Panama
Financial Services

Licensed
Mutal Funds in Panama

Panama – Financial Centre – Overview

Panama is one of the worldwide jurisdictions where you can establish a dully licensed corporation allowed to legally carry out financial operations, including general and financial consultancy, gold, silver and platinum transactions, factoring, payments processing, online processing systems, collection of debts, taking moneys from third parties, Forex, amongst others.

International investors, financiers and businessmen find Panama an ideal foreign base country for world-wide operations and transactions. Panama taxes according to the territoriality principle (that is, it does not tax foreign-source income), only the income produced locally is taxable, disregarding the citizenship of the taxpayer. Dividends are not included as income subject to income tax.

Due to its structure, geographical position, political stability and characteristics of its economy, Panama has become one of the most important tax havens of the Western Hemisphere. It has excellent international transportation and communication systems; the United States Dollar has been a currency of legal tender for more than ninety years.

Panama has taken several steps to modernise its economy and promote foreign investment. Most Panamanian and foreign investors choose to form Corporations. There are no exchange controls, currency restrictions or reporting requirements, and Panama imposes no limits on monetary transfers to and from the country.

Scope of Financial Activities
Private Placement Programs

Panamanian Mutual Funds or Investment Companies are an excellent vehicle for those wishing to invest in Securities, Stock Market, Funds participations and issuing Bonds, under a confidential Private Placement Program (PPP), to be set up under exemption from registration at the targeted countries’ financial authorities.

Important Remark:
Such bonds or securities would be supposed to be offered to citizens or corporate entities located or based outside Panama; local Panamanian citizens or corporations would not be allowed to subscribe.

Question:
Will this offering be exempted from registration or regulation at the financial authorities of Panama? What would be the requirements for application?

Answer:
Under the Panamanian Securities Law, Bonds are considered as securities; therefore, a Company operating in or from Panama, issuing bonds, will have to obtain a special license from the National Securities Commission (be registered with NSC).

However, since the Company will not be operating in or from Panama, it will be registered as an Investment Company with the NSC for the purpose of issuing its participation quotas abroad – ONLY ABROAD; in this respect, the Company will have to submit several documents, audited reports, and others.

The Investment Company will pay no tax in Panama for the earnings or profits generated abroad.

Investment Funds in Panama
Mutal Fund Companies – Investment Companies

According to current securities regulations in Panama, any Mutual Fund Company that publicly offers its participation quotas or membership interests, or offers said quotas in or from Panama, must appoint an Investment Administrator as well as a Custodian and comply with very detailed and strict requirements that are stipulated in the Securities’ regulations.

Exceptions:
Notwithstanding the foregoing, the Mutual Fund Company will not be required to appoint an Administrator or a Custodian, if its membership interests or quotas are offered abroad, or the company is incorporated and administered in a foreign jurisdiction.

If a Mutual Fund Company or its Investment Administrator or another company on behalf of the Mutual Fund Company offer securities and carry out promotional activities within the Republic of Panama, then authorities shall consider that the Mutual Fund Company is publicly offering its membership interests or quotas in Panama and thus will be required to file a license application.

Place of Management

A – An investment company shall be defined as managed in or from the Republic of Panama according to the following criteria:

1) If the investment company designates an investment administrator in the Republic of Panama;
2) If the principal domicile of the investment company is located in the Republic of Panama or the prospectus or other promotional material indicate that it is located in the Republic of Panama;
3) If the investment company has designated a custodian in the Republic of Panama;
4) If the number of directors necessary for the board of directors of the investment company to adopt a resolution are domiciled in the Republic of Panama;

B – An investment company shall not be considered to be managed in nor from Panama should one or more of the following circumstances arise:

1) That the investment company is formed or incorporated under the laws of the Republic of Panama;
2) That the investment company has a domicile in the Republic of Panama, provided that the Republic of Panama is not its principal domicile and the prospectus or promotional material being used does not suggest otherwise;
3) That one or more of company’s directors, officers, trustees, attorneys-in-fact or employees have their domicile in the Republic of Panama, provided that the majority of them, which have the power to make decisions on behalf of the Company, are not domiciled in the Republic of Panama;
4) That the administrative services, such as accounting, secretarial, registry, stock transfer, and other similar services are provided for the investment company in or from the Republic of Panama;

Moreover, Mutual Fund Companies that only offer their membership quotas or interests abroad are those that:
a) Have been incorporated in accordance to the laws of the Republic of Panama;
b) That the investment administrator’s office or principal place of business is located outside of the Republic of Panama;
c) That the mutual fund company’s assets are managed outside of the Republic of Panama;
d) That the mutual fund company offers its membership quotas to persons domiciled abroad; and
e) The securities and assets custodian is domiciled outside of the Republic of Panama;

We recommend the registration of a company that would exclusively offer its membership quotas abroad since the attainment of this registry at the National Securities Commission (NSC) is expeditious and the company’s Investment Administrator shall not be required to obtain the license that is granted by the National Securities Commission.

Remarks:
Please note that the aforementioned matters are currently regulated by the Regulatory Agreement No. 1-2006, of the National Securities Commission.

Requirements

Registration request
Any Investment Company that will offer its participation quotas to persons domiciled outside Panama will have to submit an application before the national Securities Commission through a licensed attorney, with the name and address of:

a. The Investment Company;
b. Of its Investment manager;
c. Of its representative in the Republic of Panama, that can be an investment manager in Panama, a brokerage firm, an investment advisor, a Bank, a Law Firm a Trust Company or any other person appointed by the petitioner; said representative must have enough faculties to represent the company before the Commission and to receive administrative and judicial notifications;
d. Of the custody agent;
e. Of the directors and officers;
f. Of the main executives of the Investment Company;

The NSC will review the application and could request additional information in writing and any necessary clarifications deemed convenient.

Documents to be submitted with the application
1. Power of attorney to the Lawyer or Law Firm;
2. Libel of application for the registration;
3. Power of Attorney granted to the representative in the Republic of Panama;
4. Copy of the articles of Incorporation, trust or document by means of which the fund is constituted with any amendments thereof;
5. Audited Financial Statement for the previous fiscal year; if the applicant is on pre-operational stage at the time of filing the application then it must submit an initial general balance duly audited;
6. Extract from the Public Registry;
7. Copy of the prospectus to be utilized;

The document on point 5 can be issued by a local or foreign CPA. If issued by a foreign CPA it must be translated to Spanish and legalized before a Panamanian Consulate or by means of the Apostil. The same situation for any and all documents issued abroad.

Capital Requirements
There is any minimum capital requirement; however, we would recommend using a minimum capital of $25,000.00 as this is the capital required for funds to be offered to persons domiciled in Panama.