A Panama Private Interest Foundation is an entity that is different from any other legal entity in that it does not have owners (shareholders, participants, or partners), and traditionally has a specific purpose for the benefit of a general group of Individuals. Perhaps it is of the most versatile and private entities in the world.

Before we enter into our in-depth perspective on the Panama Private Interest Foundation, it makes logical sense to discuss the jurisdiction itself and why it is one of the wisest and most beneficial choices in international jurisdictions today. And since we are predominantly going to discuss Panama entities in particular, it makes sense to first talk about Panama as a jurisdiction and why it is one of the strongest jurisdictions in the world for financial diversification, asset protection, company formation, and financial privacy.
The Private Interest Foundation helps secure Panama’s position as a tax haven. The 1995 legislation was drafted to complement the interests of foreign investors, especially those seeking asset protections. An additional protection provided by the 1995 legislation is that all persons involved in any activities, transactions or operations related to the Foundation are required to maintain full secrecy and confidentiality at all times. The punishment for breach of this duty is six months of imprisonment and fifty thousand-dollar fine, with the potential for further civil liability. This applies to persons involved in any transaction (constitution, amendments, by-laws, etc.) of the Foundation, irrespective of whether they work in the private or public sector. With the proper planning, a Private Foundation can be used as an integral part of estate planning. It is useful to keep in mind that Foundations have been established with the intent to attract capital from foreign investors, and in exchange the investor will receive secrecy on the operations made, asset protection and tax exemptions. In the event of political instability in Panama, the Foundation could relocate to another jurisdiction, subject to such jurisdiction’s recognition of the Foundation. In this way the Foundation can protect itself from government instability and the assets cannot be expropriated.
A Private Interest Foundation in Panama is to the least a state of the art legal instrument that provides all the facilities a Trust may offer and more. Assets are held in a separate manner from the Founders and managed by a Foundation Council or Board of Directors. It is also born form a mercantile act providing the certainty of existence, with the status of a juridical entity and a personality which is separate from its founders. Private Interest Foundations are a unique form of legal entity which acts like a Trust and operates like a company.

The subjects

The Foundation Founder

The Founder may be a natural person or entity that gives that is deemed the creator of the foundation and who provides the corpus (patrimony) for the entity through the charter documents and for the benefit of third-party beneficiaries or for his/her own advantage. From a U.S. planning perspective, it is advisable for a non –resident alien to be the founder of the entity due to the reporting requirements established by the Service for the establishment of and transfer of assets to a foreign entity. The U.S. person (technically referred to as the “Founder”) provides the corpus (patrimony) for the Founder in order to establish the foundation.

The Foundation Council

The foundation council is the main body of the entity and is obligated to act pursuant to the mandates as stated in the Articles, among which include the administration and management of the assets of the foundation, complying with the objectives of the foundation, preparing of an accounting at least annually for the benefit of the beneficiaries, represent and defend the interests of the foundation against third parties and to act with reasonable business prudence. The members of the council, which must initially be at least three (3) members, can be either natural persons or entities, operate in a fiduciary capacity to the Founder and is responsible for all business decisions with respect to the assets. Although not advisable, a U.S. person may serve as a member of the council in order to give the Funder a sense of control over the transferred assets.

The Protector

The Foundation Council does not operate in an absolute manner and it may have limitations imposed on it by the Founder through the creation of a Protector or Supervisory Committee. Through this committee which may consist of natural persons or entities, the activities and actions of the Foundation Council may be reviewed and scrutinized as well as act as a “buffer” in disputes between beneficiaries and the Council. More importantly however, it is through this Protector or Committee that a U.S. person could achieve his/her demands for control over the transferred assets. To achieve this objective, U.S. persons are recommended to serve in this capacity. Usually the Funder’s attorney, accountant, financial advisor, trust company, bank, or other trusted person (even the Funder him/herself) may serve as Protector or make up the Committee and, are not answerable to the Council for the daily policies of the internal matters of the Foundation. Further powers may be granted to the Protector to provide for the removal of members of the Council. The activity of serving in a Protector capacity is non-reportable from an IRS standpoint except where the persons are compensated for their services as Protector or Committee member.

