Offshore Company Formation
Panamanian Private Foundations

Panama has a long reputation for providing offshore services to the international community. In an effort to provide additional opportunities in this area, Law No. 25 was enacted in 1995. Pursuant to said law, Private Interest Foundations may now be established in Panama in similar form as had been the case in other jurisdictions such as Liechtenstein.

This legislation provides a modern, flexible, and cost efficient framework to use Private Interest Foundations as convenient and effective instruments for estate or property planning.

The corresponding law and regulations set out a simple and straightforward system for the establishment and management of Private Interest Foundations without regard to nationality requirements of the person or persons wishing to settle or administer a foundation, or the beneficiaries thereof.

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

• They provide a fiduciary structure for the maintenance of assets for the benefit of designated persons or for orderly transfer and disposition of assets to beneficiaries upon the death of the Founder, whilst keeping control of assets during lifetime.

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

• According to Law No. 25, inheritance laws that apply in the domicile of the Founder or the beneficiaries shall not be effective against a Private Interest Foundation's assets nor may these laws affect the validity or performance of the Private Interest Foundation's objectives.

• Private Interest Foundations are established to carry out the objectives set out in the Founding 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.

• A Private Interest Foundation should be established with a patrimony destined to fulfill its objectives, which shall be no lees than US$10,000.00. Said patrimony may be increased by additional contributions of the Founder or third parties, without the need to publish or register any document.

• The assets of a Private Interest 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 precautionary action or measure, unless such action or measure pertains to obligations incurred or damages arising from the fulfillment of the Private Interest Foundation's objectives.

• 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 assets and the income arising thereof.

• Foundations that are organized in accordance with the laws of another jurisdiction may continue their existence as a Private Interest Foundation in Panama, and conversely, Private Interest Foundations organized under the laws of Panama may continue their existence in accordance with the laws of another country.