Why I Don't Recommend Importing a Car to Panama, as Someone Who Imported a Car to Panama

About a year ago, I imported a car to Panama. See, I had a 2008 Honda Element that I’d owned outright for years. The little SUV was in near-mint condition with absurdly low mileage. It’d seen little use in the states, but would be perfect for my more active lifestyle in Panama. My parents had space in their 40 foot shipping container so I thought to myself, ‘Why not?’ I knew that under the Pensionado Visa program, my parents would receive full exemption from import taxes (duties) on a car every two years, provided that it’s for personal use.

Ah, but you see, pensionados are exempt from import taxes, but not ITBMS. This stands for Impuesto a la Transferencia de Bienes Corporales Muebles y la Prestación de Servicios, which translates to “Tax on the Transfer of Tangible Personal Property and the Provision of Services”. Basically, it’s Panama’s version of a Value-Added Tax (VAT) or sales tax. This is currently 7%.

According to Kelly Blue Book, the Element was valued at around $5,000. I had imagined that the ITBMS on an old, used vehicle would be somewhat reasonable, but was surprised to get a bill for over $3,000. You see, the ITBMS is based on the CIF value of the vehicle: the price listed on the vehicle’s invoice plus the cost of insuring the vehicle during shipping plus the cost of shipping it to Panama. The current value of the vehicle doesn’t matter. The formula only takes into account what I paid for the vehicle back in 2008. Also, if you do the math, the Panamanian government adjusted the $24,000 that I had originally paid for inflation, increasing the value of the vehicle to $37,000 (the cumulative rate of inflation for that period was 49.8%). This is the only way that they could have realized a CIF of $42,000. And for anyone who says, ‘Oh, well, I just wouldn’t pay!’ That’s not how bureaucracy works. So not only did I pay for the vehicle in the first place, but now I’d paid more than half of what the vehicle was worth just to get it into the country. 

So now I had a car! An unregistered car. But not just an unregistered car, a car that was imported from another country. The amount of paperwork and physical inspections involved in this process is excruciating. We were able to locate one - one! - mechanic in Juan Diaz who specializes in trucks and buses who is authorized to perform the inspections and generate the documents required just to enter the vehicle in the government’s system in the first place. Now, everyone will tell you that they can perform these inspections. Trust me, they can’t. The employees at the office that registers vehicles knew of only one guy who was authorized to do it and sent us to him. Before that, we had wasted days calling mechanics and driving around the city only to show up and be told that there had been a misunderstanding and that they couldn’t help us with our particular situation.

After the vehicle has been entered into the system, you need to take it to the police to have it physically inspected. They check that the various VIN engravings match and that you don’t have anything illegal installed and that the whole thing is roadworthy. There is only one place that does this and it's in a little gravel lot in Curundú about the size of a tennis court. They start before dawn and end around lunch. More paperwork. Disgruntled cops. I was told that my engine was too dirty and that I needed to bring it back cleaner. The officer relented after a few minutes of pleading and arguing and spraying some Windex and wiping with paper towels. It was dust, I assured him. The damn thing had been on a boat and sat in customs for a few months before sitting in my garage for another month. Have a heart. Then more paperwork. There were dozens of cars waiting to be inspected. Dozens of miserable owners. It began to rain. The cops went inside to wait it out.

Registering the car with the Autoridad del Tránsito y Transporte Terrestre de Panamá (ATTT) and the city was a continuation of the nightmare. We spent weeks bouncing back and forth between buildings and offices and cashiers until everything had been stamped and printed and copied and we finally had our car’s license plate in our hands.

Also, please keep in mind that all of this is in Spanish. But not just Spanish, bureaucratic, Spanish legalese. Jenny is a native Spanish speaker and I've got an MBA from a Spanish university and even we were confused at some points.

Now, something that everyone forgets to talk about is insurance. Let’s be honest with ourselves: why would an insurance company insure a car from 2008? What’s in it for them? It’s nearly 20 years old. And why would they insure an imported car? How do they know it wasn’t sold cheap after an accident or was submerged in floodwaters or caught in a hurricane? Think about it: there’s too much risk. The reality is, there are very few insurance companies that will insure an older car or insure imported cars. This is possibly the biggest reason why I don’t recommend importing a car to Panama. I was able to get liability insurance on my car, which is the legal minimum and suits me fine. But what if you import a $60,000 truck that’s only a few years old? Sure, you know that the car is fine, but how’re the insurance companies supposed to know that? They have no way of knowing! Do you feel comfortable driving that thing around Panama City with just liability coverage? That’s just tempting fate.

Take my advice: sell the car and use that money to buy a new one when you get here.