PRIVATE INTEREST FOUNDATIONS

The Republic of Panama has a long known reputation for providing Offshore Services to the international community. In an effort to provide additional opportunities in this area, Law 25 of 1995 was created. Said Law contains the procedures and requirements for the creation of Private Interest Foundations.

Private Interest Foundations may be used as tax and estate planning device with the following advantages:

1. They provide a fiduciary structure for the orderly transfer and disposition of assets to beneficiaries upon the death of the Founder, keeping control of the assets during lifetime.

2. They may be established to have effects from the date of their constitution or after the death of the Founder

3. According to Law 25 of 1995, inheritance laws that apply in the domicile of the Founder or the Beneficiaries, shall not be effective against the Foundations assets nor may these laws affect the validity or performance of the Foundations objectives

4. Foundations are established to carry the specifics goals set out in the Foundation Charter and may additionally undertake sporadic commercial activities, exercise rights pertaining to their holdings, own property, contract obligations and take part in administrative or judicial proceedings.

5. A Private Interest Foundation should be established with a patrimony destined to fulfill its objectives, witch shall be no less than US$10,000.00. Said patrimony may be increased by additional contributions of the Founder or third parties

6. The assets of the Foundation become legally independent and do not form a part of the private estate of the Founder. Such assets are not sizeable and may not be subject to any precautory action or measure, unless such action or measure pertains to obligations incurred or damages arising from the fulfillment of the Foundations objectives; Notwithstanding the creditors of the Founder or of a third party shall have the right to contest the contribution or transfer of assets to a foundation when such transfer constitutes an act in fraud of the creditors. The rights and actions of such creditors shall lapse at the expiration of three (3) years, counted from the date of the contribution or transfer of the assets to the foundation.

7. According to article 27 of Law 25 of 1995, Private Interest Foundations are exempt from payment of any taxes, contributions, duties, liens or assessments of any kind arising from the acts of constitution, amendment or extinction of the same, as well as acts of transfer or encumbrance of the Foundations assets and the income arising thereof, when related to:

   1. Assets localized abroad

   2. Money deposited by natural or juridical persons whose income does not derive from a Panamenian source is not taxable in Panama for any reason

   3. Shares or securities of any kind issued by corporations witch income is not derived from a Panama source, or which are not taxable for any reason, even when such shares or securities are deposited in the Republic of Panama

   4. The transfer of immovable property, titles, certificates of deposits, assets, funds, securities or shares carried out by reason of the fulfillment of the objectives of the foundation or the termination of the same, in favor of relatives within the first degree of consanguinity or the spouse of the Founder shall also be exempted from all taxes.

For additional information please visit the following sections:

I. REQUIREMENTS FOR THE FORMATION OF A PRIVATE INTEREST FOUNDATION IN PANAMA. Click here

II. MOST COMMON USES FOR THE PRIVATE INTEREST FOUNDATIONS. Click here

III. MANAGEMENT STRUCTURE. Click here

IV. TAXATION. Click here