Who pays the 2% transfer tax?
By market practice the seller pays it, settled before the deed — but it is negotiable and should be written explicitly into the promise of sale.
Costs
Taxes and closing costs when buying property in Panama
Diana Gonzalez — Real estate broker, License PJ 1489 · PN 5600
· 8 min
The asking price is never the total cost. Transaction costs in Panama are comparatively low next to Europe or the United States, but they should be budgeted before you sign the promise of sale — and above all, you should understand who pays what. The figures below are approximate and reflect practice current as of 2026: use them to plan, and confirm them with us and with your lawyer before closing, because percentages and exemptions change with legislation.
Transfer tax (ITBI): 2% and who pays it
Transferring real estate triggers a transfer tax of roughly 2%, calculated on the higher of the sale price and the updated cadastral value. By market practice in Panama the seller pays it, settled before the deed, but it is negotiable and must be written into the contract: we have seen deals where the assumption was wrong and it surfaced as a last-minute surprise.
The seller also owes the capital gains advance, in practice settled as a small percentage of the sale value. As a buyer you don't pay it, but you want it resolved: without the corresponding clearance certificates, the deed cannot proceed.
Notary, deed and Public Registry
The costs a buyer normally absorbs are those of formalisation: notary fees for the public deed, registration fees at the Public Registry, and your lawyer's fees for due diligence and contract drafting. Together, on a standard residential transaction, these tend to fall in a low single-digit percentage of the price, and the fixed portion weighs proportionally more on lower-value properties.
If you buy with a mortgage, add the creation of the mortgage security, the bank appraisal, fire insurance and the life insurance the bank requires. This is the line item that most often drifts from the initial budget; ask the bank for a written breakdown before accepting the approval letter.
Property tax: the annual line
Property tax is assessed on cadastral value using progressive brackets. The reform that introduced the family-patrimony tax regime materially reduced the burden on a primary residence, with an exempt first bracket and reduced rates above it. For property that is not a primary residence — a second home or an investment unit — a different, higher scale applies.
In addition, many newer buildings still carry improvement-tax exemptions inherited from earlier regimes, with terms that vary by the year of the construction permit. This has a real effect on an investment's cash flow, and it is verifiable: always ask for the exemption certificate and its expiry date before buying, not the seller's word.
Annual costs that are not taxes
- HOA dues: the largest line in amenity-rich towers. Charged per square metre or per unit; buildings with pools, gyms and large staff can easily double a simple building's fee.
- Reserve fund and special assessments: ask about the fund's condition and any approved or expected levies.
- Contents and liability insurance, on top of the building's own policy.
- Rental management, if you won't be handling the tenant yourself.
- Utilities during vacancy periods, which keep running with no tenant in place.
Repatriating funds and currency
Panama uses the US dollar as circulating currency and applies no exchange controls. There are no restrictions on repatriating sale proceeds or rental income: what applies is ordinary banking and compliance, meaning you must be able to document the source and destination of funds. That is why it pays to keep full traceability of every transfer from the first deposit onward.
Illustrative example: a USD 500,000 apartment
The table below is a budgeting exercise, not a quotation. The percentages are approximate and only serve to size the order of magnitude of each item.
| Item | Approx. % | Illustrative amount |
|---|---|---|
| Transfer tax 2% (customarily the seller) | ~2% | ~USD 10,000 |
| Notary and Public Registry (buyer) | ~0.5–1% | ~USD 2,500–5,000 |
| Legal fees and due diligence (buyer) | ~1–1.5% | ~USD 5,000–7,500 |
| Mortgage costs, if applicable | ~1–2% | ~USD 5,000–10,000 |
| Approximate buyer total (cash purchase) | ~1.5–2.5% | ~USD 7,500–12,500 |
Illustrative, approximate figures for 2026, rounded for readability. Not tax or legal advice. Confirm the exact amounts for your transaction with us and with your lawyer.
For perspective: for a cash buyer, closing costs in Panama usually stay below 3% of the price — far from the double-digit percentages common in some European markets. What does weigh over the long run is the HOA fee, and the gap between areas is wide: compare the real numbers on the Costa del Este and Punta Pacífica pages, and review the property catalog for current price ranges.
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Frequently asked questions
How much should a cash buyer budget?
As an approximate reference, 1.5% to 2.5% of the price for notary, registry and legal fees. With a mortgage, add another 1% to 2%.
Does my primary residence pay property tax?
The family-patrimony tax regime exempts an initial band of value and applies reduced rates above it. Investment properties are taxed on a different, higher scale.
Can I take money out of the country when I sell?
Yes. Panama has no exchange controls and uses the dollar. Only ordinary banking compliance applies: documenting the source and destination of funds.
Ask for the exact breakdown on your deal
Send me the property you're considering and I'll come back with a closing breakdown including the real HOA fee and the applicable property tax.
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