At the core of any transaction, be it small or large, are contracts. In business, contracts are what keeps all parties accountable and minimizes risk. Panama contracts are used for real estate, banking, employment, service level agreements, and tax purposes, and in Panama (just like anywhere else) they are a critical aspect of your day-to-day life. As an offshore investor, retiree, working resident, or someone who runs a corporation in Panama, it’s important to know how Panama contracts work, and what liabilities and rights you have under local law by creating and signing them.
Real Estate Contracts
One of the most common forms of Panama contracts for expats and/or offshore investors are real estate contracts. Whether buying or selling real estate in Panama, it is important that you do your due diligence and setup as efficient and thorough a contract possible before completing a deal. According to Panamanian law, all contracts on buildings must be written in accordance with Panamanian Civil Code #1232 by “escritura publica” (deed). The deed must also be listed in the public registry, and fees are required to be paid to the public registry, as well as a property transfer tax.
Parties are able to add or remove any clauses and negotiate on each contract, so be careful and have a trusted real estate lawyer look over everything in detail before signing anything. In the case of contract violations, there are protections on payments as well as recourse of actions for all parties involved.
Labor Contracts
For many who invest in Panama, particularly those starting a services business, Panama labor contracts are extremely important, and should be prioritized when establishing and growing your business. Labor contracts must be executed for all employees, independent service providers, and part-time laborers in Panama. Work contracts can be freely agreed on (there’s no set template) as long as it follows Panamanian law and can include elements of a collective agreement in most cases.
All Panama labor contracts must be done in triplicate. You will need one copy for the Ministry of Labor, one for the employer, and one for the employee. There are also three types of labor contracts that can be signed, according to law:
1) A 90-day probational contract.
2) A fixed-term contract, the duration of which can last up to 1-year.
3) An indefinite-term contract.
For any type of contract in Panama, you will need a lawyer to review all clauses and stipulations before signing, or you may run serious risks. At International Relocation Firm, we can help you navigate the procedures involved with any type of Panama contract, and make sure you have all of your bases covers before you’re ready to sign.
Don’t hesitate to call or write us with any questions or feedback regarding Panama contracts. Contact us here to learn more!