What is the ITBI in Panama?

It is the tax associated with transferring a property. Panama’s tax authority publishes Form 106 and explains how to file it. The amount for a specific transaction depends on its basis and exemptions: consult the DGI and a notary.

What is ITBI and how much is it in Panama in 2026?

ITBI (Real Estate Transfer Tax) is a 2% tax on the for-consideration transfer of real estate in Panama. It is governed by article 701-A of Panama's Tax Code and by Law 106 of 1974 (as amended). The taxable base is the greater of the price stated in the public deed and the cadastral value recorded with MEF's Cadastre Directorate. Example: if you sell a Costa del Este apartment for $350,000 but the cadastral value is $280,000, ITBI is calculated on $350,000 → $7,000 in tax. If, conversely, the cadastral value were $400,000, you'd pay on $400,000 → $8,000. The notary withholds ITBI at deed signing and pays it to the General Directorate of Revenue (DGI/ANIP) before registry recording.

Who pays Panama's transfer tax — buyer or seller?

Under Panamanian law, the 2% ITBI is paid by the SELLER (Tax Code art. 701-A establishes the transferor as the taxable party). In market practice this point is typically negotiated: in developer sales to end buyers, developers often absorb it as part of the listed price; in private resales, the buyer sometimes accepts it in exchange for a price discount or because of seller urgency. Key point: regardless of private agreement between the parties, before the DGI the legal obligor is the seller — if there is a dispute, the tax authority collects from the seller. Always document who pays in the deed minute, with clear language: 'The transfer tax under article 701-A of the Tax Code will be paid by [SELLER/BUYER]'.

What is ITBI's taxable base — sale price or cadastral value?

The taxable base is the GREATER of: (1) the price stated in the public deed of sale; and (2) the property's cadastral value recorded with MEF's Cadastre Directorate. This rule is in article 701-A of the Tax Code and was reinforced by Executive Decree 170 of 1993 (regulation). Historically lower prices were declared to cut ITBI; since the 2010-2012 reform the DGI cross-references with the cadastre and penalizes underreporting. Practical consequence: if the cadastre is outdated downward, the taxpayer pays on the real sale price; if the cadastre is high (unusual but it happens in zones with recent reassessment), they pay on the cadastral value even if selling for less. To check cadastral value: online at mef.gob.pa → Catastro, or a physical certification for $10-$20 at the Cadastre Directorate.

Which cases are exempt from ITBI in Panama?

The main ITBI exemptions are listed in article 701-A of the Tax Code and special laws. (1) Social-interest first home under Law 3 of 1985 (up to $40,000) — full exemption; (2) Transfers by inheritance or bequest (Law 106 of 1974 — mortis causa); (3) Property contributions to companies in exchange for shares (under specific conditions in art. 701-A subsection b); (4) Swaps between properties of equal value (ITBI only on the difference if any); (5) Gifts between spouses or parents and children on the first transfer (reduced ITBI or exemption depending on the case — verify with MEF); (6) Transfers to a trust under Law 1 of 1984 when the trust benefits the same titleholder (other cases pay ITBI). IMPORTANT: exemptions require a formal request to DGI with documentation — they are not automatic. Always consult a tax attorney to confirm applicability.

How is ITBI paid and what documents does the DGI require?

The process is: (1) the notary prepares the sale deed with declared values; (2) request the property's current cadastral certification from MEF's Cadastre Directorate; (3) the notary calculates ITBI at 2% on the greater value; (4) the seller (or the agreed party) pays ITBI to the DGI via the e-Tax 2.0 platform (etax2.mef.gob.pa) or at the window — the receipt is attached to the deed; (5) the deed with the ITBI payment receipt + property tax clearance is filed at the Public Registry for recording. Without proof of ITBI payment, the Public Registry will NOT record. Typical total time: 5-15 business days if everything is current; can stretch to 30-60 days with cadastral issues or outstanding property tax debt.

What's the difference between 2% ITBI and 3-10% capital gain in Panama?

These are TWO separate taxes that apply to the same sale: (1) ITBI 2% — transfer tax, base is the greater of cadastral or sale price, calculated on the price; (2) Capital gain (Law 8 of 2010 modifies Tax Code art. 701) — taxes the GAIN on the sale (sale price minus acquisition cost minus documented improvements). Rate: 10% on the gain with a 3% advance withholding on the sale price. If the real gain × 10% > the 3% withholding, you pay the difference; if it's less, you can request a refund or treat the 3% as a final payment. Example: you sell a Punta Pacifica apartment for $450,000 that you bought for $320,000. Gross gain $130,000. ITBI: $9,000 (2% of $450K). Capital gain: $13,500 withheld (3% as final) OR $13,000 (10% on $130K) if you elect to file. Total sale taxes: $22,000-$22,500 (~5% of price). The seller pays ITBI; the buyer/notary also withholds the 3%.

