If you’d like to book a trip to Central America, the top countries to visit are Panama and Costa Rica. Both offer a wealth of nature sites, wildlife, breath-taking beaches, historical and cultural diversity, and adrenaline-filled activities. The incredible offers make both countries not just attractive locations for vacations but also for investment opportunities.
Conveniently located between Colombia and Nicaragua, Panama and Costa Rica have a lot in common. However, when investing in property, you must not only consider factors like rich culture and scenic beauty. By doing so, you’ll ensure an excellent investment.
As an entrepreneur, you need to know the pros and cons of investing in either country. The research stage is where we come in. We’ll leave no stone unturned whether you want to invest in real estate or stocks or open a business abroad.
Panama vs. Costa Rica— which is the better investment? Look no further than this comprehensive guide.
Panama vs. Costa Rica: Comparing Investment Opportunities
There are many ways to invest in Panama and Costa Rica. Some of the most popular include:
- Real estate
- Stocks
- Starting a business
Which is right for you? Let’s take a look at how investment opportunities differ between both countries.
Panama or Costa Rica — Which Is Better for Investing From Abroad?
Investing in Real Estate
Costa Rica
With an ideal location between the Pacific Ocean and the Caribbean Sea, Costa Rica attracts thousands of tourists, snowbirds, and retirees yearly. With the ecological policies set in place to maintain the beauty of this country, it’s no surprise many tourists choose to stay permanently.
Real estate is among the most popular ways to invest in Costa Rica. Like Panama, Costa Rica offers year-round warm weather, a low cost of living, affordable health care, and low taxes.
However, while Costa Rica offers low property taxes (0.25% of the registered property’s value), not all foreign buyers are eligible for a mortgage. Most lenders require borrowers to be legal residents of the country.
Panama
There has been an enormous growth in retirees moving to Panama. Not only are they looking to retire in this tropical paradise, but Panama offers retirement incentives, including importing tax-free household items and discounts on restaurants and hotels, among other professional services.
There are also various incentives for construction projects. For example, new residential construction projects valued up to $120,000 will receive 20 years of property tax exoneration for improvements. For any construction ranging from $120,000 to $300,000, they will receive ten years of property tax exoneration. Anything above $300,000 gets five years.
With a Real Estate purchase of $300,000 you can immediately apply for permanent residency, which will be granted in just 30 days. However, in October of 2024, this incentive will rise to $500,000.
Also, knowing how to speak Spanish is not a necessity when investing in real estate. We are accustomed to English-speaking investors, making Panama a prime choice when looking to purchase properties abroad!
Investing in Stocks
Costa Rica
Costa Rica doesn’t sit high on the list of countries for stock investment. The national stock exchange is known as the Bolsa Nacional de Valores. It’s extremely small, with only about 60 companies listing stocks.
If you’re looking to invest in Costa Rica, the stock exchange is the most challenging way. However, if you prefer this option, find a brokerage specializing in this country.
Panama
The Panamanian stock market exchange, also known as the Bolsa de Valores de Panamá, is a great investment opportunity for entrepreneurs. Here, investors can trade stocks, government securities, and corporate debt. While this exchange is relatively new and smaller in size, it’s attracting investors more and more each day.
For example, Grupo ASSA, S.A. is one of the most heavily traded stocks. The large Panamanian insurance company services clients in Panama, Costa Rica, El Salvador, and Nicaragua.
Another attractive option is Copa Holdings S.A., the leading Latin American provider of airline passenger and cargo service. The last quarterly report represented an earnings surprise of 18.52%., It was expected that this holding company for Panama’s national airline would post earnings of $0.36 per share when it actually produced earnings of $0.70, delivering a surprise of 94.44%.
Opening a Business
Panama or Costa Rica — Which Is Better for Investing From Abroad?
Costa Rica
Costa Rica is a small country of around 20,000 square miles—about the size of West Virginia, USA! While small in territory, it’s a force to be reckoned with in the business world. If you’re a business owner considering an international expansion, this is a great place to start, as Costa Rica has shown continuous economic growth.
