Understanding Short-Term Rental Legalization in Panama

What Property Owners and Investors Need to Know in 2025

As short-term rentals through platforms like Airbnb and Booking.com continue to grow globally, Panama has taken steps to regulate and clarify how these services operate—especially in popular tourism and expat destinations such as Panama City, Boquete, Coronado, and beyond.

Whether you're a homeowner considering renting out your property or an investor evaluating rental returns, it’s important to understand what’s legal, what’s not, and how to stay compliant.

What's the Law?

Panama's Decree Law No. 4 of 2008, along with follow-up resolutions by the Autoridad de Turismo de Panamá (ATP), outlines the framework for short-term accommodations:

• In Panama City, it is illegal to rent out apartments for less than 45 consecutive days, unless the building is registered as a hotel or the unit is located in a mixed-use zone with proper commercial licensing.

• Outside of Panama City—such as in beach areas, mountain communities, and rural zones—short-term rentals are legal but may be subject to local regulations or community HOA rules.

• Rentals intended for commercial use (ongoing bookings, multiple units) may require an operating license (Aviso de Operación) and business registration.

What This Means for Property Owners

✔️ Beach and mountain homes, like those offered by ChiqWorld in Coco Beach or Yuma Mountain Community, are well-positioned for legal short-term rental use.

✔️ Homes with ATP hotel licenses, such as ChiQ Villa Gatun, can operate as legal vacation rental or hospitality businesses, including nightly stays.

✔️ Property management through registered companies ensures local compliance, guest handling, tax filing, and operational transparency.

What Are Tourism-Friendly Districts in Panama?

Tourism-friendly districts are areas that either:

1. Actively promote tourism development, or

2. Have relaxed or clearly defined regulations that allow short-term rentals and hospitality businesses.

These districts are typically outside the main metropolitan area of Panama City, where short-term rental restrictions are more stringent. Instead, they are located in beach towns, mountain regions, islands, and rural destinations known for attracting both local and international visitors.

Key Characteristics of Tourism-Friendly Districts:

• Local governments are open to or support short-term vacation rentals

• Infrastructure is designed to welcome non-residents (hotels, resorts, tour operators, expat services)

• Zoning often permits commercial or mixed-use residential rentals

• Many allow properties to operate with a basic Aviso de Operación (commercial license)

• No minimum-night restrictions in most rural districts

Examples of Tourism-Friendly Districts:

• Coronado / Gorgona / Chame: Popular beach destinations with growing expat and tourist populations

• Boquete (Chiriquí): Mountain town with a high volume of eco-tourism and short-term accommodations

• Pedasí & Playa Venao (Los Santos): Surf, beach, and boutique hospitality hotspots

• Bocas del Toro: Island region where short-term rentals are common and legally supported

• Puerto Armuelles (Coco Beach): An emerging west coast destination with increasing development and rental activity

• Campana (Yuma): Highland escapes with growing eco-retreat and Airbnb appeal

Property Tax Exemptions

Panama offers a range of tax incentives to promote investment in the tourism sector, particularly outside the capital district. These incentives are designed to encourage the development of new tourist accommodations and the expansion of existing ones

To qualify for these incentives:

• The tourism project must be registered with the National Tourism Registry maintained by the Autoridad de Turismo de Panamá (ATP).

• Investments must meet minimum thresholds, which vary depending on the project's location and nature.

• The project must comply with environmental regulations and obtain the necessary approvals.

These incentives aim to stimulate growth in Panama's tourism sector by attracting both domestic and foreign investment, particularly in areas outside the capital. By leveraging these benefits, investors can contribute to the development of sustainable tourism infrastructure while enjoying significant tax advantages.

Why It Matters

Buying in a tourism-friendly district reduces legal uncertainty and gives owners more flexibility to:

• List properties on Airbnb, Booking.com, and VRBO

• Earn rental income legally

• Sell properties with an income history as added value

• Operate retreats, B&Bs, or boutique hospitality ventures

Advice for Investors

If you're buying with short-term rental income in mind, consider:

• Zoning laws and municipal permits

• Whether the property is in a tourism-friendly district

• The benefits of forming a Panamanian company for rental income reporting

• HOA rules, which may restrict rental duration or platforms

• Using professional managers to ensure quality and legality

ChiqWorld’s Role

At ChiqWorld, we not only help you buy or build your dream property—we also provide end-to-end rental setup and management, including:

• Legal registration guidance

• Guest screening and communication

• Maintenance and turnover services

• Revenue reporting and optimization

When working with ChiqWorld, we help you identify which zones offer legal, low-risk income opportunities and support you through the licensing or management process to remain fully compliant.