Here’s how to get residency in Panama using your IRA or other US retirement account. If you want to get residency in Panama through investment, you can use your retirement account in one and only one opportunity.
First, let me mention the rules in play when you make an investment and get residency in Panama using your retirement account. These rules significantly restrict your options to get residency, but there is one path open you you.
Note that, even when you take your IRA or other retirement account offshore, you must follow all US IRA rules. If you get caught cheating, your entire IRA may be considered distributed, taxes due on the total amount (not just the amount used improperly), plus a 10% penalty for early withdrawal and other charges.
The most important IRA rule is that you can’t receive a personal benefit from investing your IRA. So, you can’t simply invest $x in Panama and get residency in return. The residency permit must be done as a side deal not directly related to the investment made by your IRA.
Second, you can’t borrow from your retirement account. As the owner of an IRA, you are prohibited from borrowing against the account for more than 60 days. Therefore, you can’t borrow from your IRA to invest in Panama. The investment must be made by your IRA and the asset must be titled in the name of your IRA or your IRA LLC.
Third, let’s consider the residency programs in Panama. For a complete list, see my article Top 6 Panama Residency Programs.
The options that require an investment are the Person of Means visa, the Friendly Nations Visa, and the Reforestation Visa.
Because a person with a US retirement account is likely a US citizen, and thus from a “friendly” nation, we will ignore the Reforestation Visa option. That visa is intended for people not from friendly nations. This is because the friendly nations investment program requires an investment of $20,000 and the reforestation visa requires an investment of $80,000. For a list of “friendlies”, see: Best Panama Residency by Investment Program.
So, we’re left with the Friendly Nations visa and the Person of Means investment offerings.
In order to qualify for residency in Panama using the Person of Means visa, you must a) deposit $300,000 in a bank account in Panama, 2) buy a home for at least $300,000, or 3) invest a minimum of $100,000 in a two-year certificate of deposit in a bank located in Panama and buy a home in Panama. The combined total of your CD and real estate should be at least $300,000.
The Person of Means visa requires that the bank deposit, CD, and/or real estate be in your name. You can’t use a corporation or trust. Because the investment in Panama for the Person of Means visa must be titled in your name, this program is not compatible with the US IRA rules.
Your IRA LLC, or assets purchased with your retirement account, must be titled in this manner:
US Custodian, Inc. FBO Your Name IRA # 55-55555555
Remember that, even after you take your IRA offshore through an IRA LLC, you will have a US custodian involved. You will be in control of the account and the custodian will be responsible for annual filings in the United States.
FBO = For the Benefit Of
And here lies the conflict – any investment made by your IRA must be titled in the name of your account. If you’re using an offshore IRA LLC, the investment can be titled in the name of your LLC. Under no circumstances may an IRA investment be titled in your name.
If you were to use IRA money to buy a home, CD, or deposit into a bank account in Panama, and that account is in your name (not in the name of your IRA), this would be a distribution subject to US taxes and penalties.
Now we’re left with the Friendly Nations visa. If you want to invest in Panama using your IRA or other retirement account and get residency in return, this is the only option available.
And the only investment compatible with both the IRA rules and the Friendly Nations Visa is teak. If you invest $20,000 in teak, you will get residency in Panama for free (included in the investment amount.
When you invest in teak to get residency in Panama through your IRA, you need to break-out the investment and the costs associated with residency. To avoid self dealing, you invest about $16,000 in teak through your IRA and pay other fees of about $4,000 from your personal savings (not your IRA account).
You will get teak of the same value had you invested $20,000 and avoid the IRA self dealing rules. And you and your family may all apply under the Friendly Nations visa with an investment in teak.
Note that this Panama residency option also avoids the issue of titling. You can hold the investment in teak in the name of your retirement account or in the name of your IRA LLC and process the Friendly Nations visa under your name.
If you would like to get residency in Panama using your IRA or other US retirement account, the Friendly Nations visa is your friend. For more information, please contact me at firstname.lastname@example.org or call (619) 550-2743. We will be happy to work with you to get residency using your IRA.