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SUMMARY
Yes, Panama is removing most of the 2% ITBI burden from qualifying first sales of new homes, but the reform is not yet in force. Bill 661 has cleared the National Assembly and now needs Executive sanction and publication before the new treatment can be used.
This is not a repeal of Panama’s property transfer tax. ITBI will remain in place across the wider real-estate market; the reform creates a targeted exemption for the first sale of qualifying newly built homes.
The legal benefit belongs first to the seller, usually the developer, because the seller owes ITBI. Bill 661 also blocks contracts from simply shifting that tax back onto the buyer, although buyers can still benefit indirectly through pricing, incentives and stronger developer willingness to negotiate.
The proposed structure is more generous than a simple exemption for homes priced below $120,000. The first $120,000 remains exempt on qualifying properties above that level, while reduced rates apply to the excess up to $200,000 and the general regime resumes above that threshold.
That produces meaningful savings without creating a hard tax cliff at $120,000. A qualifying $150,000 home would generate about $300 of ITBI under the proposed scale rather than roughly $3,000 under a straight 2% calculation.
The reform is also broader than a first-time-buyer program. Eligibility is built mainly around the first sale of a new residence, with the final Assembly version allowing a 30-month window from the occupancy permit rather than requiring the purchaser to have never owned property before.
The $120,000 threshold already shapes Panama’s housing market before the tax reform even takes effect. Transaction data show thousands of homes clustering at exactly that price while the median apartment delivered for $120,000 has shrunk from 74.6 m² in 2024 to 62.9 m² in the latest period examined.
The individual tax saving is only a few thousand dollars, but the fiscal cost is not trivial. Government estimates put the reform’s possible annual revenue impact as high as roughly $40 million, compared with about $52.4 million of ITBI revenue collected in 2024.
The return of full ITBI in 2026 probably did not cause Panama’s construction slowdown, but it landed at a bad time. Developers were already dealing with financing costs, mortgage qualification problems and unsold inventory, so adding another cost at the first-transfer stage made completed homes harder to move.
For someone buying now, the timing matters more than the political likelihood. The Assembly has finished its work and the Executive sponsored the reform, but a transaction completed before the new law takes effect remains under the rules currently in force.
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Is Panama actually removing the 2% tax on new homes?
Panama is very close to removing the 2% ITBI from the first $120,000 of qualifying new-home sales, but the change is still not in force today.
Bill 661 has already passed all three debates in Panama’s National Assembly. The final vote was unusually decisive: 53 deputies voted in favor, five against and one abstained. The bill now sits with the Executive for sanction and publication in the Official Gazette.
That last step is important for anyone closing a property purchase now. Until the new law is promulgated, the existing 2% Real Estate Transfer Tax, known as ITBI, continues to apply.
Approval looks highly likely. The proposal came from the Executive itself through Economy and Finance Minister Felipe Chapman after Cabinet authorization, so the government would effectively have to reject its own tax reform. Still, a likely law and an effective law are two different things when money is due at closing.
The wording “Panama is eliminating the 2% property tax” also goes too far. ITBI will continue to exist across the wider real-estate market. Bill 661 creates a large exemption for qualifying first sales of new homes and lower rates on part of the value above $120,000.
| Question | Position right now | What Bill 661 changes | What still has to happen |
|---|---|---|---|
| Is Panama abolishing ITBI completely? | No | ITBI remains part of the tax system | Nothing changes for many ordinary transfers |
| Are new homes getting an exemption? | Very likely | First $120,000 can become exempt | Executive sanction and promulgation |
| Can a transaction use the new rates today? | No | Current law still applies | Wait until the law enters into force |
| Has the Assembly approved Bill 661? | Yes | Passed 53-5-1 | Legislative debates are finished |
Why did Panama suddenly start charging 2% on new homes?
Panama’s 2% ITBI problem appeared this year because an old exemption expired, leaving new-home transactions exposed to a tax they had largely avoided before.
The 2% transfer tax itself has existed for decades. What changed was the treatment of newly built housing.
Previous legislation had protected qualifying first sales of new homes from ITBI. Later changes to Panama’s preferential-interest housing laws removed that protection, although the government temporarily extended the exemption through the end of last year.
Once that extension ended, the full ITBI started applying again.
Economy and Finance Minister Felipe Chapman has been careful to describe this as the expiration of an exemption rather than the creation of a new tax. Legally, he is right. For a developer trying to close a new-home sale, though, the practical result was an extra tax bill that had not been part of the transaction before.
