Panama's New-Home Tax Break Is Coming Back in 2026: What the $120,000 Exemption Bill Means for Buyers
If you have been watching Panama's property market this year, you may have noticed that one of its longest-running buyer incentives quietly disappeared - and that the government is now moving to bring it back. On July 30, 2026, Panama's Cabinet Council (Consejo de Gabinete) approved a bill that would restore the transfer-tax exemption on first sales of new homes up to $120,000, with reduced rates on homes priced up to $200,000.
For anyone considering a new-construction purchase in Panama - whether a first home, a rental investment, or a pre-construction unit near the beach - this is the single most important piece of tax news of the year. Here is what changed, what the new bill proposes, and how to think about timing your purchase while the National Assembly decides.
A Quick Refresher: How Panama Taxes a Property Purchase
Panama charges a real estate transfer tax, known locally as ITBI, of 2% on the greater of the sale price or the registered cadastral value. It is formally filed by the seller, but in practice it is part of the economics of every deal - developers price it in, and buyers feel it.
For decades, first sales of new homes enjoyed special treatment. An exemption regime dating back to 1974, updated in 2017, meant that buying a brand-new home from a developer often carried no transfer tax at all within certain price bands. It was one of several incentives - alongside Panama's famously low annual property taxes and its territorial tax system - that made the country's new-construction market so attractive to local and foreign buyers alike.
What Changed: The Exemption Disappeared in 2025
That long-standing benefit ended with Law 468 of 2025, published in April 2025, which repealed the exemption for first sales of new construction. A narrow transition window protected certain preferential-mortgage purchases under $120,000 through December 31, 2025 - and then it closed.
The practical result: since January 1, 2026, every first sale of a new home in Panama has paid the full 2% transfer tax, with no exemption in force. On a $200,000 condo, that is $4,000 of tax that did not exist in the deal two years earlier. Developers, buyers, and the construction industry all felt the change, and industry groups lobbied hard for relief.
The July 2026 Bill: What the Cabinet Approved
On July 30, 2026, Finance Minister Felipe Chapman and Housing Minister Jaime Jované jointly announced that the Cabinet had approved a bill to bring a version of the exemption back. As proposed, the structure looks like this:
Up to $120,000: fully exempt - no transfer tax on the first sale of a new home.
$120,000 to $130,000: a reduced rate of 0.5% on the portion above $120,000.
$130,000 to $150,000: 1%.
$150,000 to $170,000: 1.4%.
$170,000 to $190,000: 1.6%.
$190,000 to $200,000: 1.8%.
Above $200,000: the standard 2% continues to apply.
The design is progressive: modest new homes would regain a full exemption, mid-range new construction would get meaningful relief, and higher-end purchases would continue paying the standard rate.
One point worth underlining: this is a bill approved by the Cabinet, not yet a law. It still needs to pass Panama's National Assembly, and it could be amended along the way. Until it is published in the Gaceta Oficial, the full 2% applies to every first sale.
Who Benefits - and Who Doesn't
Two distinctions matter enormously here, and they trip up even experienced buyers.
First sales only. The exemption - in both its old form and the proposed new one - applies only to the first sale of new construction from a developer. A resale between two private parties pays the standard 2% transfer tax regardless of price. It always has. If you are buying a resale condo in El Cangrejo or Coronado, this bill does not change your math.
Transfer tax, not annual property tax. This bill deals with the one-time tax on the transaction. Panama's annual property tax is a separate regime with its own exemptions - including generous treatment for primary residences - which we covered in an earlier guide. The two are often confused because both use similar thresholds.
Why This Is Happening Now
The bill is not arriving in a vacuum. Panama's construction sector is staging a genuine recovery after two slow years. According to the national statistics institute (INEC), permitted construction area grew about 26% in the first quarter of 2026 versus the same quarter of 2025, with over 2,000 new housing units permitted, and preliminary figures for January through April show permit values up more than 40% year over year.
At the same time, the construction chamber has called the recovery partial and pointed to more than $11 billion in planned public infrastructure - Metro Line 3, the fourth bridge over the Canal, and more - as the engine that will carry the sector through 2026. Restoring a targeted incentive for entry- and mid-level new homes is the government's way of keeping private residential demand moving alongside that public investment.
For investors, the signal matters as much as the savings: Panama's government is actively working to keep the cost of buying new construction low. That is consistent with everything else that draws capital here - a dollarized economy, a territorial tax system, and residency programs tied to real estate investment.
What Buyers Should Do While the Bill Is Pending
If you are shopping for new construction in the $120,000-$200,000 range, timing suddenly has a real dollar value - potentially several thousand dollars depending on where your price lands in the proposed bands. A few practical guidelines:
Don't budget for the exemption yet. Until the National Assembly passes the bill and it is published, assume the full 2% applies to your closing.
Ask your developer how the pending bill is being handled. On units under contract, whether closing happens before or after a potential change can move real money. Some developers may build flexibility into promise-to-purchase agreements.
Remember resales are unaffected. If your target property is a resale, negotiate on price, not on tax changes that will not apply.
Get current advice before you sign. Tax rules in Panama have moved twice in two years. Confirm the rules in force at your closing date with a qualified Panamanian attorney or tax professional - the details above reflect the proposal as announced and may change as the bill moves through the Assembly.
The Bigger Picture for 2026 Investors
Panama's fundamentals have not changed: strong GDP growth, record tourism, a construction rebound, and a government that keeps signaling support for property buyers. What has changed is the fine print - and in a market where the fine print can be worth 2% of your purchase price, having someone on the ground who tracks these rules daily is not a luxury.
Talk It Through With a Local Expert
If you are weighing a new-construction purchase and want to understand exactly how the pending exemption bill could affect your numbers - or which projects and price bands make the most sense for your goals - book a free consultation with Luca Piva, our Panama-licensed advisor with 13 years of experience helping international buyers navigate purchases from Panama City to the Pacific beaches. He and the Panama Investors team can walk you through current costs, timing scenarios, and the opportunities opening up as this bill moves forward. Schedule your free consultation here: https://panamainvestors.com/book-now
