An increasingly popular type of Private Investment Fund recognized by Panama law is the PIF-20.
The Panama PIF-20 is a Private Investment Company which can be incorporated in Panama with a specially tailored constitutional document providing:
(a) that there will be no more than twenty (20) investors due to their membership to an enterprise or an association; &
(b) that shares or units in the Company will be offered on a private basis and not by public means of communication.
This type of Fund is not required by law to appoint an investment manager or a custodian. Moreover, the Panama PIF-20 Fund does not have to be registered with (nor its existence even notified to) the SMV (ie the Superintendency of the Securities Market of Panama) and is not required to comply with the provisions of Regulation No. 5 of 23 of July of 2004 (ie a PIF-20 Fund is not subject to the normal post regulation Regulatory Supervision/Reporting requirements that normally apply to Licensed Mutual Funds in Panama).
The PIF20 is ideal for deployment as a Start Up (or First Time) Fund and is significantly cheaper and (much) easier to set up compared with its direct competitor ie the BVI Incubator Fund. Most significantly, unlike most (it not all) comparable jurisdictions you don’t need to include a Licensed/Experienced Financial Professional on/in the proposed Board of Directors/Management Team/Ownership Team.
OCI can provide you (and/or your client/s) with the required legal/practical/etc assistance to establish such an Investment Fund in Panama.
Here are some of the frequent questions we receive and their answers:
1. How long will it take to establish a PIF20?
Once we have obtained the due diligence information/documentation, we will be able to register your PIF20 in 1-2 weeks.
2. What really makes a difference between a PIF20 and an ordinary Panama company? Meaning what makes it to become / to carry the name of “fund”?
A PIF20 is subject to the Panama Corporations Law and the Panama Securities Law (and its regulations). A PIF20 Fund may carry the name “FUND”.
3. Do I understand correctly that PIF20 is tax neutral and also no withholding applies for distributions to investors?
A PIF20 will be considered as an ordinary Panama offshore company for taxation purposes. Consequently, a PIF20 will not be subject to any withholding tax in Panama and will not be subject to Corporate Tax in Panama ie assuming (i) the PIF20 is managed/controlled from outside of Panama and (ii) that all its income is sourced from outside of Panama
4. Is there any accounting / reporting required?
A PIF20 must maintain accounting records but there are no reporting requirements. Our firm as Registered Agent will need to have access to the accounting records for compliance purposes, upon requirement. All you need to do is provide an address and the name of contact person being the individual who will keep custody of the accounting records. A PIF20 is not a regulated entity, but the Company’s Panama registered agent may be subject to inspections from the SMV in order to validate that the company is in full compliance with PIF20 regulations.
5. What does OCI’s fee cover / what documents will be produced? What is required to carry PIF20 in general and annually, like address, local contact person? What about a bank account? Is it realistic to open it in Panama if non-resident beneficiaries are involved?
The set up fee of $US2,000 includes the total legal fees and expenses for registering your PIF20 company with a specially drafted provision in the Articles of Incorporation, to comply with the Panama Securities Law. There is no need to appoint a local director or representative. Opening a bank account for a PIF20 in Panama is not unrealistic but it can certainly be very bureaucratic. Kindly note that the PIF20 is generally incorporated with two classes of shares, Investor Shares (ie Class B shares which have dividend rights but no voting rights) and Management Shares (ie Class A shares which come with both voting rights and dividend entitlements).
It also should be noted that the Fund Manager of a PIF20 must be a separate legal entity that can be established as an ordinary Panama company or of any other jurisdiction that is not managed in or from Panama.
Would you like to know more? Then please Contact Us:
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.