The backlash arrived quickly enough that the government reversed course within the same year. Bill 661 is essentially an attempt to repair that change while redesigning the exemption around the part of the housing market the government wants to support most.
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Who actually pays Panama’s 2% ITBI on a new home?
Under Panama’s ITBI rules, the seller pays the transfer tax, and Bill 661 goes further by blocking agreements that shift that tax directly or indirectly onto the buyer.
That detail gets lost in a lot of coverage describing the reform as a tax break for people buying homes.
For a new development, the taxpayer will usually be the developer or legal entity transferring the property. Under the proposed rules, the seller would also be unable to write a clause into the contract simply telling the buyer to reimburse the ITBI.
The buyer can still feel the effect economically. A developer facing an extra $2,400 on a $120,000 sale has fewer options for discounts, incentives and margin. Across hundreds of units, those amounts add up quickly.
The government explicitly acknowledged this when presenting the reform. Chapman argued that even though the seller legally owes ITBI, the cost can affect project viability and eventually feed into the final economics of the home.
So for buyers, the useful question is less “Do I personally write a cheque for the tax?” and more “Does this tax make the home harder or more expensive to sell to me?” In Panama’s lower-priced new-build market, the answer can clearly be yes.
How much ITBI will new homes actually pay under Bill 661?
Bill 661 would completely exempt the first $120,000 of a qualifying new home and then charge reduced rates on the amount above that threshold.
The rate structure is more generous than a simple headline saying “0% tax on homes under $120,000.”
A $150,000 qualifying home, for example, would keep the first $120,000 exempt. Only the remaining $30,000 would be taxed, at 1% under the proposed scale. The ITBI would therefore be $300 instead of $3,000 under a straight 2% calculation.
A $170,000 home would pay 1.4% on the $50,000 excess, or $700. A $200,000 home would pay 1.8% on $80,000, or $1,440.
The official MEF explanation also confirms an important point above $200,000: the first $120,000 remains exempt. The excess then returns to the general ITBI regime. That means even a qualifying $250,000 new home would receive some benefit.
The percentage shown in each band applies to the whole amount above $120,000 for that price band. It should not be calculated as a conventional staircase where each small slice gets a different rate.
| Total qualifying home value | Exempt amount | Rate on excess | Approximate ITBI |
|---|---|---|---|
| $120,000 | $120,000 | 0% | $0 |
| $130,000 | $120,000 | 0.5% | $50 |
| $150,000 | $120,000 | 1.0% | $300 |
| $170,000 | $120,000 | 1.4% | $700 |
| $190,000 | $120,000 | 1.6% | $1,120 |
| $200,000 | $120,000 | 1.8% | $1,440 |
| Above $200,000 | $120,000 | General regime on excess | Depends on value |
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Which properties will qualify for Panama’s new ITBI exemption?
Panama’s proposed ITBI exemption is aimed at the first sale of a newly built home, so ordinary resales will continue under the regular transfer-tax rules.
“First sale” is the key phrase.
Imagine a developer finishes a new apartment and sells it to its first owner. That transaction can qualify if the other conditions are met. If that owner sells the apartment again a year later, the second transaction has moved into the resale market.
The rule is tied mainly to the property and its first transfer rather than to whether the person buying has never owned a home before. That clears up another common misunderstanding around Bill 661.
Some political messaging has understandably emphasized young families and people trying to access their first home. The legal mechanism itself focuses on the first sale of the new residence.
The Assembly also said the benefit operates independently of family-group status. In practical terms, we should avoid turning the government’s social objective into an eligibility test that the legislation does not contain.
How long does a new home have to qualify for the ITBI exemption?
The final Assembly version gives a new home 30 months from its occupancy permit to complete the qualifying first sale.
That is more generous than the two-year window contained in earlier versions of the proposal.
The extension is useful for a simple reason: developments rarely sell every completed unit at the same speed. A project may hand over its first apartments quickly while spending another year or two moving the final inventory.
A 30-month window gives developers two and a half years after the occupancy permit to complete a qualifying first transfer. Homes that sit unsold far longer eventually age out of the special treatment.
Recent inventory is also covered. The final legislative discussion specifically allowed homes whose occupancy permits were issued before the law takes effect to qualify, provided the sale still falls within the permitted period.
That makes Bill 661 relevant immediately to developers carrying recently completed unsold apartments. The government does not have to wait for entirely new projects to reach the market before seeing an effect.
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Why does the $120,000 price matter so much in Panama housing?
