Foundations in Panama
Private Interest Foundation
A Private Interest Foundation is an independent legal entity, instituted and separate from its founders, beneficiaries, or administrators. It is constituted by one or more persons, who are known as founders.
Private Interest Foundations may own property of any kind, nature or description. There is no initial capital requirement.
Private Interest Foundations can be shareholders of corporations which facilitates the anonymity of the shares, with greater security than bearer shares, generally clients seeking anonymity purchase the Foundation to be the owner of the shares issued by the corporation.
YOU CAN OPEN BANK ACCOUNTS IN THE NAME OF THE FOUNDATION, WHICH WILL BE A SEPARATE PATRIMONY OF THE FOUNDER, BENEFICIARIES AND DIRECTORS, IN PANAMA THERE ARE MORE THAN 90 BANKS, WE WILL ADVISE YOU AND PROCESS SEPARATELY THIS BANK ACCOUNT OPENING, (know the banks)
Foundations have different uses, one is the one explained in the previous paragraph, another is tax minimization, the following taxes are not applicable to foundations:
- Income tax
- Capital gains tax
- Withholding Tax
- Invention Tax
- Interest income tax
- Sales tax
- Tax on beneficiaries
- Transfer tax to the beneficiary
- Capital tax
- Property tax (for foreign companies)
- Real Estate Transfer Tax
- Gift tax
- Inheritance tax
- Stamp tax
- Inheritance tax
- Inventory tax
The Elements required in a Foundation are the following: organization, Assets, Private Interest and Non-Profit.
The Foundation has a Founder, a Board, a Protector and Beneficiaries. Below, we explain what role each of them plays in the Foundation.
Founder: is the one who establishes the Foundation. Our law firm, one of our corporations or our client's corporation is generally the Founder of each Foundation we establish.
Tip: The Council of the Foundation is the Body that directs the Foundation and determines the Protector, a Panamanian corporation can be designated to be the council of the foundation. The members of the board are registered in the public registry with their names, addresses.
Protector: It is the person or entity that controls the Foundation and all the assets held in it. He is appointed by the Foundation Council when the Foundation is created, the Protector has the power to remove the Foundation Council, it is not necessary that the Protector be registered in the Public Registry.
Beneficiary or Beneficiaries:
The Beneficiaries of the Foundation are appointed by the Protector and can be any person.
Facts of a Panamanian Foundation:
- No Reporting and Tax Requirements
- No Penetration of the Corporate Veil
- No Capital Requirement
- Meetings of Directors or Beneficiaries can be held anywhere in the world and are not a requirement.
- Foundations will pay the annual fee of US$300.00 per year.
- Must have a Resident Agent and a Home Address
Requirements for the creation of a Private Interest Foundation in Panama
To proceed we require the following:
- Three possible foundation names in order of preference.
- Your e-mail address, country and city address and telephone number.
- Name and addresses of the members of the founding council. (if they are to be appointed by you) Our law requires a minimum of three people. Copy of the passports of the directors and their designated positions (e.g. president, secretary, treasurer) to be sent via fax to (507)236-4975
- Transfer the cost of the foundation to our bank account or contact us to offer alternative means of payment. Once we receive the confirmation that the funds have been transferred to our account, we will proceed to the elaboration of the foundation, which will take 5 working days and we will send it to your address via courier. The cost is of (US$2,000.00)
Frequently Asked Questions
What is a Private Interest Foundation?
A Panamanian Private Interest Foundation simply consists of the following: A person (natural or juridical) "founds another person (juridical) to which he/she transfers or assigns assets of his/her property, so that this in turn manages and protects them in favor of certain beneficiaries, who have been appointed by whoever founds it. All this structure in a public document called "Acta Fundacional" and a private document called "Reglamentos".
What are the main elements of a Private Interest Foundation?
The indispensable elements for the existence of a private interest foundation are:
The Organization: refers to the distribution of the entities or persons participating in a foundation.
Assets: assets, whether movable (e.g., works of art, bank accounts) or immovable (farms or apartments).
Private Interest: this refers to the fact that a Foundation must be created with the purpose of benefiting or favoring any person, be it a private individual, a family, a company.
NON-PROFIT: that is, a Private Interest Foundation is created without the primary intention of making a profit. Profits or money yield.
