Our team assists those who want to set up a fund in Panama for the purpose of asset protection, estate planning, or other reasons.
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How are Panamanian funds used?
An investment fund in Panama can be used for asset holding, investment management, and other business-related purposes.
In some cases, a fund in Panama can be used for asset protection purposes, given the fact that assets can be placed therein and, as such, are protected against creditors’ claims.
High-net-worth individuals can also use a fund in Panama for inheritance distribution purposes. In this case, the assets placed in the fund are distributed as per the founder’s instructions, the fund doubling as asset protection against inheritance claims.
What are the steps for opening a fund in Panama?
The following requirements apply when establishing an investment fund in Panama:
- Choosing the legal form, which will also involve company creation in Panama, as the legal form to hold the fund;
- Structuring and purpose. Specific documents are drafted that include the prospectus, bylaws, etc.;
- Appointing a local representative – this is a mandatory step;
- Registration with the governing authority and notifying of any changes related to the fund.
What types of funds can investors set up in Panama?
An investment fund is incorporated in Panama in the form of a company, structured to achieve the purpose of the fund, and, when intended for qualified investors, pertains to specialized investment strategies.
For those who set up a fund in Panama, the usual choice will be between a personal investment fund with a maximum of twenty investors and the equivalent designed for a maximum of 50 investors. In practice, these can be referred to as the PIF-20 and the PIF-50, where PIF refers to personal investment fund.
What are the key characteristics of Panamanian funds?
Some main issues to keep in mind concerning Panamanian funds include the following:
- The fund takes into account the number of investors and thus the private investment fund participation quotas;
- Some funds can be public; however, in this case, the founders comply with additional requirements;
- Those who open a fund in Panama will duly notify the authority that governs and supervises these instruments (see below);
- The main law that regulates investment funds in Panama is the Securities Law, along with other important regulations.
What special conditions are in place for Panamanian funds?
The following conditions may also apply:
- The number of investors can be limited according to fund type: 20 or 50;
- For a private investment fund offered to qualified investors, the minimum initial investment can be set at USD 100,000;
- The criteria for being considered a qualified investor may also mean that the individual will be required to provide proof of minimum net worth (in some cases, no less than USD 1,000,000).
A condition for those who set up a fund in Panama is to have an appointed investment manager located in the Republic.
The fund manager can be a natural or legal person; however, in any case, the party appointed for this role shall maintain a valid license at all times (see below for details).
What documents are required to open a private investment fund in Panama?
The following documents are prepared when setting up a fund in Panama:
- Incorporation documents: these are usually the company’s articles of incorporation, when the fund is set up as a company in Panama;
- The prospectus: the document containing details about the fund (objectives, performance, expenses, etc.);
- Audited financial statements, as available;
- The name and addresses of the representative, directors, main executives.
Please keep in mind that the list above is not exhaustive, and the authorities may require additional documents.
The application for registration is oftentimes submitted through a representative.
The Superintendence carefully reviews all applications and issues its decision, usually within thirty days of submission (or more, in some cases).
Our team of experts in company incorporation matters in Panama can assist with the steps required to open a company in Panama that will be used for the fund, and with a better understanding of the requirements for residency.
Are Panamanian funds registered with the authorities?
The process to set up a fund in Panama is complete once registration with the Superintendency of the Securities Market of the Republic of Panama (SMV) is approved. The role of the SMV is key in implementing the Securities Law and overseeing financial instruments, funds, and forex, among others.
What are the main regulatory requirements for funds in Panama?
A fund in Panama:
- Is properly set up, following the process for company formation in Panama, and its structuring according to purpose;
- Has an investment administrator and a representative in Panama. Conditions apply for the latter, and our team can give you more details before you start the process to set up a fund in Panama;
- Any changes brought to the fund are duly notified to the SMV in due time.
What are the requirements for the fund administrator in Panama?
A Panamanian fund is ordinarily required to be administered by a licensed fund administrator. This means that adequate licensing and license compliance are required.
The license of a fund administrator is issued by the Superintendence of Securities Market, and it is subject to a registration fee of ten thousand balboas, along with other compliance requirements.
In addition to the initial license for this role, the fund administrator shall pay an annual supervision rate of five thousand balboas to the Superintendence.
How is a private investment fund taxed in Panama?
The Panama-incorporated fund will be subject to tax on its Panama-sourced income. As a result of the local tax laws, foreign-source income is generally exempt from tax.
Our team can give you more information if you are interested in Panama company formation or fund creation. Contact us for assistance.