The $120,000 mark has become one of the clearest dividing lines in Panama’s housing market, and developers are already reshaping apartments to stay around it.
Panama’s preferential-interest housing system has made $120,000 a particularly important financing threshold. CAPAC, the country’s construction chamber, also identifies the segment up to that price as one of the strongest areas of housing demand.
Transaction data show how powerful the threshold has become.
Nexo Living recently analyzed actual property transfers and found 2,662 transactions recorded at exactly $120,000 between 2024 and the latest period in its dataset. That is unusually strong clustering around a single round number.
More interestingly, the homes are getting smaller while the price stays fixed. According to the same transaction database, the median apartment sold at exactly $120,000 measured 74.6 square meters in 2024. It fell to 69.2 square meters in 2025 and has dropped to 62.9 square meters in the latest data.
That is roughly 16% less space in about two years.
The same shrinkage is absent higher up the market. Apartments in the $150,000-$200,000 range stayed around 93 square meters across the periods Nexo examined.
Developers appear to be compressing the product to preserve a financially important $120,000 sticker price. Bill 661 now reinforces that same threshold through the tax system.
| Market measure | 2024 | 2025 | Latest period | What changed |
|---|---|---|---|---|
| Median size at exactly $120,000 | 74.6 m² | 69.2 m² | 62.9 m² | About 16% smaller than 2024 |
| Median size in $150,000-$200,000 range | 92.9 m² | 93.2 m² | 93.2 m² | Essentially flat |
| Transfers recorded at exactly $120,000 | 2,662 across study period | Strong clustering at threshold | ||
| Role of $120,000 | Housing-policy threshold | Housing-policy threshold | Also central to Bill 661 | Importance is increasing |
How much could Panama’s new ITBI exemption actually save?
The saving can reach roughly $2,700 on a qualifying home, which is large enough to matter in Panama’s mass-market housing segment.
The calculation changes depending on the property value.
A $120,000 qualifying home currently generates a headline ITBI of $2,400 if the taxable base is $120,000. Under Bill 661, that becomes zero.
At $150,000, the current 2% calculation gives $3,000. Bill 661 would reduce the tax to about $300, saving $2,700.
At $170,000, the tax falls from $3,400 to roughly $700, again producing a saving of about $2,700.
Above $200,000, the percentage benefit gets smaller because the amount above $120,000 returns to the normal regime. But the exempt first tranche can still remove around $2,400 from the tax calculation.
For a wealthy cash buyer, a few thousand dollars may barely affect the decision. The market Bill 661 is targeting contains plenty of households for whom $2,000-$2,700 is meaningful closing money.
| Home value | Approx. ITBI under 2% regime | Approx. ITBI under Bill 661 | Approx. saving |
|---|---|---|---|
| $120,000 | $2,400 | $0 | $2,400 |
| $130,000 | $2,600 | $50 | $2,550 |
| $150,000 | $3,000 | $300 | $2,700 |
| $170,000 | $3,400 | $700 | $2,700 |
| $190,000 | $3,800 | $1,120 | $2,680 |
| $200,000 | $4,000 | $1,440 | $2,560 |
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Did the return of the 2% ITBI actually hurt Panama’s new-home market?
The 2% ITBI clearly added friction to Panama’s new-home market this year, although the evidence does not support blaming the entire construction slowdown on one tax.
What stands out is how quickly different parts of the industry converged on the same complaint.
CAPAC pushed for the exemption to return. ACOBIR, representing real-estate brokers and developers, publicly backed the change. APEDE joined the technical discussions. The government then formed a broader working process involving lawmakers, officials and private-sector representatives.
That kind of alignment carries more weight than one developer saying taxes are too high.
The timing fits too. The exemption disappeared just as Panama was already dealing with expensive financing, difficult mortgage qualification and slower movement of some completed residential inventory. Adding another cost at the transfer stage made a weak point of the process worse.
We still lack a clean experiment showing how many sales failed specifically because of ITBI. Mortgage affordability and household income remain much larger forces. But the government moved from letting the exemption expire to proposing its restoration within months, and the Assembly then passed the replacement bill through all three debates in just a few days.
That speed is hard to ignore. Policymakers clearly decided the problem was real enough to fix quickly.
Can removing the ITBI really revive Panama’s construction sector?
Removing the ITBI should help Panama sell recently completed homes faster, but it is nowhere near powerful enough to fix the construction sector on its own.
The strongest mechanism runs through unsold inventory.
