Investment Migration in Panama and Around the World.

Investment migration has become a more or less common phenomenon in our time. Various economic and political factors can drive people with substantial wealth to move across borders.

According to national media, the Organisation for Economic Co-operation and Development (OECD) included Panama and other Caribbean States in what appeared to be a list of nations with immigration schemes that could facilitate tax evasion, potentially having a negative impact on the operations of the Common Reporting Standard (CRS).

On its page on residence and citizenship by investment, the organization flagged Panama as having a high-risk RBI (Residence by Investment) system, through its friendly-nations visa, reforestation, and economic solvency programs.

"While residence and citizenship by investment (CBI/RBI) schemes allow individuals to obtain citizenship or residence rights through local investments or against a flat fee for perfectly legitimate reasons, they can also be misused to hide their assets offshore by escaping reporting under the OECD/G20 Common Reporting Standard (CRS). In particular, identity cards and other documentation obtained through CBI/RBI schemes can be misused to misrepresent an individual's jurisdiction(s) of tax residence and to endanger the proper operation of the CRS due diligence procedures.

Potentially high-risk CBI/RBI schemes are those that give a taxpayer access to a low personal income tax rate on offshore financial assets and do not require an individual to spend a significant amount of time in the jurisdiction offering the scheme. Financial institutions are required to take the outcome of the OECD's analysis of high-risk CBI/RBI schemes into account when performing their CRS due diligence obligations.

The OECD's perspective

The OECD has analyzed more than 100 CBI/RBI schemes offered by CRS-committed jurisdictions, identifying the following schemes as potentially posing a high risk to the integrity of the CRS.

"The CRS contains the Common Standard on Reporting and Due Diligence that underpins the automatic exchange of financial account information. A jurisdiction adopting the CRS must have rules governing the obligation imposed on financial institutions to report information aligned with the scope of the reporting obligations established."

— OECD (2017), Standard for Automatic Exchange of Financial Account Information in Tax Matters, Second Edition, OECD Publishing, Paris.

In Panama's case, integration into local legislation was carried out through Law 51 of October 27, 2016 (Official Gazette No. 28149-B). The OECD includes on its website the details of the specific programs that raise suspicion among its analysts. These schemes are essentially of two types:

Residence by Investment (RBI): the most common scheme. It has been used in developed countries such as the U.S., the United Kingdom, Canada, Australia, New Zealand, and half of the EU, and has existed for decades. As its name indicates, it consists of obtaining a residence permit in certain nations in exchange for meeting a requirement that generally has to do with the investment of money.

Citizenship by Investment (CBI): born in the small nation of St. Kitts and Nevis in 1984 — the world's first CBI program — it was rapidly adopted throughout the Caribbean and later spread across the globe. From Austria, through Turkey, and as far as distant Vanuatu, many developing nations have adopted these capital-attraction models. This system goes beyond mere residence: it turns those who make the required minimum economic investment into nationals of the State, with various political and tax benefits. Its usefulness may lie, for example, in providing visa-free access to the European Union's Schengen Area; one of its main problems is that it can also make it easier for criminals to escape local authorities.

Russia, China, and the Middle East are the main customers of these schemes, while the U.S., the EU, and the United Kingdom are the main markets where most of these permits are processed. For smaller territories, the income obtained directly and indirectly from these programs can represent between 4% and 25% of GDP (source: CountryProfiler Ltd., Investment Migration Yearbook 2018/2019). The schemes have become popular the world over, to the point that around 100 different states offer some type of CBI/RBI, so they cannot be regarded as a necessarily harmful instrument, but rather as an alternative that offers reciprocal benefits between the applicant and the State.

Colombia

Colombia, for its part, was the only South American nation to appear on this list — it was removed shortly afterward in an update to the content, in what turned out to be a strange declaration on the OECD's part, given that Colombia is a member of that organization. Colombia had simplified its visa system through Resolution 6045 of August 2, 2017, dividing visas into three types (Article 7): Visitor Visa "V", Migrant Visa "M", and Resident Visa "R". The Colombian instruments flagged as "high-risk" were specifically the Migrant Visa categories 6 and 10 (M Visa, Article 17), and the Residence by Investment Visa (R Visa, Article 57):

• Migrant Visa as Entrepreneur (category 6): having incorporated or acquired an interest in the capital stock of a commercial company in the minimum amounts established in the requirements chapter — the minimum amount was 100 current minimum wages (about USD $24,000.00 at the exchange rate of this publication).
• Migrant Visa as Real Estate Investor (category 10): having registered foreign direct investment in Colombia for real estate in the established minimum amounts — the minimum amount was 350 current minimum wages (about USD $85,000.00).
• Resident Visa by Foreign Direct Investment: having registered foreign direct investment in the established minimum amounts with the international exchange department of the Banco de la República, or with the agency acting in its stead — the minimum amount was 650 current minimum wages (about USD $158,000.00).

Fortunately for the Colombian State, the inclusion did not gain traction or make news at the local level. In Panama, by contrast, it resulted in a wave of outrage from several of the country's productive sectors, which watched with frustration as the nation was once again singled out despite its efforts to escape the blacklists of tax havens and jurisdictions with lax tax regulation — efforts that notably include the Automatic Exchange of Tax Information, submission to the CRS, and the criminalization of tax evasion.

Investment migration in Panama

In Panama, the flagged structures were the following: the Friendly Nations Visa, Economic Solvency, and the Reforestation Visa. With respect to the residence permit through the Friendly Nations route, an examination of the legislation shows that, in those cases where this permit is requested on the basis of maintaining economic ties with Panama (being a shareholder of a company, for example), it is not necessary to prove any period of effective residence — as does occur in other jurisdictions, such as Spain — nor is a minimum period of stay required to obtain such a permit. The legislation on this matter at the international level is, moreover, extremely varied, even within the OECD.

Despite the above, the flagged schemes do not grant Tax Residence as such — the certificate issued by the General Directorate of Revenue (DGI) certifying that a natural or legal person is a resident of Panama during a fiscal period, in accordance with Article 762-N of the Tax Code — which must instead be applied for separately before the DGI, among whose requirements are the following:

"To prove a stay in the national territory of more than 183 days, whether consecutive or not, in the fiscal period being requested, or documents confirming the availability of a permanent home or access to lodging", for natural persons.

"To provide evidence establishing the existence of means of direction and administration in the Republic of Panama, in accordance with the provisions of Executive Decree 958 of August 7, 2013 and Resolution 201-0354 of January 13, 2016", for legal persons.

Since this market is in constant flux, adapting to the economic needs of the offering countries, it is impractical to report with precision the full range of schemes used around the world. Cyprus has sold around 3,000 passports, Malta 2,000, and Portugal about 17,000, making them the European countries that have had the most success with these schemes. Even so, they are not free from criticism over the poor quality of the filters applied, the discretion of the authorities, the lack of public data on these programs and their beneficiaries, and the way they put other European Union citizens at risk by indiscriminately selling access to it (sources: El País, Citywire, Arton Capital).

Related content

• Temporary Protection Permit
• What is an immigration status and how to obtain it?
• Restricted professions for foreigners
• Catalog of immigration permits

Relacionado: Investing in Panama: 2026 guide