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The Panama Foundation

A comparison between the Private Foundations and the Trust The Foundation is the civil-law equivalent of the trust in anglo-saxon law. Where the trust has a settlor, trust property and trustees, the Foundation has a founder, foundation funds and the foundation council; both the trust and Foundation have beneficiaries and protectors.

There are, however, significant differences between the two: the Foundation is, in itself, a legal entity, whereas the trust is not; in a trust there are legal owners and beneficial owners, whereas in a Foundation there is no such split as the Foundation itself is the owner of the Foundation funds.

Despite these differences, both trusts and Foundations are considered among the best vehicles for individuals wishing to arrange the succession of private assets.
The Panamanian law on Foundations Although Panama already had a modern trust law, Act No. 25 on Private Foundations (the Act), passed by parliament on June 12th 1995, provided Panama with a civil law alternative to the trust.
What is a Foundation? According to Panamanian law, a Foundation is a capital endowment made by one or several individuals or corporations, called Founder, for a specified purpose, such funds becoming thereby autonomous, the administration of which is committed to a governing body, called Foundation Council, for the purpose of implementing the founder’s intentions or objects of the foundation and for the benefit of one or several individuals or corporations, called beneficiaries, acquiring legal personality upon its registration in Panama’s Foundations Register in the form of a Foundation Charter. A Panama foundation may be formed either inter vivos (revocable) or mortis causa (irrevocable).
Basic documents The main documents of a Panama Foundation are the Foundation Charter, which must be registered for the foundation to become a legal entity and the By-Laws, which set down the rights and identity of the beneficiaries. The By-Laws, usually issued by the Foundation Council, are strictly private and 7confidential. (See below for more information).
Purpose According to the Act the purpose of a Foundation must be non-commercial and non-profit. A Foundation may not operate as a company, although it may own shares in other companies or invest in the finance industry, provided that any income generated be used exclusively for the specific purpose of the Foundation.
Initial Foundation Capital and subsequent changes The minimum initial capital required for a foundation is 10 000 USD, though this amount can be increased at any time after constitution and the change need not be notified in Panama. The Foundation funds may be paid in by the Founder or a third party, and no proof that this has been paid is required by the registrar prior to formation. Once the Founder has made the initial endowment, the Foundation Funds become autonomous and legally separate from any other assets owned by the Founder.
Foundation council The Foundation Council must contain at least three individuals or one company, or a combination of the two. These may be of any nationality, though it is usual for the Resident Agent (a local lawyer) to sit on the council as a fiduciary councillor.
By-laws or regulations The By-laws or Regulations are the documents which set down the identity and beneficial rights of the Beneficiaries. These are normally drawn up by the Foundation Council, and remain strictly private and confidential. There is no requirement for the details to be registered with either the Foundations Register or the Registered Agent in Panama, and all administration can be carried out abroad.
Beneficiaries The Beneficiaries can be physical persons of any age and/or legal entities of any nationality. They are not the owners of the Foundation, nor are they creditors. It is possible to appoint new beneficiaries at any time after the Foundation has been registered. The rights of the beneficiaries are set down in the Foundation Charter or the By-Laws, or by resolutions passed by the Foundation Council.
Protector(s) The Foundation Charter may stipulate the appointment of optional “protectors” to control or advise over the Foundation. The Act sets down the possible roles of such protectors, and the Founder or Foundation Council finalise the specific powers in each individual case.
Data required to be registered In order for the foundation to be registered and acquire corporate status the following minimum details must be stated in the charter (as required by the Act): foundation name, initial foundation capital, members of the board, domicile of foundation, local representative (registered agent), purpose, method of appointing beneficiaries, rights reserved by founder (if any), and duration of foundation. It is not necessary to register details of the beneficiaries or beneficial rights.
Amendments to charter and by-laws Generally, the Foundation Council has the right to make and register amendments to the charter at any time. The registered agent must file a memorandum of amendment with the Foundations Registrar. It is not necessary to register or make public amendments to the by-laws.
Accounting and Auditing requirements The Foundation is not required by law to file accounts in Panama. However, the Foundation Council is responsible for reporting the financial affairs of the Foundation to the Beneficiaries (or their representatives), and thus a bookkeeping requirement is implied. The Charter or By-Laws may, however, make other provisions.
Dissolution of a Foundation Art. 25 of the Act and the Charter and By-Laws of a Foundation set down the terms for dissolution. The Charter may state a fixed duration for the Foundation; if the purpose is deemed unattainable, or if the Foundation was formed subject to revocation, then the Foundation can be dissolved. If the Charter does not make provisions for dissolution, then any decision on dissolution is the responsibility of the Foundation Council. Whenever a Foundation is dissolved, this decision must be registered in Panama.
Transfer of Domicile It is possible for Panama Foundations to transfer their domicile abroad, and for foreign foundations to transfer their domicile to Panama. This does not entail loss of corporate status or a change in the obligations to third parties. From the date of transfer, the Foundation becomes subject to the law of the new country of domicile.
Registered Agent requirements In accordance with Art. 5 of the Act, all Foundations must have a local Registered Agent in Panama. The Registered Agent can be either a local lawyer or law firm.
Laws governing Confidentiality Panama has a strong tradition of protecting confidentiality and privacy. Both statutes and the penal code strictly govern this matter in the fields of law practice, banking, trusts and foundations etc. Abuse or unauthorised transmission of confidential information by anyone with access to such information may result in prosecution. Banking secrecy will only be over-ruled by court order and in criminal cases. Tax offences do not, however, result in criminal action.
Fiscal Territorial Rule and Inheritance Tax Fiscal law in Panama is based on territorial rules, which means that foreign-source income of individuals and corporations is free of tax and freely transferable. In addition, Panama has entered no agreements on juridical assistance on tax matters with any other countries. There is no inheritance tax in Panama, so companies or foundations inheriting assets can do so tax-free.
No Enforced Inheritance rights Panamanian law does not recognise enforced inheritance, and foreign judgements on such matters can not be applied. However, it is still not advisable for the assets of a Panamanian Foundation to be held in a country where forced inheritance exists, as this may lead to complications and conflicts.
What are Panama Foundations usually used for? The Panama Foundation is an ideal vehicle for the non-commercial holding and administration of assets and for estate planning. The Foundation provides suitable protection and ensures succession in an advantageous tax environment. The flexibility allows for changes in the beneficiaries, amounts of Foundation funds and rights of beneficiaries.


Compulsory costs
Formation Fee 1590 USD
Annual Fees
Registered Agent 990 USD
Annual Tax 300 USD
Total Fee for Formation and First Year Fees 2880 USD
Optional costs
Foundation council 990 USD per year
Power of Attorney – non-registered 250 USD
Power of Attorney – non-registered + Apostille 250 + 160 USD
Power of Attorney – registered 350 USD
Power of Attorney – registered + Apostille 350 + 160 USD
Extract of Public Registry 195 USD
Extract of Public Registry + Apostille 195 + 160 USD
Modifications of Foundation Charter 600 USD
Amendments to By-Laws (Regulations) min. 500 USD

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