ITBI 2% Real Estate Transfer Tax in Panama 2026

Last updated: August 14, 2026

⚡ Update — August 2026. A bill now before the National Assembly (presented August 13, 2026) would exempt ITBI on the first sale of new homes up to B/.120,000, with reduced rates up to B/.200,000. It is not law yet — until it passes, the 2% described in this guide applies. Bill details in Law 468 and the new-home ITBI reform.

Every real estate sale in Panama pays a 2% ITBI on the greater of the sale price and the cadastral value. For a $300,000 apartment that's $6,000 in tax, which by law is paid by the seller — though in practice it's negotiated. This guide breaks down the exact calculation, the taxable base used by the DGI, the legally exempt cases under Panamanian law, and the difference between ITBI and the other tax that also applies to a sale: the 3-10% capital gain.

Pair it with property purchase taxes Panama, hidden costs of buying property, and selling an apartment in Panama. To estimate cadastral vs. sale value use PanamaEstimate; to browse opportunities see apartments for sale.

ITBI Legal Framework

Main statute

Article 701-A of Panama's Tax Code (added by Law 106 of 1974, amended by Law 6 of 2005 and Law 8 of 2010): establishes the 2% Real Estate Transfer Tax.

Regulation

Executive Decree 170 of 1993 — regulates calculation, taxable base, and collection details.

Taxable party

The SELLER (transferor) is the legal taxpayer for ITBI.

Trigger event

Any for-consideration transfer (sale, swap, corporate contribution, payment in kind) of real estate located in the Republic of Panama.

Taxable Base: The Greater-Value Rule

Formula

ITBI base = MAX(deed price, MEF cadastral value)
ITBI = base × 2%

Why the greater value

Historically low prices were declared to cut tax. Since the 2010-2012 fiscal reform, the DGI systematically cross-checks with MEF's Cadastre Directorate.

Practical examples

Case	Sale price	Cadastral value	ITBI base	ITBI 2%
A	$350,000	$280,000	$350,000	$7,000
B	$280,000	$320,000	$320,000	$6,400
C	$500,000	$350,000	$500,000	$10,000
D	$180,000	$180,000	$180,000	$3,600

How to verify cadastral value

Online: portal mef.gob.pa → Catastro → search by property folio or address.
Physical certification: Cadastre Directorate, $10-$20.
Catastro Panamá app.

Who Actually Pays ITBI?

Legal rule

The seller (Tax Code art. 701-A).

Market practice

Developer-to-buyer sales: developers usually absorb it as part of the listed price (check whether it's included or added).

Private resales: it's negotiated. Sometimes the buyer takes it on in exchange for an equivalent discount.

Forced or distressed sales: the seller almost always pays (or it's withheld from the price).

Recommended deed clause

"The parties declare that the real estate transfer tax under article 701-A of the Tax Code shall be borne in full by [SELLER/BUYER], who releases the other party from any obligation related to said tax."

Who actually pays the DGI

Regardless of private agreement: the DGI can collect directly from the seller if not paid. The buyer-seller agreement is enforceable only between the parties.

ITBI Exemptions

1. First social-interest home

Law 3 of 1985 (Social-Interest Housing).
Properties up to $40,000.
Requires prior MIVIOT qualification.

2. Inheritance transfers

Law 106 of 1974 and Law 61 of 2002.
Mortis causa: full exemption.
See Panama real estate inheritance 2026.

3. Corporate contributions

Art. 701-A subsection b.
Property contributed to a company in exchange for shares.
Requirements: company under Law 32 of 1927, documented contribution, matching contribution value.

4. Swaps

ITBI only on the value difference if any.
Equal-value swap: exemption.

5. Family gifts

Between spouses, parent-child on the first transfer.
Application per current Executive Decree — verify with MEF.

6. Trust for the same titleholder

Law 1 of 1984 on Trusts.
Transfer to trustee WITHOUT change of ultimate beneficiary: exemption.
See Panama real estate trust 2026.

Procedure

They are NOT automatic. They require a formal request to the DGI with supporting documentation.

Step-by-Step Payment Process

Step 1: Deed preparation (days 1-5)

Notary drafts the sale deed minute.
Declared price.
Property and party data.

Step 2: Cadastral certification (days 5-8)

Request to MEF Cadastre Directorate.
Certification with current cadastral value.
Cost $10-$20.