The Beneficiary

The Beneficiary may be natural persons or an entity and may also be the Founder or Funder, although not recommended in the case of U.S. persons. The beneficiary (ies) need not be identified at the time of the initiation of the foundation and may be determined in a later publication but, under all circumstances, must be determined at some point. This is important in the case of U.S. persons with respect to gift tax issues in that the tax is not imposed upon uncompleted (inchoate) gifts . Based on case law precedents in the U.S., gifts intended to beneficial interests are not completed if the beneficial holders are not yet named or if the Founder (Grantor) reserves the right to modify, change and/or remove beneficiaries. Creative planning through professional advisors would be instrumental in these types of strategies.




◆The assets in the Panama foundation must have a minimum value of US$10,000;
The founder of a foundation can be listed as the agent- providing privacy for the person establishing foundation.

◆Assets held by a foundation in Panama can be real, tangible or intangible;

◆Assets within a foundation are protected from insolvency or bankruptcy, seizure, claims;

◆Panama foundations can in fact own Panama corporations, and can do business in Panama. As long as the revenue generated for the foundation is earned outside the jurisdiction, the foundation income is tax free;

◆Panama foundations can undertake passive investments like stock market investment, trading, Forex trading, interest bearing bank deposits, as long as the earnings are used for the benefit of the beneficiaries. The Panama Foundation can own shares and interests in private or public companies;

◆The foundation is like a corporation, it is a separate legal entity that can buy and sell property, sue and be sued, enter into contracts and hold assets in its own name.

◆You can be a beneficiary of the Foundation.


◆Protects assets – Since the PPIF is not owned by anyone (it has no owners), the assets of the PPIF can’t be claimed if the founder, council members, protector or beneficiaries have unpaid debt.

◆According to Panama law, the assets of a PPIF are non-freezable. There are some exceptions, but if the money has been in the foundation for over 3 years, it’s certainly non-freezable.

◆Foundations can be used to help family members financially according to the protector’s instructions, and forced heirship rules are specifically excluded.

◆It can be used to collect royalties.

◆Tax free for income derived outside of Panama. Local bank interest is also tax exempt.



In order to set up or form a Panama foundation, the following conditions must be met:

◆One or more natural or legal persons may establish a foundation; agent can act as nominee founder;

◆The initial property endowment (in any legal currency) must have a minimum value of US$10,000;

◆Private Interest Foundations must have a Panama registered agent acting on their behalf;

◆The Panama Foundation is established through the written foundation charter
◇Name of foundation
◇ Property endowed
◇ Name, address of founder or founders
◇ Full name of foundation council member (minimum of 3)
◇ Name and address of registered agent
◇Name and address of secretary (if any)
◇Purpose of the foundation
◇Duration of foundation

◆Meetings shall be held at such times as Foundation Council may determine and may be held anywhere in the world

◆A foundation shall keep or may have cause to keep such accounts or records as its council deems necessary.



In general, Private Interest Foundations may not engage in commercial activities like a corporation but they may carry out commercial activities like owning corporations that are actively engaged in commercial business activities, as long as the profits of those activities are used for the purposes for which the Foundation exists. The Foundation can of course engage in passive investments like stock market investments, mutual funds, bank deposits bearing interest, Forex, bonds etc as long as the proceeds are used for the purposes for which the Foundation exists – for the benefit of the beneficiaries and you can of course be a beneficiary of the Foundation. You could also have an investment manager agreement with the foundation signed by the nominee council members, notarized and apostilled stating your compensation and benefits for managing the investments of the foundation. This agreement would be private and would document your role as an employee with the foundation.




  1.     Private relationship: For example, the founder’s wishes are not publicly registered
  2.     Wealth protection
  3.     Recognised in all common and civil law jurisdictions
  4.     Holding assets which can be passed on from one generation to the next (estate planning)
  5.     Inheritance tax planning
  6.     Avoidance of forced heirship rules
  7.     Maintenance of corporate control
  8.     Separation of voting and economic benefits
  9.     Employee share option schemes
  10.     Pension funds
  11.     Art collections
  12.     Charitable purposes
  13.     An important tool in international income, capital gains and estate tax planning
  14.     Used by corporations for employee benefit plans, retirement and stock option schemes, insurance plans and special financing arrangements