When a developer finishes a project but cannot sell enough units, capital remains tied up in those apartments. Slower cash recovery makes the next project harder to finance. Fewer new projects then mean less work for contractors, engineers, material suppliers and construction workers.
Bill 661 targets the point where that chain can get stuck: the first sale.
The government clearly sees a wider economic goal here. Officials have tied housing and construction measures to a broader strategy that aims to generate more than 80,000 jobs across revitalized sectors. Housing Minister Jaime Jované has also said the government has been working with developers and mortgage banks on additional measures, including support for down payments.
That broader package matters more than ITBI alone. Mortgage access, preferential interest rates, construction costs, permits and household incomes will still decide how much housing Panama can absorb.
So we should expect a better sales environment before expecting a construction boom. If developers start clearing completed units faster, new project launches are the next indicator worth watching.
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How expensive is this tax break for Panama?
Panama could give up as much as roughly $40 million a year through the ITBI reform in a strong housing market, which makes Bill 661 a meaningful fiscal decision.
Finance Minister Felipe Chapman gave that upper-end estimate during the legislative discussion. Other estimates have been closer to $30 million.
The more revealing comparison is with the tax itself. Panama collected about $52.4 million in ITBI in 2024, according to figures cited during the current debate.
A $40 million maximum cost would equal roughly three-quarters of that 2024 ITBI revenue.
That does not mean Panama will literally lose three-quarters of future collections. The $40 million figure assumes a high-activity scenario, while ITBI revenue also comes from transactions that will remain taxable. Still, it shows the exemption is large relative to the revenue stream being modified.
There was discussion about replacing some of the lost revenue through better taxation of digital services supplied from abroad. The housing bill ultimately advanced without being held up until that replacement revenue was secured.
The government is therefore willing to sacrifice a noticeable amount of transfer-tax revenue to get residential transactions moving again.
| Fiscal measure | Amount | Comparison |
|---|---|---|
| ITBI revenue in 2024 | About $52.4 million | Historical reference point |
| Government estimate of maximum annual reform cost | Up to $40 million | About 76% of 2024 ITBI revenue |
| Other cited estimates | Around $30 million | About 57% of 2024 ITBI revenue |
| Maximum saving on some individual qualifying transactions | Around $2,700 | Small nationally, meaningful at household level |
Does the ITBI exemption help buyers more or developers more?
Panama’s ITBI exemption should help both sides of a new-home sale, while the local balance will depend heavily on how much unsold inventory developers have.
The developer receives the clearest legal benefit because the seller owes ITBI. Removing $2,000-$2,700 of tax can protect margin immediately.
Buyers can still capture part of that value through lower effective prices, better closing incentives or simply a developer becoming more willing to negotiate.
Competition will decide how much.
Imagine ten projects in the same area competing for mortgage-qualified buyers around $120,000. A developer trying to keep the entire tax saving while rivals offer discounts may struggle. In a development with little competing inventory and strong demand, the seller has more room to keep the benefit.
That is why advertised asking prices are a poor test of whether Bill 661 works for households.
We would learn much more by watching actual transaction prices, developer incentives and sales velocity. If homes start closing faster while effective buyer costs improve, part of the relief is reaching demand. If prices rise by almost the full tax saving with no improvement in sales, developers are capturing much more of it.
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Could Panama’s new ITBI exemption push even more homes toward $120,000?
Yes. Panama already has unusually strong clustering around $120,000, and adding another financial advantage at the same level gives developers one more reason to design homes around that number.
As we saw previously, actual $120,000 apartments have already shrunk from a median 74.6 square meters to 62.9 square meters across Nexo Living’s study period.
That is a useful warning about policy thresholds.
Developers do not necessarily respond by making a formerly $130,000 apartment cheaper. They can redesign units, reduce floor area, move features outside the base package or build a different mix of apartments that fits what buyers can finance.
Bill 661 softens that distortion by keeping the first $120,000 exempt even when the property costs more. A $125,000 home does not suddenly lose the whole benefit, which removes the worst kind of cliff.
Even so, $120,000 now sits at the intersection of mortgage policy, buyer affordability and tax treatment. We should expect that number to remain highly visible in project pricing.
For buyers, the question should increasingly become “What am I getting for $120,000?” rather than assuming homes carrying the same price are equivalent over time.
Should someone buying a new home in Panama count on the tax break now?
A buyer closing today should still evaluate the transaction under the existing 2% ITBI rules and treat Bill 661’s saving as upside until the law is officially promulgated.
