica Panama and Maids & Nannies.
Once you have identified your needs and the right person, it’s time to discuss contracts for your Panama maid. Even if she’s not Panamanian, still write a contract! If you don’t have a written contract: you have a verbal contract. Panama Labor Law does not leave a vacuum – there was a contract, it was not in writing. And the worst part is: the employee’s word has more weight than the employers! What was agreed? How was it agreed? Put it in writing. And yes, it should be in Spanish. And yes, ideally, prepared or reviewed by someone (a lawyer or labor law expert) that actually knows labor contracts. I know – your neighbor has a model contract! You can probably also ask for one at the Ministerio de Trabajo.
Basic contract requirements:
The very basic requirements of the contract are:
- Parties: name, nationality, age, male/female, civil status, domicile and cédula or passport number
- Worker’s dependents: name of those that live and depend on the worker
- Type of service offered
- Place where the worker is to show up for work
- Length of the contract: definite (period of time) or indefinite
- Working hours and the type of “shifts” – if applicable
- Salary – how it will be paid, on what date and where it will be paid
- Place and date of signing the contract
- Signatures of the parties
Register your contract with the Ministry of Labor.
As well as the contract, consider registering her at Social Security. For that, you (the employer) must register. You can do this without a lawyer, but you might want a translator or a good taxi driver for this. I had a great guy for this until about 3 years ago, when he passed away unexpectedly. I’ve never actually found someone to replace him. He was awesome – knew where all the government offices were, had a basic idea of the forms, and could take you through it without it costing you an arm and a leg! But, you could always ask your lawyer or law firm to help you with this. Which branch to go to? The one that is easiest for you to get to in rush hour when you forgot the paperwork was due “today” – there’s going to be a day that happens!
The benefit of registering your Panama maid at CSS (Caja de Seguro Social) is that you get rid of a couple of risks:
- healthcare – you are no longer responsible for her healthcare – she can go to CSS;
- pregnant? You are not responsible for her maternity leave, check ups or if it’s a high-risk pregnancy;
- if she has an accident at work – CSS covers it completely (the medical and the time she’s off work after the first 18 days. You cover the first 18 days of sick leave in a year.)
And as an added benefit: she will (if it is still around when she reaches retirement age) get a pension. Even if your maid is an illegal immigrant, and they do not have their work permit, it is still possible to register them at Social Security and put them into that system.
On the down-side: you have to go in and register yourself and you have to register your maid. You have to calculate and pay the SS deductions each month – employer and employee contributions, which you withhold from the salary and you pay in (there is contribution from you and one from her), and each month you have to make the payment, complete the online forms in the system, and present. You also have to pick up her “paz y salvo” each month from CSS (so pick the most convenient office to where you live and/or work). It’s not the most user-friendly system I have encountered – and I admit I have my office book-keeper take care of it for me, because I didn’t want to invest my time working it out!
The system is called SIPE: http://www.css.gob.pa/sipe/. This is where you sign up as an employer: http://www.css.gob.pa/sipe/afiliacion.html – and, of course, it’s ALL in Spanish! And this is where you advise that you have a new employee starting: http://www.css.gob.pa/sipe/avisodeentrada.html. They have a whole section on “e-learning” – not me! I gave this to my book-keeper and told her to let me know what personal details she needed from me!
If you didn’t hire a Panama maid, what is the legal status of your maid? If she already has a visa, what kind of visa does she have? The two most common visas you will find are:
- doméstica (the actual visa for maids)
- Crisol de Razas
Unfortunately, the Crisol de Razas program appears to no longer be available, unless they got in before the 31st of May 2017 with this first application. If they are already in the system, they will be allowed to continue, but the Immigration Office is not accepting any new applications for those not already registered. Some people with Crizol de Razas were able to get a 10-year visa under the program, upon renewal. That is no longer available to new applicants, but you may still find someone that has that status. Most people have a 2-year visa, but they are able to renew.
Visa de Doméstica:
If they need to apply for the doméstica visa, then YOU the employer, will need to provide some documents to the immigration department. The maid will need to complete the form from the Panama Tramita site. The basic requirements of this visa are published in Gaceta 26104.
- This visa requires a $500.00 bond, plus a $250.00 fee to the Immigration Department.
- The return ticket to their home country must be presented.
- A utility bill for your home must be included.
- The employer must provide their paz y salvo, which is certificate of Good Standing from the DGI (Dirección General de Ingresos) – Tax Department – showing that you are in good standing.