  1.     Shares and stocks in both quoted and private companies
  2.     Investment portfolios
  3.     Real and intellectual property
  4.     Bank deposits
  5.     Life assurance policies
  6.     Most other types of asset



A foundation is the solution for individuals who:

  1.     Want to preserve their wealth against uncertainty; either political, economic or family related
  2.     Want to transfer wealth to their heirs in a tax-efficient manner. They want to plan their estate to maximise the benefits of their wealth for family members and others
  3.     Want to transfer wealth to their heirs in accordance with their wishes and not in accordance with the laws of the country where they live
  4.     Want to consolidate the ownership of assets owned throughout the world in one location
  5.     Want centralised reporting
  6.     Want to minimise or eliminate estate taxes arising on the death of the founder

Panama Foundation Law

PANAMA LAW No. 25 June 12, 1995 “Whereby Private Foundations are regulated”


Article 1. One or more natural or juridical persons by themselves or through third parties, may create a private foundation in accordance with the provisions set forth in this law.

For such purposes, the endowment of a patrimony exclusively dedicated to the objectives

or purposes expressly stipulated in the foundation charter is required. The initial

patrimony may be increased by the creator of the foundation, hereinafter called the

founder, or by any other person.

Article 2. Private foundations shall be governed by the foundation charter and its

regulations, as well as by the provisions of this law and other legal or regulatory

provisions that may be applicable. The provisions of Title II of Book I of the Civil Code

shall not apply to these foundations.

Article 3. Private foundations shall not be for profit. However, they may carry out

mercantile activities in a non-habitual manner or exercise the rights deriving from titles

representing the capital of mercantile corporations that make up the patrimony of the

foundation, provided that the economic results or proceeds of such activities be dedicated

exclusively for the purposes of the Foundation.

Article 4. Private foundations may be constituted to become effective at the time of

constitution or after the death of its founder, by anyone of the following methods:

a) Through a private document, executed by the founder, whose signature must be

authenticated by a notary public at the place of constitution.

b) Directly before a notary public at the place of constitution. Whichever may be the

method of constitution, it must comply with the formalities established in the present

Law, for the creation of foundations.

In case of a foundation being created either by public or private document, to have effect

after the death of the founder, the formalities stipulated for the execution of testaments

shall not apply.

Article 5. The foundation charter shall contain:

· The name of the foundation, expressed in any language with characters of the

Latin alphabet, which shall not be equal or similar to that of a foundation

previously existing in the Republic of Panama, 80 as to avoid confusion. The

name must include the word “foundation” to distinguish it from other natural or

juridical persons of a different nature.

· The initial patrimony of the foundation, expressed in any currency of legal tender

that in no case shall be less to a sum equivalent ten thousand Balboas

(B/10,000.00) =U.S. Dollars .

· A complete and clear designation, of the member or members of the Foundation

Council, to which the founder may belong, including their addresses.

· The domicile of the foundation.

· The name and address of the Resident Agent of the foundation in the Republic of

Panama, which shall be an attorney or a law firm, who must countersign the

foundation charter prior to its registration at the Public Registry.

· The purposes of the foundation.

· The manner in which the beneficiaries of the foundation shall be designated,

among which the founder may be included.

· The reservation of the right to amend the foundation charter whenever deemed


· The duration of the foundation.

· The destination to be given to the assets of the foundation and the method of

liquidation of its patrimony in case of dissolution;

· Any other lawful clause that the founder may deem convenient.

Article 6. The foundation charter, as well as any amendment thereto must be written in

any language with characters of the Latin alphabet, and must comply with the regulations

for the registration of acts and titles in the Public Registry; for which purpose it must be

previously protocolized by a notary public of the Republic (of Panama). If the foundation

charter or its amendments are not written in the Spanish language, they must be

protocolized together with their (Spanish) translation by an authorized public translator of

the Republic of Panama.

Article 7. Any amendment to the foundation charter, when permitted, shall be carried out

and executed in accordance with what is established therein. The respective agreement,

resolution or act of amendment shall contain the date on which it was carried out and the

name, clearly identifiable, of the person or persons subscribing it and their signatures

which shall be authenticated by a notary public of the place where the document is


Article 8. Every private foundation must pay a registration fee and an annual maintenance

tax equivalent to those established for corporations in Articles 318 and 318A of the Fiscal

Code. The procedure and method of payment, the surcharge for late payment, the

consequences for lack of payment and all other complementary provisions of the

aforementioned legal principles, shall be applied to private foundations.

