Panama Foundations

The Panama Foundation came into being with the Law no 25 of June 1995.This entity is commonly referred to as a cross between a corporation and a trust. The Panama Foundation Law was modeled after that of Liechtenstein which was in fact the first country to implement such a law structure. Since the implantation of the relevant legislation a number Panama foundations have been incorporated in the republic. The Foundation can be regarded as a progressive and flexible tool which can be utilized in estate planning.

A second option is the St. Kitts Citizenship by Investment which offers a sugar investment route and a real estate investment option to applicants for St. Kitts citizenship. The island of Grenada once operated a similar program, under the Grenada citizenship program but this no longer exists. Application procedures for Dominica citizenship by investment are strict but full support is provided by licensed agents.

A Panama foundation is registered with the help of a registered agent in Panama. The process involves the submission of the Foundation Charter. The Foundation Charter must include the following:

  • The name of the foundation which must include the word foundation
  • The initial capital of the foundation which stands at US$10,000 or the equivalent in any currency
  • Designation of member of the foundation
  • Name and address of members of the foundation
  • Address of the foundation
  • The purpose of the foundation
  • Name and address of the registered agent
  • Appointing of beneficiaries
  • Time span of the foundation
  • How the foundation is to be liquidated and how the shares are to be assigned
  • The by-laws of the foundation

The Foundation Charter can be stated in a language which uses the Latin alphabet. If the Charter is not written in Spanish then a certified copy must be submitted. Translated copies must be certified by Public Translator of the Republic of Panama.

The Panama Foundation has four basic but very important elements; a founder, a council, beneficiaries and a protector. The Founder is the person or company incorporates the foundation. In Panama the agent or law firm representing the client or acting as the agent fill that role. The Council plays the same role as that of a director of a corporation. The protector has control over the assets of the foundation. The beneficiaries are the persons who will ultimately inherit the assets of the Foundation in case of death or any other circumstances stated in the Foundation’s by- laws. Nominee services are provided for the Protector and Foundation Council.

Panama Foundations according to the legislation cannot carry out business activities for gain but the act makes provisions for Foundations to increase their capital by giving them the right to purchase stock or shares in other companies, and banking amongst other commercial activities. The Foundation will be acting within the limits of the law if the profits in such transactions benefit the beneficiaries.

All assets in a Panama Foundation are a separate entity from the founder and beneficiaries. This makes the assets safe from civil litigations, forced heirship or any such activity brought against the beneficiaries or founder.

Panama is a tax haven therefore none of the following will be paid by a Panama Foundation, capital gains tax, income tax, property tax, gift tax, inheritance tax, property tax amongst others. Stamp Duty will not be paid on transactions carried out by a Foundation incorporated in Panama. Panama Foundation must each year pay a renewal fee to the Government of the Republic of Panama.

A Panama Foundation is a good tool to use in tax and estate planning. Developed to protect people from people from forced heirship and mismanagement of wealth the Foundation also efficiently minimizes taxation.

Panama Foundation is a very good vehicle to use for tax and estate planning. A Panama Foundation is very economical to incorporate when compared to the price of incorporation in other jurisdiction. A Panama Foundation is easy to set up and agents in the Republic of Panama can provide nominee services to protect the identity of the owners of the foundation. Panama Foundations must have the following; council, founder, protector and beneficiaries. These must be states in the Foundation Charter.

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