- Proof that you have already registered with the CSS (Social Security).
- An employment letter from you to her, offering her the employment.
This visa is only valid for 2 years; then she must renew it. She needs a lawyer for this visa.
Once you have your Panama maid, then these basic “rules” apply as to what you can and cannot expect.
The Labor Code applies to all maids, irrespective of their legal status (illegally in the country or not). Even if they are an illegal immigrant, they can go to the Ministry of Labor to report you. So, comply with minimum wage, holiday pay, décimo pay, and the payment of public holidays, etc. That said, a special section of the Labor Code is dedicated specifically to “domésticas”. The important section is Article 231.
The Code considers that the first two weeks are a trial period. This differs from normal labour contracts, which consider that there is a 3-month trial period. If you terminate after this first 2-week trial period (and it’s not a justified termination), you will give 30-days notice (or pay out the 30-day notice).
I typically spend the first week at home with her, and then the second week I show up at any time unexpectedly during the day to check on her. And I still do that months and years later!
Minimum salary for a maid in Panama City is $250.00/month. Good luck finding anyone willing to work for that! The typical monthly salaries that I hear are above $375.00, and go as high as $700.00/month. You will probably get what you pay for (but choose well).
The Labor Code explicitly states that “unless otherwise agreed” it is presumed that the remuneration package includes (in addition to the payment of money): food and board. The food must be healthy, abundant and nutritious; the room must be comfortable and hygienic.
I know some people that offer their maids: $XXX in salary plus $20.00/week for food (the maid then buys what she wants). Others buy the food that the maid will eat, but it is not what the family eats. I have always had the custom that the maid eats what she cooks for us (because she will sit and eat with my daughter if I am not home), unless she really wants “something from home”, in which case she may cook something separate for herself. I usually ask what types of coffee, bread, beans and rice she likes, and buy those for her (because they usually are different from what I like).
Loans or Advances:
Panama’s Labor Law prohibits that you deduct any money loaned to an employee from their liquidation pay. So, if you are going to loan them money: how and when are you going to get repaid?
- One option: don’t loan them money.
- Second option: don’t loan them money, but give them an advance on their next month’s salary (and document that this is an advance). Or advance them their décimo.
- Or ask them to come and work extra for you on the weekends and spring-clean your house.
According to the Labor Code, the Panama maid receives a “rest period” from 9.00 p.m. to 6.00 a.m. I realise, if you have a newborn, everyone in the house may wake up with the baby and colic! But you should not require her to serve and cater a party till 2.00 a.m., and then be up at 6.00 to get breakfast on the table for the kids.
She also receives her “weekly break” and “annual holidays” which are to be paid. She is entitled to paid day-off on public holidays or national days of mourning (such as when an ex-President dies). Nevertheless, you can ask her to work this public holiday, as long as you pay a surcharge of 100% on a normal day’s pay.
Every week she is entitled to one day off – “rest day” or “weekly break”. The law describes this as “descanso semanal“. Usually, this would be Sunday, but you could agree with her any day of the week off. It is supposed to be the same day each week. Customarily, however, they get a day and a half off each week: leaving Saturday afternoon (1pm, 3pm, 4pm – whatever you have agreed upon), and returning Monday morning (7am). I had one maid that never seemed to make it at 7am Monday morning, and so I changed her day off, so that she left on Friday afternoon and came back Sunday morning. Problem solved! It no longer mattered if she was an hour late.
In Panama, you should consider the public holidays. Here is an example of the 2017 public holidays: http://www.cuandoenelmundo.com/calendario/panama/2017. Those dates marked in red are actual public holidays. those in blue are days that people usually don’t work (banking holidays or employees work the hours beforehand in order to take them off). A Panama maid is going to expect to have off the days in red, or be paid overtime (extra 100%) for that day.
Additionally, your maid is entitled to one month’s holiday per year. This is one month to go home to her family (probably in the interior or possibly overseas). You may choose to break this up into two 2-week holidays: giving her time off after the first 5.5 months, and then another 2-week holiday at the end of her work year. Note: It doesn’t have to be exactly at the end of the year. It could be at 11 months, 12 months or 13 months. But she has to get it!
We’re going away on holiday:
What if you go away on holiday? Then what? You have a couple of choices:
- take her with you
- leave her at home to look after the dog
- send her on holiday
If you choose option #2, you still have to pay her the complete salary she is due, as if she was doing everything (unless you can reach an agreement of some sort with her that she will do some side jobs while you are away for a friend of yours, and they will pay her). But the reality is, she’s still your employee while you are away on holiday.