Article 9. The registration at the Public Registry of the foundation charter shall bestow

upon the foundation juridical personality without the need for any other legal or

administrative authorization. Besides, the registration at the Public Registry constitutes a

means of publicity before third parties. Consequently, the foundation may acquire and

own assets of any kind, incur obligations and be a party to any type of administrative and

judicial proceedings in accordance with applicable legal provisions.

Article 10. Once the foundation has obtained its juridical personality, the founder or third

parties that have pledged to contribute assets to the foundation, on their own or at the

request of any person with interest in the foundation, shall formalize the transfer to the

foundation of the assets so pledged. When the foundation is constituted to be effective

upon the demise of the founder, it shall be deemed to have existed prior to such death, in

respect to the donations that he (she) may have made to the foundation.

Article 11. For all legal purposes, the assets of the foundation shall constitute a separate

patrimony from the personal assets of the founder. Therefore they cannot be sequestered,

embargoed or subject to any precautionary action or measure, except for obligations

incurred, or for damages caused by virtue of fulfilling the purposes and objectives of the

foundation, on behalf of the legitimate rights of its beneficiaries. In no case shall the

assets respond for personal obligations of the founder or of the beneficiaries.

The Foundation Council of a private foundation may approve the constitution of any

pledge or mortgage guarantees on the assets of the foundation, whether to guarantee its

own obligations or of third parties, if the founder does not expressly prohibit so in the

Foundation Charter of the foundation.

Article 12. Foundations shall be irrevocable, except in the following cases:

a) When the foundation charter has not been registered at the Public Registry;

b) When the opposite is expressly established in the foundation charter.

c) For any of the causes of revocation of donations.

The transfers (of assets) made to foundations shall be irrevocable by whoever has made

the transfer, unless the opposite is expressly established in the act of transfer.

Article 13. In addition to the provisions of the previous article, when the foundation has

been created to be effective after the demise of the founder, the latter shall have the

exclusive and unlimited right to revoke it. The heirs of the founder shall not have the

right to revoke the creation or the transfers, even if the foundation has not been registered

in the Public Registry prior to the demise of the founder.

Article 14. The existence of legal provisions in inheritance matters in the domicile of the

founder or of its beneficiaries, shall not be opposable to the foundation, nor shall it affect

its validity, or prevent the fulfillment of its objectives as provided for in the foundation

charter or its regulations.

Article 15. The creditors of the founder or of a third party shall have the right to dispute

the contributions or transfer of assets in favour of a foundation, when the transfer

constitutes an act of fraud to the creditors. The rights and actions of such creditors shall

prescribe three (3) years from the date of the contribution or transfer of the assets to the


Article 16. The patrimony of the foundation may originate from any lawful business and

may consist of present or future assets of any nature. Periodic sums of money or other

assets may also be incorporated to the patrimony by the founder or by third parties. The

transfer of assets to the patrimony of the foundation may be effected by public or private

document. Nevertheless, in the case of real estate, the transfer must conform with the

rules for the transfer of real estate.

Article 17. The foundation should have a Foundation Council, whose duties or

responsibilities shall be established in the foundation charter or in its regulations. Unless

it be a juridical person, the number of members of the Foundation Council hall not be less

than three (3).

Article 18. The Foundation Council shall be in charge of carrying out the purposes or

objectives of the Foundation. Unless otherwise stated in the foundation charter or its

regulations, the Foundation Council shall have the following general obligations and


To administer the assets of the foundation, in accordance with the foundation

charter or its regulations.

Enter into acts, contracts or lawful businesses that may be suitable or necessary to

fulfill the object of the foundation, and to include in such contracts, agreements

and other instruments or obligations, such clauses and conditions as are necessary

and convenient, which conform to the purposes of the foundation and are not

contrary to the law, to morals, to bonus mores or to public order.

To inform the beneficiaries of the foundation of the patrimonial situation of the

latter, as established in the foundation charter or its regulations.