Can assets be disposed of during my lifetime in the name of a Private Interest Foundation?
By giving assets or properties, and placing them in the name of a Private Interest Foundation, we make use of what in law is called the "theory of the free disposition of assets", fully accepted by countries with a civil law tradition such as ours. This consists in the fact that a person may dispose of his assets during his lifetime in any way he wishes. That is to say, he can: sell, donate, give them in mortgage or pledge guarantees, lease them, lend them and even remove them; as long as they do not have limits of social or public interest.
What is it and who can be a founder?
The concept of founder under our Private Interest Foundations Law is very broad. The Founder is the person to whom the creation of a Foundation is imputed. This person can be either a national or a foreigner. It can be one person or several persons simultaneously. But there are limits to the person who acts as founder, since this person must have the capacity to act in the juridical world. That is to say, neither the insane, nor the deaf mute, nor minors (girls under 12 years old and boys under 14), are able to act as founders.
What are the rights and obligations of the founder?
Among the rights of the Founder, we find the following:
- Establish the limits, effects, rights and obligations of all persons participating in the "foundation business", the Foundation's board, the protectors, and the beneficiaries.
- To revoke the creation of the Foundation itself (when this is expressly established in the foundational act).
- To receive back the assets transferred to the foundation (when so expressly established in the act of transfer of the assets.
- Reform the Foundation's legal documents, i.e., the foundation charter and bylaws.
- That their assets are not linked to the assets assigned in the name of the foundation. This right is acquired by the existence of two separate estates in two different "persons".
- Reserve the right to change Board members when the interests of the Board are not compatible.
- To appoint supervisory bodies for the correct execution of the foundation's purposes, such as auditors, lawyers, accountants, bankers, as well as the appointment of a "protector" of the foundation.
- To demand strict confidentiality from the members of the Board of Trustees, as well as from public servants and private companies, who have knowledge of the activities of the foundation
- The fundamental obligation of the founder is to adapt the assets to the Private Interest Foundation, once the "foundational act" has been registered in the Public Registry.
What is the Foundation Board?
The Foundation Council is the body in charge of the "Administration". Its members represent the legal entity that constitutes the foundation before the State and other third parties. The members of the Council must be capable of administering its assets. The "Foundation Council" is obliged to strictly follow the rules, conditions, limitations and rights established by the founder in the "Foundation Charter" and its regulations. As a practical recommendation, the persons who make up the board must have good credit and banking references.
What are the duties and rights of the board?
The determination of the Board's limitations and obligations are very flexible. Its responsibilities can be broadly determined in the Foundation's legal documentation. Although this freedom exists, the law establishes some general parameters for the Board:
- To administer the assets given to the Foundation during the entire period of its existence.
- Sign legal documents on behalf of the Foundation
- Submit annual reports to the beneficiaries during the administration of the assets or after their delivery.
- To deliver the assets (given in its Administration) to the beneficiaries, according to the rules established by the Founder in the legal documents.
Who can be a beneficiary of a Private Interest Foundation?
The beneficiaries are simply the persons "favored by the foundation as provided by the founder in the foundation charter or bylaws. From a practical point of view, the beneficiary can be "any person", "national or foreign", "natural or juridical".
What is the resident agent?
It is a Panamanian lawyer or a law firm. Usually the person in charge of the drafting of the legal documents of the foundation outside the Panamanian territory needs a representative who resides where the foundation was registered, Panama.
Who is the owner of the assets given to the Foundation?
The assets that are transferred to the foundation are owned exclusively by the foundations, therefore, all assets that are properly transferred to the foundation are its private property.
Can assets given to a Foundation be seized?
The law guarantees that the assets given to the foundation cannot be seized or seized. In fact, this benefit is possible because the founder and the foundation are two different persons. The founder, by transferring his assets in the name of the foundation, makes the foundation the new owner of the assets; therefore, the assets of the founder and the assets of the foundation are transformed into separate assets, which are not confused. This benefit of "non-sequestration" has two limitations:
- Contracted obligations of the foundation: when the foundation acquires contracted debts in the fulfillment of its purposes, through some type of contractual obligation.
- Non-contracted obligations of the foundation: when the foundation acquires non-contracted debts, in the fulfillment of its purposes, through some type of non-contractual obligations, non-contracted creditors are born who can extend precautionary measures to the assets of the foundation.