The bill has moved about as far as legislation can move before Executive action. Political approval is strong, the Executive originally sponsored the reform, and the Assembly has already completed its work.
The legal trigger remains publication.
The approved text says qualifying transactions completed after the legislation takes effect can use the new treatment. Transactions formalized before that point remain governed by the rules in force when the sale occurs.
That creates a real timing issue for anyone whose title transfer is imminent.
A buyer should therefore know exactly when the deed will be formalized, whether the property is genuinely a first sale, when its occupancy permit was issued and how the contract deals with ITBI.
Waiting a short period could potentially change the economics of an eligible transaction by several thousand dollars. Assuming the saving before the legal trigger arrives could create the same-sized surprise in the other direction.
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So, is Panama removing the 2% tax on new homes?
Yes, mostly. Panama has approved a major rollback of the 2% ITBI on qualifying new homes, and the reform now looks very likely to become law, but transactions cannot use it until the Executive completes the final legal steps.
The new structure is better described as a targeted exemption than a blanket tax repeal.
Qualifying first sales would pay zero ITBI on the first $120,000. Homes between $120,000 and $200,000 would pay reduced rates only on the excess. Even qualifying homes above $200,000 keep the first $120,000 exemption before the normal regime resumes on the remaining value.
That design is significant because Panama’s housing market is already heavily organized around $120,000. Actual transaction data show thousands of sales clustering at that exact figure while the median apartment delivered for the money has become about 16% smaller.
So the headline claim is mostly true today and likely to become fully true once promulgation occurs. The bigger story is that Panama tried exposing new-home sales to the full ITBI, saw enough resistance from the housing and construction market to reverse course within the same year, and has now built a more targeted tax break around the segment where affordability pressure is strongest.
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OUR METHODOLOGY
To answer whether Panama is removing the 2% ITBI on new homes, we treated the headline as a legal and market question rather than assuming that Assembly approval meant the change was already effective. We separated the analysis into the reform’s current legal status, the transactions that qualify, the proposed rate structure, the importance of the $120,000 threshold, the likely economic benefit and the fiscal effect.
We reviewed the freshest evidence available through August 31, 2026 and gave the most weight to primary sources. Final National Assembly actions were used to establish the legislative status and final amendments, while Executive and Ministry of Economy and Finance material was used to confirm the government’s intended tax structure and policy rationale.
We kept legislative approval separate from legal effectiveness. The Assembly’s third-debate approval and 53-5-1 vote show that the legislative stage is complete, but the existing regime remains the relevant one until the reform receives the remaining Executive action and is promulgated.
For the underlying ITBI rules and the history of the exemption, we relied on Panama’s Official Gazette, DGI material, Procuraduría Infojurídica and MIVIOT. These sources were used to distinguish the long-standing 2% transfer tax from the exemption for qualifying first sales of new homes that expired before the current reform was proposed.
The tax examples in the article apply the proposed Bill 661 rates to the amount above the first $120,000. We used the MEF explanation to confirm that the first $120,000 remains exempt on qualifying homes above $200,000 rather than treating $200,000 as a point where the entire exemption disappears.
We also separated legal liability from economic incidence. DGI material establishes the seller’s role in the transfer-tax process, while Bill 661 goes further by restricting contractual attempts to pass the ITBI directly or indirectly to the buyer. The discussion of buyer benefits therefore focuses on effective pricing, incentives and competition rather than pretending the purchaser is the statutory taxpayer.
To test whether $120,000 is genuinely important in the housing market, we compared the policy threshold with observed transaction data. Nexo Living’s analysis of property transfers provided the clustering at exactly $120,000 and the change in median apartment size, while CAPAC material helped establish the importance of the same price range for housing demand and financing.
We treated claims about construction-sector effects more cautiously than the legal findings. CAPAC, ACOBIR, government discussions and official construction data can show that the tax was regarded as a meaningful source of friction, but they cannot isolate ITBI from mortgage access, financing costs, household income, permits and other forces affecting residential construction.
Key sources used for this analysis include: Panama’s National Assembly on the final third-debate approval of Bill 661, the Ministry of Economy and Finance on the bill’s final approval, the Presidency on the original Executive proposal, MEF’s detailed explanation of the proposed tax structure, the Official Gazette text of Law 468 of 2025, Procuraduría Infojurídica on the history of Law 106, DGI’s ITBI Form 106 material, MIVIOT on the preferential-interest housing framework, CAPAC on the construction industry’s response to the reform, and Nexo Living’s transaction analysis around the $120,000 threshold.
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