Step 3: ITBI calculation (day 8)

Greater of price or cadastral × 2%.
Notary issues calculation.

Step 4: Payment to DGI (days 8-12)

e-Tax 2.0 platform (etax2.mef.gob.pa).
Or DGI window with form.
Official DGI receipt — attached to deed.

Step 5: Public deed signing (day 12-15)

Notary executes the deed with the ITBI receipt.
Parties sign in person or by attorney-in-fact with notarized power of attorney.

Step 6: Property tax clearance

DGI certification that the property has no outstanding property tax.
See Panama property tax Law 66.

Step 7: Public Registry (days 15-45)

Recording of the deed.
Without ITBI receipt: NO recording.
Additional registry fees $300-$800.

ITBI vs. Capital Gain: Two Taxes on the Same Sale

ITBI (2%)

Base: greater of price or cadastral.
Paid by: seller.
When: at deed signing.
It's on the PRICE, not the gain.

Capital gain (3% withholding / 10% effective)

Law 8 of 2010 modifies Tax Code art. 701.
Base: gain (price − cost − improvements).
Rate: 10% on the gain.
Advance withholding: 3% on sale price.
Options: pay the 3% as final OR file 10% on real gain.

Consolidated example

Juan sells an apartment in San Francisco that he bought 6 years ago:

Sale price: $400,000.
Cadastral value: $310,000.
Acquisition cost: $290,000.
Documented improvements: $15,000.

ITBI:

Base: MAX($400K, $310K) = $400,000.
ITBI: $400,000 × 2% = $8,000.

Capital gain:

Gain: $400,000 − $290,000 − $15,000 = $95,000.
Option A (withholding): $400,000 × 3% = $12,000.
Option B (filing): $95,000 × 10% = $9,500.
Juan picks B (cheaper): $9,500.

Total sale taxes: $8,000 + $9,500 = $17,500 (4.4% of price).

Special Cases

Sale with bank financing

ITBI is paid the same as in cash. The mortgage bank requires the ITBI receipt + clearance to disburse.

Sale of pre-construction unit

If the promise is transferred before final deed (rights assignment), it can qualify as a taxable act. Consult specific case.

Sale of property to a Panamanian company

General rule: 2% ITBI applies. Exception: contribution in exchange for shares under art. 701-A subsection b.

Sale to non-resident foreigner

Same 2% rate. The 3% capital-gain withholding also applies. See selling an apartment as a non-resident foreigner.

Payment in kind

If real estate is delivered to satisfy a debt: ITBI applies on the property's value.

Common Mistakes and Penalties

Underreporting price

Declaring a price below the real one to cut ITBI is tax fraud. Penalty: 2-5x the evaded tax + interest (Tax Code art. 756).

Not paying before the deed

Notary jointly liable. The deed cannot be recorded.

Outdated cadastre

If the cadastre is well below real value, the taxpayer pays on the deed price (not a legal "trick").

Failing to claim available exemption

Exemptions are strictly applied and must be formally requested. If not requested → not granted.

Planning: How to Optimize ITBI Legally

1. Corporate structure

Property held in a Panamanian corporation: sale of shares (not property) avoids ITBI. But it has capital-gain implications and substance doctrine considerations.

See corporate ownership vs. personal name.

2. Document improvements

Improvements reduce capital gain. Keep invoices from the time of purchase.

3. Compare 3% vs. 10%

If real gain is low or there's a loss: file 10% (partial refund of the 3% withheld).

4. Verify applicable exemptions

First social-interest home, corporate contribution, swap, family gift.

5. Timing of sale

If an upward cadastral reassessment is imminent, consider selling first (the ITBI base goes up).

Sources and Regulations

Panama Tax Code — arts. 701, 701-A, 700, 756.
Law 106 of 1974 — creates ITBI.
Law 6 of 2005 — ITBI adjustments.
Law 8 of 2010 — Tax Reform, capital gain.
Law 3 of 1985 — Social-Interest Housing.
Law 1 of 1984 — Trust.
Law 32 of 1927 — Corporations.
Executive Decree 170 of 1993 — ITBI regulation.
General Directorate of Revenue (DGI/ANIP) — dgi.mef.gob.pa and anip.gob.pa.
MEF Cadastre Directorate — mef.gob.pa/catastro.
Public Registry of Panama.

This article is informational. Specific calculations and exemptions require advice from a tax attorney. Regulations verified as of August 2026.

Need to calculate the exact ITBI for your transaction? We prepare an estimate with verified cadastral value + capital gain + required clearances, coordinated with a Panamanian notary and tax attorney. Ask Alma with estimated sale price and property location.