Panama Moves to Scrap the 2% Transfer Tax on New Homes Under 120,000 Balboas

Panama's assembly backed Bill 661 by 53 votes to 5, exempting new homes up to 120,000 balboas from the 2% ITBI property transfer tax, with tiered relief above.

Panama's Ministry of Economy and Finance announced on 27 August that Bill 661 had passed a legislative vote by 53 in favour, 5 against and 1 abstention. The bill amends Law 106 of 1974 and removes the 2% real estate transfer tax — the ITBI — from purchases of new homes priced up to 120,000 balboas. Because the balboa is fixed one-to-one with the US dollar, that threshold reads directly as $120,000 to a foreign buyer.

The relief is tiered, not a cliff

Above the threshold the exemption tapers rather than disappearing. For new homes priced between 120,000 and 180,000 balboas, the first 120,000 remains exempt and only the balance is taxed, at rates between 0.50% and 1.80% rather than the standard 2%.

The arithmetic at the threshold is straightforward: 2% of 120,000 balboas is 2,400, so a buyer at the cap saves that amount outright. On a purchase at 180,000 balboas, the taxable base falls to 60,000 and the rate to at most 1.80% — a maximum charge of 1,080 against 3,600 under the existing rule.

Finance Minister Felipe Chapman presented the measure, which the ministry frames as helping Panamanian families reach ownership while stimulating the construction sector. The ministry's statement records the vote but does not publish an estimated fiscal cost, a projected number of beneficiaries, or an entry-into-force date.

Two limits worth reading carefully

First, the relief applies to new homes. Resale transactions are not covered, so the measure is a construction-demand instrument as much as an affordability one — which is consistent with how the ministry describes it.

Second, the ITBI is only one line in Panama's closing costs. Glopra's file puts total transaction costs for the country at around 8.1%, so removing a 2 percentage point component leaves roughly 6% of frictional cost in place. The saving is real but it does not transform the entry economics of a Panamanian purchase.

Where Panama sits in our coverage

We carry Panama at $1,666 per square metre nationally with a gross rental yield of 6.94% and annual price growth of 6.81%. That yield sits in the middle of our Latin American coverage: below the Dominican Republic at 8.53% and Costa Rica at 7.63%, above Mexico at 5.79% and Brazil at 5.71%. The standardised effective tax on rental income is 5.8%, among the lightest in our entire file, and the dollar peg removes the currency risk that shapes returns in Colombia, Brazil or Argentina.

Our Bubble Risk score is 40, in the moderate band, though the Panama price series carries a Medium confidence flag: national coverage is thinner than in the larger markets, and Panama City's own dynamics can diverge from the national figure.

The honest caveat is that a threshold set at 120,000 balboas sits well below the price points most international buyers consider. This is domestic affordability policy, and the read-across for a foreign investor is indirect — a signal about where the government wants construction volume directed, and about the political appetite to use transfer tax as a lever. Nothing here should be taken as a recommendation to buy; the tax treatment of any individual purchase depends on residency, structure and the final text of the law.

Sources: Ministerio de Economía y Finanzas de Panamá, 27 Aug 2026 https://www.mef.gob.pa/2026/08/proyecto-de-ley-661-para-facilitar-el-acceso-a-vivienda-nueva/

Market data: Panama