To deliver to the beneficiaries of the foundation the assets or resources set up in

their favour by the foundation charter or its regulations.

To carry out all such acts or contracts which are permitted to the foundation by

the present Law and other applicable legal or regulatory provisions.

Article 19. The foundation charter or its regulations may provide that the members of the

Foundation Council may only exercise their powers by obtaining previous authorization

of a protector, a committee or any other supervisory body, appointed by the founder or by

the majority of the founders. The members of the Foundation Council shall not held

liable for the 1088 or deterioration of the assets of the foundation, nor for any damages or

prejudice caused, when said authorization has been duly obtained.

Article 20. Unless otherwise provided for in the foundation charter or its regulations, the

Foundation Council must render an accounting of its activities to the beneficiaries and,

when applicable, to the supervisory body. If the foundation charter or its regulations

stipulate nothing in this regards, the rendering of accounts must be done annually. If the

accounts 90 rendered are not objected within the term established in the foundation

charter or its regulations, in lack of it, it shall be deemed as having been approved within

ninety (90) days from the day it was received, for which purpose, record of this term shall

be made in the report rendering the accounts. Such period having lapsed or the account

approved, the members of the Foundation Council shall be exempted from liability for

their administration, unless they had failed to act with the diligence of a bonus

paterfamilias. Such approval does not exonerate them before the beneficiaries or third

parties having an interest in the foundation, for damages caused due to gross negligence

or fraud in the administration of the foundation.

Article 21. In the foundation charter the founder may reserve for himself/herself or for

other persons, the right to remove the members of the foundation Council, as well as to

appoint or add new members.

Article 22. When the foundation charter or its regulations do not establish anything in

respect to the right to and the causes for removal of the members of the Foundation

Council, these may be judicially removed, through summary proceedings, for the

following causes:

· When their interests are incompatible with the interests of the beneficiaries or the


· If the administration of the assets of the foundation lacked the diligence of a

bonus paterfamilias.

· If they are convicted for a crime against private property or public faith. In this

case, while the criminal proceedings are in progress, the temporary suspension of

the member on trial may be decreed.

· For incapacity or impossibility to carry out the objectives of the foundation, from

the time such causes may arise.

· For insolvency or bankruptcy proceedings.

Article 23. The founder and beneficiary or beneficiaries may request the judicial removal

of the members of the Foundation Council. Should the beneficiaries be disabled or under

age they may be represented by whoever exercise upon them the “patria potestas” or

guardianship, as the case may be. The judgment of the court decreeing the removal, shall

appoint new members in replacement of the previous ones, who shall be persons with

sufficient capacity, competence and good moral standing to administer the assets of the

foundation, in accordance with the purposes established by the founder.

Article 24. The foundation charter or its regulations may provide for the constitution of

supervisory bodies, that may be constituted by natural or juridical persons, such as

auditors, protectors of the foundation or others. The duties of the supervisory bodies shall

be established in the foundation charter or its regulations and may include, among others,

the following:

To ensure the fulfillment of the purposes of the foundation by the Foundation

Council and (to protect) the rights and interests of the beneficiaries;

To demand from the Foundation Council, the rendering of accounts;

To modify the purposes and objectives of the foundation, if and when they

become too costly or impossible to fulfill.

To appoint new members of the Foundation Council due to temporary or

permanent absence or for expiration of the period of anyone of them.

To appoint new members of the Foundation Council in cases of temporary or

accidental absence of anyone of them.

To increase the number of members of the Foundation Council.

To approve the acts adopted by the Foundation Council, as indicated in the

foundation charter or its regulations.

To guard the assets of the foundation and observe their application to the uses or

purposes stated in the foundation charter.

To exclude beneficiaries of the foundation and to add others in accordance with

the provisions of the foundation charter or its regulations.

Article 25. The foundation shall be dissolved due to:

Reaching the day in which the foundation must terminate, in accordance with the

foundation charter.

The fulfillment of the purposes for which it was constituted or if their fulfillment

becomes impossible.

Being in a state of insolvency, cessation of payments or due to bankruptcy

proceedings having been declared judicially.

The loss or total extinction of the assets of the foundation.

Its revocation.