Décimo (décimotercer mes):
This is a particularity of Panamanian and Central American law that I struggled for a long time to understand and get my head around. Basically: you pay employees a monthly wage, which covers 12 months. But if you look at the year as weeks, and periods of 4 weeks, there are 13 months in the year. And so the
crazy (sorry, I meant to say difficult to understand) system here in Panama is that throughout the year (April 15, August 15 & December 15) you pay that “missing” month in 3 quotas. Often, the April 15 payment is made earlier in the year (after Carnavales, before the start of the school year). You are not required to pay this early, but in my office we do, because of the many employees with children starting school.
It is your responsibility to sign up and sign your Panama maid up for Social Security coverage. This will cover her healthcare needs. If you don’t sign her up for CSS, then you are responsible for her healthcare, and if she has an accident at work, you are responsible for the hospital bills and well as paying her throughout the recovery time!
You are not required to provide her with private health insurance, dental coverage (also provided at CSS) or private healthcare.
Her mobile phone:
Oh, this one is difficult: ask any office manager! I connected my maid’s phone to my house wifi (setting up a Guest user), so that I can control my bandwidth usage. She listens to music all morning while cleaning. I have asked her NOT to use the headset when my daughter is home, as I want her paying attention to my daughter, not on the phone. And with this maid, I have not had any problems. But I have had problems in the past with maids and their mobile phones! Sometimes, there is nothing to do, but let them go – some things just will not be corrected!
One protection offered by Panama’s Labor Code is the “fuero de maternidad“: Articles 105-116 of the Labor Code. This means that for the entire 9 months of the pregnancy and for 1 year after giving birth, you can only terminate the relationship through a justified firing (with cause), and it has to be approved by the Ministry of Labor. Buy her contraceptives! You can’t force her to take them, but you can make them available to her.
There are a number of scenarios that can result in termination: resignation, firing (justified) or simply unjustified termination.
If she resigns, she is still entitled to:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
Firing (with cause)
If you fire her, with cause (i.e. you caught her red-handed stealing or one of the causes indicated in Article 213, then you are required to give her only the 4 payments indicated above:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
You do not need to pay any notice or indemnification.
Termination (without cause)
If you don’t have documented (and well documented – written amonestations), then the best way to terminate the relationship is just to pay your Panama maid her dues, and let her go!
You will have to pay:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
- 30 days notice
- the indemnity identified in Article 231, subsection 4 of the Labor Code.
Other causes of termination:
The Labor Code also provides another ground for termination, in article 231 that is NOT available for normal workers: sickness for more than 4 weeks which makes them unable to go to work. You are only required to pay the 1 month of incapacity (sick leave), and then the indemnity mentioned in subsection 7 of Article 231.
My favorite form of termination is “Mutuo Acuerdo” – a written agreement between the parties to terminate the employment relationship. This gets rid of any “he said – she said” arguments or whether or not it is justified or not. Even with this agreement, you still have to pay the first 4 items listed above:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
But, depending on why you are letting the person go, you can then decide what you are going to offer regarding the 30-day notice and indemnification for termination.
In the case of any doubt, ask for a lawyer.
Common Relocation Questions: Panama
We often hear relocation questions from clients who are moving to Panama for the first time and getting settled in to their new homes. I share a couple of them here to help you get an idea of what is easy and what is hard when you are relocating.
Bank account – Driver’s License – Utilities
Relocation Questions: Opening a bank account
I went to a local Panamanian Bank the other day, having just arrived in Panama. They would not allow me to open anything because I didn’t have a banking reference letter or a letter from an employer here in Panama. Can I open a bank account without a banking reference?
Panamanian banks, even before the Panama Papers, made it difficult for foreigners to open bank accounts here. Ideally, you want to be introduced to the bank by someone (your lawyer, your employer, a business associate). If you are applying for residency, let the bank know: this will make it easier to open the account. If you already have residency, make sure you take your immigration card or cédula with you.
Know Your Client: KYC
Banks here are required to complete their “Know Your Client” procedures, and all banks have a compliance officer that reviews and approves accounts. This is not the customer service representative that you meet. You will not meet the compliance person (that would hinder the purpose of having compliance). So, you need to have all the papers that they need to tick the boxes. Those papers include:
- Your passport
- 2nd ID of some kind
- Utility bill – that shows you have a place in Panama
- Professional reference – preferrably two – from lawyers, accountants, insurance brokers, realtors. No more than 3 months old.