Another reason many business owners invest in Costa Rica is its high-quality education system and 96% literacy rate. The country has proven itself as a suitable place for entrepreneurs to expand their brand or open a business. The education levels will reflect nicely within your business since you’ll have a large pool of talent to source. Count on this country’s high-skilled workers to successfully perform important tasks like sales or marketing.
Panama
An even stronger contender, Panama offers unique benefits for entrepreneurs who want to start a business abroad. For starters, foreign investors can start a business in one of three structures: sole proprietorship, partnership, or corporation.
The process of opening a business in this country is straightforward. It all starts with filing an income tax registry with the government. Then, you’ll need to obtain a commercial license and a social security number. The last step is to pay all municipal taxes and necessary permits depending on the type of business you’re opening.
Further, it is a popular country to start a business because you are only liable for income tax in Panama for money or assets earned on Panamanian territory, meaning that you do not need to pay for income generated abroad.
It also has favorable tax laws and financial privacy in place, companies abroad will be exempt from the following taxes:
- Corporate
- Withholding
- Capital gains
- Income
- Estate
And thanks to the strict privacy laws, business owners and their members could remain completely anonymous if necessary.
Another entrepreneurial customs and tax advantage in Panama is the Colon Free Trade Zone (CFZ), which caters to U.S. businesses and investors. The CFZ is the largest free-trade zone in the Western Hemisphere. It serves as a highly effective distribution channel for accessing Latin American and Caribbean markets. It encourages imports and exports of quality goods, which allows you to manufacture your products in the country or export raw materials when needed. These materials could include metalliferous ores, crude materials, or minerals.
In certain areas, such as Casco Viejo, you have 10 years with no income tax as well as tax exemption from the profits that are generated in the property.
Invest in the Panama Pacifico Special Economic Area
Located at the former Howard Air force base, Panama’s Pacifico Special Economic Zone (SEZ) adds value to the country’s economy. Its designation is the production of goods and services. Investors should consider investing in it as it provides many incentives.
Panama offers labor incentives like fixed rates for overtime, holiday hours for staff, or exemptions for hiring foreign laborers. It encourages international trade, call centers, corporate offices, and more in this special zone. Fiscal incentives include exemption from certain imports, real estate, industrial taxes, and commercial.
Panama or Costa Rica: Which Is a Better Choice For You?
The decision of which country to invest in can feel complicated and overwhelming. We can help to narrow down the decision by considering the following:
- Booming economy: Panama is the #1 growing economy in Latin America with a cosmopolitan and vibrant city. It currently has the lowest inflation, 1.7% reported in October 2022. Be a part of real growth. You will experience it for years to come. Be welcomed by a big expat community already living and investing here.
- Investing in Dollars: It is the only country in Latin America that has a dollarized economy, making it a safe country to invest in.
- Tax incentives: You are only liable for income tax in Panama for money or assets earned on Panamanian territory. Panama’s property tax rates are among the lowest in the region. The rates are 0.6% to 1%, and the first $30,000 of the property value is exempt. Projects built before 2012 have a 20 year tax exemption, meaning that there are many projects in the city with 10 years of this tax exemption left.
- Panama and Its many benefits: Panama is one of the safest countries in Latin America. You can walk the streets with tranquility and peace. The quality of healthcare in Panama hospitals equals the quality of hospitals in the USA and Europe. The general physicians provide exceptional care. And because nothing is more important than your children’s education, in Panama there are excellent schools with American and European standards. Among the best are International School of Panama (ISP), Balboa Academy, and Boston School International. Panama also has an affordable cost of living. In Panama you can live very well on a lot less than many other countries.
Want to Buy Panama Real Estate? Get in Touch
Investing in another country can be daunting. When comparing investment opportunities, Panama comes out on top. Its economy is prime for foreign businesses, and it’s been a dollarized country for over 100 years. The currency access instantly makes foreign investors feel more comfortable. This country also has laws to protect foreign investments giving entrepreneurs peace of mind.
Ready to purchase real estate in Panama? Get in touch with our team today for personalized support!
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