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Panama Law 8 provides for monetary incentives to start and to run tourist-related businesses in the Republic of Panama.

The incentives of Panama Law 8 include multi-year exemptions from import taxes, real estate taxes on land and improvements, taxes relating to use of airports or docks built by the investor, and, in a selected case mentioned below, exemption from income taxes on investment profits.

Required investment with Panama Law 8 starts as low as $50,000 plus cost of land and buildings for non-metropolitan Panama and $300,000 plus cost of land and buildings for the metropolitan areas of Panama on the Pacific and its sister city of Colon on the Caribbean. The city of David in Chiriqui Province may also be considered metropolitan now or in the near future with continued growth there.

This article deals with how Panama Law 8 treats non-metropolitan Panama and with "national interest tourist development areas" which are defined as areas that "meet special conditions for tourist attraction but lack the basic infrastructure to develop the activity." These are the areas of investment that are given a 15-year exemption from income taxes. These areas are rural, largely untouched, and good targets for developing facilities for eco tourism in Panama.

Background and Geography

Geography is important here because Panama is about the size of Kentucky with more of an hourglass shape. Many rural/untouched areas in Panama ripe for eco tourism development are only a few miles from major roads, or close to Tocumen International Airport, which is becoming the major hub airport for all of Latin America.

For example, the Isthmus of Panama between Panama and Colon, where the Panama Canal goes, is only 50 miles wide. A dozen miles from Tocumen airport you are in Cero Azul in Panama's central mountains where transplanted pine trees vie for space with palm trees. Further inland is Chagres National Park where Toucans feed in farmers' front yards and flocks of parrots fly overhead. This area is an example of what Panama Law 8 was written for. Panama would prefer to keep its natural beauty and the unspoiled nature of much of its interior. As such it is offering incentives to steer development in an ecologically sound direction with an eye toward employment of local people not displacement.

Current Panama Eco Tourism and New Opportunities

Eco tourism as now practiced in Panama involves taking people to National Parks or one of the indigenous areas to observe, hike, buy souvenirs, and leave. This is the business of tour operators. Likewise, hotels in the city cater to tourists and developers of such projects can derive benefit from Panama Law 8. But there is more.

Panama Law 8 provides increased incentives for development of tourist related projects away from the city in economically undeveloped areas where there is little infrastructure. For example, Panama Law 8 provides incentives for building housing such as cabanas or a small hotel integrated into a natural setting in one of the many areas of natural beauty in Panama. A tour operation from such a location would also qualify as being in an undeveloped area. If a project is carried out away from the metro areas the cost is less to obtain the incentives and if the project is carried out in a "national interest tourist development area" Panama Law 8 allows the developer to operate free of income taxes for the first fifteen years in addition to the law's other incentives.

Despite the first world nature of Panama City much of the interior of Panama is unspoiled. That means undeveloped. Panama would like to develop more of the interior without spoiling its natural beauty. Panama wrote Panama Law 8 to create jobs and better living conditions for its people in these areas. Panama Law 8 offers substantial incentives to investors interested in developing tourist related businesses, especially in "national interest tourist development areas." In short, Panama would prefer an eco tourism approach to much of the development of its interior to a more aggressive "slash and burn" approach. And Panama will provide the incentives for this to happen.

Ask ABPanama about Panama Law 8 and ecotourism development opportunities. Ask ABPanama about investment opportunities in Panama in general. We have over 23 years experience managing investment portfolios. Let us help you.