Blair is in her early 40s from Southern California. She’s intelligent, fairly aggressive, and an experienced financial executive at a mid-sized manufacturing company. In total, she has about $250,000 in savings, some of which she used to buy property in Panama.
She is single with no children and has been traveling to Panama to plant flags since 2006. She plans on (semi) retiring there in another 5-years and has unfortunately learned a lot of hard and costly lessons.
At the height of the global property boom, Blair bought a unit in an ocean-view condominium tower in the San Francisco barrio of Panama City. I like San Francisco– it is well located and presents a nice mix of local Panamanians and foreign expats.
At the time, however, San Francisco was put under a building moratorium because the neighborhood was severely overcapacity with its infrastructure. Waste treatment facilities were overburdened to the point that raw sewage was washing away construction sites, water utilities couldn’t get pressure to higher floors.
Of course, Blair’s real estate agent didn’t mention any of this to her. He cheered her on to make the purchase, encouraging her wise decision-making and investment acumen at every step along the way. He looked good, sounded good, and had even lived in Miami for a while… sounds like a trustworthy fellow worth his salt, right?
Wrong. Blair was terribly misinformed. Aside from the sewage and the lack of water pressure, even her beloved ocean view was gone before the building was even complete– another building was erected between her bedroom window and the sea, built by (you guessed it) the exact same developers.
Like many gringos, Blair found her real estate agent on Google and was initially impressed by his English skills and claims of knowing important people in the country. She admits to being taken as a fool and quite literally is paying the price for it.
(It is exactly for this reason that I put together my Panama Black Paper, released in September and December, which names names of people in Panama to do business with, and people to avoid like the plague.)
Because Blair has such a long-term view, though, she has taken everything in stride. She feels that, by the time she semi-retires in five years, she will be able to recoup what she invested in the condo. Meanwhile, as Panama City’s infrastructure improves, she has been able to generate positive rental cashflow on the unit.
She has since wised up to the city life, and these days she is actively searching for a new property outside of Panama City where it is cleaner, quieter, but still accessible.
By the time she is ready to move there, she expects several new multinationals to have relocated to the nearby Panama Pacifica commercial park located just outside of the city. This commercial park, she believes, will present a lot of opportunity to entrepreneurial-minded people who can provide essential business services.
Because she expects to be generating business income in Panama, she plans on registering a Belize company to conduct the business, thus planting her business flag outside her country of (future) residence.
She told me that she already made this mistake once– two years ago she searched for “Panama companies” on the internet and purchased a corporation from one of the service providers who popped up.
As it turns out, a Panamanian corporation was the exact opposite of what she needed, and the Panamanian lawyer she spoke with had no earthly idea what her US tax implications would be as a result.
Blair has since straightened out her tax situation once she finally found a competent US tax attorney who had expert knowledge of international business structures and was willing to help her out without breaking the bank.
Aside from planting a residency and business flag, Blair has moved some money to a European bank; she feels comfortable in Austria because she does not live there or do business there, so the government has little cause to milk her.
Lastly, she is planning on eventually acquiring second citizenship, possibly through a South American program that I will be discussing next month.
Her ideal vision for the future will be living outside of Panama City as a citizen of a South American country, with her business based in Belize, generating revenue in Panama from multinational firms, and banking her capital in Austria.
Because her foreign business will neither be engaged in US trade nor generating US-source income, her company will not be subject to US corporate income tax. Additionally, as an expatriate, she will be able to pay herself a salary of roughly $90,000/year tax free.
I think one of the key lessons here is that planting multiple flags is not always a do-it-yourself process. As Blair’s story demonstrates, there are potential landmines along the way, though expert advice is available to ensure a smooth journey.
Knowing how critical this expert advice is, in the last few months we provided you with key contacts in the Panama Black Paper, and introduced you to a top international tax attorney. Next month, we will be discussing South American residency and citizenship programs, so stay tuned for that.