Panamanian Trusts and Foundations
handle almost every financial task. The admired and world famous Liechtenstein Anstalt is a living proof of this statement: the protection offered during the last decades has acquired world-wide prestige.
A trust may be used as a stand alone Offshore Vehicle or in combination with an offshore corporation. Basically a trust can be used in lieu of a corporation and a will to make sure that your offshore assets are distributed according to your wishes during your lifetime and upon your death. As a business vehicle it is a little unwieldy. We recommend to use a corporation for your business and have a trust own the shares of your company with instructions on how to proceed upon your death or disability. Operating in this manner you have maximum flexibility in your business dealings, maximum privacy due to the multi jurisdictional nature of our company/trust vehicle and a clear cut set of instructions on how we should proceed, should something happen to you. As always what vehicle we design for our clients is mandated by each clients special needs.
However, been aware of the hefty fees involved with the incorporation of the Liechtenstein Anstalts (although we can arrange for interested clients), we have decided to shift our focus to the new Panama trust and (PT) foundation, offering all the same advantages at a mere fraction of the costs: you can incorporate now a Private Interest Trust or Foundation in Panama in accord with Liechtenstein Law by a mere fraction of the cost.
Panamanian Private Interest Foundations. Constitution.
The Panamanian Legislative Assembly approved Law No 25 of June 12th, 1995, regulating private interest foundations. The following paragraphs summarises some of its most important aspects.
The foundation may be constituted by one or more natural or juridical person, either by themselves or through third parties. The endowment of a foundation capital is required, exclusively destined to the purposes expressly provided in the foundation instrument. The foundation capital may be increased by the founder or any other person. Constitution is obtained by the founder after subscription of the private instrument. The founder's signature must be authenticated by a Notary Public of the place of constitution. In case the foundation is to be formed to have effect after the founder's death, testamentary grant formalities are not required.
The foundation instrument must contain:
- Name of the foundation, which must be different to any other existing foundation in Panama.
- The word foundation must be included in the name.
- Foundation capital: al least USD 10,000
- Names and addresses of the foundation board members to which the founder may belong.
- Domicile of the foundation.
- Name and domicile of the foundation's resident agent (lawyer or law firm) who must authorise the foundation instrument before its registration at the Public Registry Office.
- Purposes of the foundation.
- Procedure to appoint the foundation's beneficiaries, among which the founder may be included.
- Reserve of the right to modify the foundation instrument when deemed convenient.
- Duration of the foundation.
- Destiny of the foundation assets and liquidation procedure upon dissolution, and
- Any other lawful clause the founder deems convenient.
Private interest foundations must seek non-profitable purposes. Nevertheless, commercial activities may be carried out, and capital stock rights may be enforced by the foundation as long as the outcome of such activities is destined to the foundation's purposes.
All foundations are subject to payment of registration fees and annual franchise tax equivalent to those charged to Panamanian corporations. All acts of constitution, modification, extinction, transference or encumbrance regarding the foundation assets and foundation assets related income, are exempt of any kind of taxes, duties, charges or fees, if such assets:
- are located abroad.
- money is deposited by natural or juridical persons whose rent is not of Panamanian source or not taxable in Panama.
- stocks or securities, issued by corporations whose rent is not of Panamanian source or not taxable by any cause, even though those stocks or securities are deposited in Panama.
Registration of the foundation instrument before the Public Registry Office shall invest legal capacity to the foundation, regardless of any other legal or administrative authorisation. Said registration will also be of public record against third parties.
Once the foundation is registered, the founder or third parties that have obliged to the endowment of assets (either current or future), must formalise its transfer. An important characteristic of the foundation capital is that it constitutes an independent property from the founder's personal property. Therefore, foundation capital may not be attached or garnished, except for damages or obligations incurred as a result of the foundation purposes. In any case, foundation capital will compensate personal obligations of the founder or the beneficiaries.
Private interest foundations and transfers to the foundation are irrevocable.
This board must have a minimum of three (3) members, in the case of natural persons. Its main function is to fulfil the foundation purposes. Supervisory Organs Besides the foundation board, the foundation instrument may provide for the appointment of supervisory organs (custodians, auditors or any other similar) appointed by the founder or majority of founders.
Specific causes are established in the Law.
Foreign foundations may be registered in Panama and continue their legal existence as a private interest foundation in the Republic of Panama. Likewise, private interest foundations constituted according to Panamanian Law and its assets, are entitled to transfer to another foreign jurisdiction.
Money Laundering Provisions
In order to avoid the use of Panamanian corporations for drug traffic or money laundering purposes, every Panamanian attorney acting as resident agent of a Panamanian corporation must know his client and be able to keep enough information for his identification, in accordance with Executive Decree No 468 of 1994. These provisions are applicable to the operations of private interest foundations.
All members of the Foundation Board and Supervisory Organs, as well as private or public functionaries that are aware of the foundation activities or operations, must provide reserve and confidentiality at all times and are subject to civil and criminal responsibility.
The foundation instrument may express that all controversies will be settled by arbitration. In lack of this provision, general Procedural Law would be applicable. Finally, we would like to mention that many of the provisions contained in the Private Interest Foundations Law follow general principles contained in the Panamanian Trust Law (Law No 1 of 1984) as well as the Liechtenstein Family Foundation Law.