Tourism Authority & the war on shortterm rentals

Prohibited Shortterm rentals:

Panama City Airbnb Listing

Since November 2012, it is illegal in Panama City to rent out your home or apartment for less than 45 days. Law 80 (2012) applied fines to those offering short-term rentals in the City district. The Tourism Authority enforces this law strictly. These fines range from 5,000 to $50,000.000. This prohibition  includes advertising the property online : for example: an Airbnb listing,, or  Note, this only applies to the District of Panama.

HOA & Condomium Association rules:

Outside of the Panama City district, it is legal to offer the short-term rentals, such as an Airbnb listing. But, HOA or Condomium Association rules for buildings and housing subdivisions regulate what is permitted by their owners (which may restrict use of this nature). So, even for properties outside of Panama City, HOA rules may prohibit using the property for short term rentals. In these cases, the HOA association is responsible for enforcement, rather than the Tourism Authority.

So, in some cases, it may be beneficial to register your property as a tourism activity, such as a B&B, in order to avoid problems with your neighbours or the tourism authority.  Of course, that will depend on the size of your property/home and whether you can comply with the requirements for registration. So, if you have a home in the provinces (rather than in Panama City), you might be able to register with the tourism authority as a B&B, and then get your Airbnb listing to assist in getting it filled, if you intend to run it as a business, rather than occasional lodging when you are not using your holiday home.  Not all homes will be eligible, as the tourism authority requires a minimum of 3 rooms which must be separate from the rooms that the family uses habitually.

Registration with Tourism Authority:

For some properties, benefits exist for registration with the Tourism Authority of Panama under Law 80 (2012). However, the deadline to completed registration outside of the District of Panama is December 31, 2020.  Tourism is a priority, in the national interest. “Tourism” includes agrotourism, ecotourism, rafting and adventure sports and other tourism activities.


Outside of the District of Panama City:

New Hotels and buildings:

To this end, the national tourism registry offers tax incentives for building new tourism establishments. These incentives apply to:

  1. import duties on construction materials & furniture and fixtures;
  2. property taxes on the land and improvements built for 15 years;
  3. duties for docks and airports built by the tourism company (which may be used by the State at any time without cost), for 15 years;
  4. income tax on interest on loans (available to the creditors who loan money for construction);
  5. income tax from the lodging business (hotel, motel, b&b, hostal, etc.) for first 15 years;
  6. capital tax for 5 years (this is a tax in the annual tax return of companies on paid in capital);
  7. loans made to the tourism business. These loans are exempted from the withholding of Law 4 (1994), and are not considered personal or commercial loans.

Existing tourism businesses:

For existing tourism businesses, with up to 50 rooms, who are not registered and receiving tax breaks, registration with the Tourism Authority results in shorter tax breaks.  These incentives are:

  1. import duties on construction materials & furniture and fixtures for remodelling (for 5 years from the time of registration);
  2. property taxes on the land and improvements built for 10 years;
  3. income tax from the lodging business (hotel, motel, b&b, hostal, etc.) for 5 years;
  4. loans made to the tourism business. These loans are exempted from the withholding of Law 4 (1994), and are not considered personal or commercial loans.

Basic registration requirements:

The registration form must be completed and handed in to the Tourism Authority. This form is quite basic, asking information regarding the tourism operator, the investment being made and the property on which the lodging will  or has been built.  The following documents must also be submitted:

  1. Blueprints, stamped by the local city council (when you are requesting tax exemptions on the construction).
  2. If applicable, certification of approval by the environmental authority.
  3. Certification regarding the financing for the project – signed by a CPA.
  4. Public registry certificate – for the company that will own/operate the project
  5. ID of the legal representative
  6. Public registry certificate for the property on which the project is being built
  7. Feasibility study, signed off by an economist.
    1. Market study: the type of lodging offered, supply and demand, marketing
    2. Total investment to be made: income which is expected to be earned, operating costs, financing, payment terms, debt servicing, income/loss statement
    3. Financial evaluation: net income; IRR (internal rate of return); present value; cost benefit ratio; sensitivity analysis; and breakeven.

Once presented, the applicant has 30 days to provide a bond (to ensure completion of the construction/remodelling and the investment to be made) covering 1% of the investment (up to a maximum of $500,000.00).  This is to ensure completion of the project, and not simply obtaining the tax benefits on the import duties and then never actually completing the project.  If no construction is required, then the applicant must start operating in no more than 2 months after having been approved.

Types of Registration:

  1. Hotel 
  2. Motel – minimum of 20 rooms, cafeteria, reception & salon, no more than 2 stories high
  3. Hostal – 20 to 80 beds/bunks; small reception/administration area; parking; communal kitchen area.
  4. B&B – 3 to 9 rooms, with at least one bathroom for every 3 rooms (may be shared bathrooms), which cannot be used by the family, offering at least breakfast.
  5. Aparthotel – at least 8 apartments (40 if in Panama City), each apartment with at least basic kitchen, dining room, living room & bedroom.
  6. Camp sites – basic infrustructure with bathrooms, showers, cooking area, and recreational areas, in addition to the camping sites.  Mens and women’s lavatories.  Each site should have: electric outlets, water, and an appropriate sewage system.  Appropriate rubbish disposal system and bins.
  7. Cabins – at least 3 cabins which must each have their own bathroom/shower and closet and each must have its own cooking equipment (basic).  Parking close to each cabin, as applicable.  Reception area/principal entrance / administration area.