Any other cause established in the foundation charter or in the present Law.

Article 26. Every beneficiary of the foundation may contest any acts of the foundation

that may damage the rights conferred upon him/her, denouncing such circumstance to the

protector or to other supervisory bodies, if any; or lacking them, directly promoting the

respective judicial claim, before a competent court of the domicile of the foundation.

Article 27. The acts of constitution, amendment or extinction of the foundation, as well as

the acts of transfer, transmittal or encumbrance of the assets of the foundation and the

income derived from such assets or any other act in connection therewith, shall be

exempt from all taxes, contributions, duties, liens or assessments of any kind or

denomination, provided that such assets are:

Assets located abroad.

Money deposited by natural or juridical persons whose income is not derived

from Panamanian sources nor taxable in Panama for any reason whatsoever.

Shares or securities of any kind, issued by corporations which income is not

derived from Panamanian sources or when such income is not taxable for any

reason whatsoever, even when such shares or securities be deposited in the

Republic of Panama.

The acts of transfer of real estate, titles, certificates of deposit, securities, money

or shares, carried out in fulfillment of the purposes or objectives, or for the

extinction of the foundation, in favour of relatives within the first grade of

consanguinity and of the spouse of the founder, shall also be exempted from all


Article 28. Foundations constituted in accordance with a foreign law may become subject

to the provisions of this law.

Article 29. Foundations referred to in the previous article that opt to become subject to

the provisions of this Law, shall present a Certificate of Continuation, issued by such

bodies as their internal regime may call for, and which shall contain:

The name of the foundation and the date of its constitution.

Data about its registration or deposit (of the charter) at its country of origin.

An express declaration of its desire to continue its legal existence as a

Panamanian foundation.

Requirements stipulated under Article 5 of this Law, for the constitution of

private foundations.

Article 30. The certification containing the resolution of continuation and other

requirements mentioned in the preceding paragraph must have the following documents

attached there to:

Copy of the original act of constitution of the foundation expressing its desire to

continue in Panama, along with any subsequent amendment;

A power of attorney granted to a Panamanian attorney to carry out the necessary

proceedings to make effective the continuation of the foundation in Panama.

The certificate of continuation, as well as the documents attached thereto referred to in

this Law, shall be duly protocolized and registered at the Public Registry so that the

foundation may continue its legal existence as a private foundation in the Republic of


Article 31. In the cases foreseen in Article 26, the responsibilities, duties and rights of the

foundation acquired prior to the change or domicile or legislation, shall continue in force,

as well as the proceedings already initiated against it or those that the foundation may

have promoted, without being affected such rights and obligations due to the change

authorized by the aforesaid legal provisions.

Article 32. The foundations constituted in accordance with this Law, as well as the assets

comprising its patrimony, may be transferred or become subject to the laws and

jurisdiction of another country, as may be provided by the foundation charter or its


Article 33. Registrations related to private foundations shall be effected at the Public

Registry in a special section that shall be named “Section of Private Foundations” The

Executive Branch through the Ministry of Government and Justice shall issue the

regulations applicable to such section.

Article 34. To avoid the unlawful use of private foundation, all legal provisions contained

in Executive Decree No. 468 of 1994 and any other rule in force aiming at fighting

money laundering derived from drug-trafficking, shall apply for their operation.

Article 35. The members of the Foundation Council, of the supervisory bodies, if any, as

well as the public or private employees who might have any knowledge of the activities,

transactions or operations of the foundations shall at all times maintain secrecy and

confidentiality in this respect. Infringement of this shall be penalized with six (6) months

imprisonment and a $50,000.00 fine without prejudice of the corresponding civil liability.

The provisions of this article shall apply without prejudice of the information which must

be disclosed to the official authorities and of the inspections that they must carry out in

the manner established by the law.

Article 36. Any controversy for which there is no special procedure in this Law, shall be

resolved through summary proceedings. The foundation charter or the regulations of the

foundation may establish that any controversy arising in respect to the foundation shall be

resolved by arbiters or arbitrators, as well as establish the procedure they should abide by.

In the event that such procedure is not established, the rules in respect to such matters, as

contained in the Judicial Code, shall apply.

Article 37. This law shall be effective from the date of its publication.


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