Is a Foundation a Private Will?
In a foundation, the founder (as well as the testator in the will) can freely dispose of his assets, determining as beneficiaries of such assets the persons that the founder considers, without necessarily being the "forced heirs" that the law indicates at the moment of establishing a will. On this point it is clearly stated that the "hereditary "rules" are not applicable in a Private Interest Foundation.
Thus, the advantages of a foundation (created to be executed upon the death of the founder) over a will are obvious:
- It is not necessary to open a process for the transfer in favor of the beneficiaries.
- The appointment of forced "heirs" is not necessary.
What are the purposes or objectives of a Panamanian Private Interest Foundation?
The purposes are as follows:
- For Testamentary purposes: a private interest foundation can be created to take effect upon the death of the founder. As we have already explained, the use of this type of foundation can supplant the will, as far as the transfer of assets is concerned. In this modality, it is customary to place in the regulations the "founder" as the first beneficiary of the foundation, with all the rights over the assets during his lifetime, so that upon his death, the assets (transferred prior to the foundation) are distributed or administered in favor of the beneficiaries.
- For personal annuity: create a foundation that has the same effects as an old age plan or private pension.
- For tax purposes: this is given with the simple transfer of the assets to the foundation. There are different tax advantages of the creation of a private interest foundation.
For the protection and administration of assets: it provides the possibility that the assets assigned to the foundation are not "seized or sequestered" due to personal obligations of the founder.
- For charitable, beneficent and general interest purposes: at the time of creating the legal documentation, it also grants the Board the capacity to administer the assets assigned in favor of public purposes of social interest or charitable entities.
- For training and management of capital and securities: a Panamanian Private Interest Foundation can be structured to raise capital from various sources: Fixed term interest, stock market investments, dividends from shares in private companies, etc.
- To be used as collateral: this is done through a mortgage for real estate, or a pledge, for personal property.
- For Insurance Administration: This use is common for trusts. Where the foundation is the beneficiary of an insurance policy previously agreed upon by the founder with an insurance company.
What is the Foundation Patrimony ?
It is nothing more than the sum of assets and rights that are assigned (by the founder or a third party) to the foundation and are in its name.
What are the steps to create a Private Interest Foundation?
We can summarize the steps for the creation of the Panamanian Private Interest Foundation as follows:
1. Signature of power of attorney by the Founder for the creation of the Foundation.
2. Drafting of the founding charter in simple documents.
3. Transfer of the foundational bond in a public notarial deed, with the respective protocol.
4. Entry of Public Deed in the Public Registry.
How does the liquidation of the Foundation Patrimony take place?
Several phenomena can occur at the time of the fulfillment of conditions and events in a foundation, and the subsequent beginning of the process of liquidation of the foundational patrimony. Distribution: this is the traditional way of liquidating a foundation. It orders the delivery of the foundational patrimony to the beneficiaries, as provided by the founder, at the time and in the manner indicated by him/her. Restitution: this can occur in the event that the legal documents of the foundation order to "dissolve" the assets transferred to the foundation to those who originally contributed them. This restitution could very well include the fruits or profits produced by such assets during their stay in the hands of the foundation.
Private Interest Foundation Incorporation Costs
The total cost of our firm for incorporating a Private Interest Foundation in Panama, including the translation of the documents into English, duly authenticated, and delivery by courier to your office is US$2000.00
*This cost includes all fees and expenses, and including shipping to your door, this includes a basic foundation that is broken down:
Notary fees. Rights of inscription in the Public Registry, based on an authorized capital of US $10,000.00. The shares may be nominative or bearer shares. This capital does not have to be paid in any of its parts. Our fees for the first year as Resident Agents.
Legal Expenses. The foundation pays an annual fee to the Ministry of Economy and Bond for its effectiveness as its resident agent in Panama.
The fee to be paid annually from the date of registration is US$300.00 per year and the amount of US$300.00 for resident agent in Panama (this amount will be paid annually from the date of registration of the foundation, we deliver it to you with the first year paid).
*Nominative Founding Council: For privacy purposes or if you wish to remain anonymous, our firm can nominate the three members of the founding council required by law for an additional cost of USD $200 per year for each member for their representation.