- Banking references – no more than 3 months old; a relationship longer than 2 years (ideally)
And then you need patience: sit down and complete all the bank forms. Follow up on the account opening. Patience.
Can you open an account without a banking reference? Yes, if
- You are 18 years old or just recently became an adult
- Your employer refers you to the bank to open your payroll account
- A business associate or family member introduces you to the bank as a first time account holder. This one will only work in a couple of banks and in limited cases.
Relocation Questions: Driver’s License
I heard that my driver’s license is only valid for 90 days after I arrive in Panama, but my tourist visa is valid for 180 days? What can I do?
That is right: your foreign driver’s license is only valid for 90 days, but your tourist visa for 180 days. If you are living here on the tourist visa, and driving, then you either leave every 90 days or apply for residency. Panama does not offer a driver’s license to non-residents.
I am applying for my residency and would like to get my Panamanian driver’s license, what do I need to do?
Once you have your residency approved, you may apply for your driver’s license. You will need to have your foreign license (copy) certified by your Consulate. The Panamanian Ministry of Foreign Affairs then needs to stamp this copy, to make it valid for use here in Panama. The documents you need to take to Sertracen are:
- Your driver’s license + photocopy
- The copy stamped by the Consulate and Foreign Affairs
- Immigration Card – original + copy
- Passport – original + copy
- Blood test – blood type – laboratory approved by ATTT (if this is already printed on your driver’s license, not required)
- Do sight and hearing tests at Sertracen (wear your glasses and/or hearing aids, if applicable)
- Pay $40.00 at Sertracen – includes sight and hearing test
Be in good standing with ATTT – i.e. not have any tickets.
Another one of the relocation questions that we get is regarding utilities:
How hard is it to get your home connected to utilities: water, electricity, phone & internet?
This depends on where you are going to live in Panama:
Most water in Panama is provided by IDAAN, the national water institute. This applies to most small towns and urban areas. However, you need to check with people who live in the area how often the water gets cut off. You might want to buy a water tank to have a back-up system for your home. It is quite common in the rural areas, during the dry season, to only have water a couple of hours each day. Water is rationed, and you will want to have your personal tank for water storage.
In some remote areas, you will need to have your own well and filter system.
Most of the country of Panama is on an electrical grid and has electricity available, without having to go to solar power or diesel generators. However, I know of a couple of areas (Bocas del Toro, for example) that do not have electricity and where hotels or hostals rely on their own generators or solor power systems for their electricity.
You definitely need UPS batteries on all electronic equipment in Panama becuase of the electricity spikes. While theoretically the electric company is meant to replace electronics that get blown because of these spikes, the reality is that we don’t see this happening. Get prevention!
Phone & Internet:
There is phone and internet coverage in most of the country, although quality may be dodgy. I had clients in Bocas that struggled with phone coverage, because a hill blocked the cellphone tower. I have also been in parts of Chiriqui where you need to walk to the top of “that” hill in order to be able to make a phone call. But both of these locations where quite “off the grid”. You have a choice in Panama of Cable & Wireless (MasMóvil), Claro, Movistar and Digicel. Depending on which part of Panama (country) you are in, one provider may have better coverage than another.
For internet connection, there is limited fiber optics in some parts of Panama City. If you require high speed internet, you definitely want to check out availability. Speak with other expats regarding their experiences before deciding on a location. But if you are only looking for internet for personal use or limited office use, coverage is reliable in most areas. Please note: when there is a thunder storm we often have to restart our modem.
If you live in Panama City, and you are moving into an apartment, it should already have water connected. If it is a rental, it may already have the electricity connected, you need to check with the realtor. In Panama City you have numerous options for internet and phone, but you should check regarding the quality in your area. As I mentioned above, in some parts of Panama City, you will have fiber optics available.
Coronado & Beaches:
In Coronado, most of the apartment buildings have emergency water tanks, but you should check before you rent or buy. The electricity in Coronado has a wide coverage, but you may want a generator if you want 24-hour air-conditioning.
Pedasi & Las Tablas
You will want to make sure you have water storage tanks, as this area of Panama is known as the “dry belt”. There is water, but it will get rationed in the dry season. Internet: I am not sure of the quality, so you should ask expats that live in the area.
Boquete has a great supply of water, so this never seems to be a problem. You may suffer power outages due to rain storms, so if having electricity 24-hours a day is important to you, you will want to have a backup system. You should ask neighbours which internet provider is the best.
Please contact Joan Villanueva for more information regarding relocating to Panama.