Panama Private Foundations booklet – English

A G L O B A L A P P R O A C H T O L E G A L S O L U T I O N S

Pr ivate Foundat ions

www.mossfon.com

HEADQUARTERS - ISO 9001 CERTIFIED

This brochure is intended for use exclusively by our clients. It

contains key information about Panama Private Foundations, which

offer significant structuring opportunities for your estate planning,

private wealth management and asset protection requirements,

whether basic or complex. Our international team of attorneys and

other professionals will be pleased to assist with the structuring and

establishment of your Foundation and its maintenance and

management to ensure that it conforms to your specific needs, and

achieves its maximum potential.

Depending on your circumstances and requirements, during the

“structuring” process to fulfill the specific needs and goals of your

Foundation(s), it may become evident that you could benefit further

from additional “layers” of planning options i.e. corporation(s) and/or

Private Foundation(s)/Trusts established in jurisdictions other than

Panama, as well as many other professional services offered by our

worldwide group. Our extensive team of international experts can also

implement more complex structures for you, including Company,

Foundation and Trust formation and maintenance/management

services in several jurisdictions, all legal services, Trust services,

Asset Management services (investment advisory and portfolio

management), investment opportunities, and numerous other

corporate and legal products. Please visit our website at

www.mossfon.com for further information about our group‟s full

range of professional services, or use the „contact us‟ feature on our

website to submit your question(s).

NOTE: For the valued protection of our clients‟ business and our

reputation, our firm and affiliated international companies strictly

adhere to the internationally accepted guidelines and principles related

to the process of due diligence and “KYC” (Know-Your-Client) rules

and we therefore do not provide services to any person or entity

seeking to engage in any unlawful and/or money laundering activities.

2 | P r i v a t e F o u n d a t i o n s

CONTENTS

INTRODUCTION …………………………………………………. 1

1

SUMMARY OF FACTS AND FEATURES ……………….…….. 3 3

PURPOSES AND USES OF THE PANAMA FOUNDATION…… 7

5

REQUIREMENTS FOR ESTABLISHING A PANAMA

FOUNDATION ………………………………………………..… 9

A. FOUNDATION CHARTER ……….…..……………. 9

B. REGULATIONS ………………………………..……. 11

7

INTRODUCTION

Since its inception via Law No. 25, which was enacted in 1995, the

Panama Private Foundation (“the Panama Foundation”) has developed

into a well-established and favorable alternative to a trust for

international advisers by providing an excellent and flexible corporate

solution for the preservation/protection, administration and investment

of assets whether for family/other persons, religious, public or

charitable/social or asset protection purposes for a designated class or

classes of beneficiary (ies), whether individuals or institutions.

For clarification purposes, it should be noted that the Panama Private

Foundation is distinctly different from the Panama Charitable Public

Foundation (which is a separate vehicle that operates as a charity for

charitable purposes only).

Originally based on the conceptual model of the Liechtenstein Private

Foundation dating back to 1926, Panama‟s government developed a

simpler, more modern, affordable and flexible corporate vehicle, the

Panama Foundation, for international asset protection, wealth and

estate planning applications which, also provides confidentiality,

anonymity and protection to Founders, Beneficiaries and Protectors.

Panama‟s Private Foundation legislation is clear and concise, and is

not overly regulated.

Unlike a Trust, which does not by itself represent a legal entity

separate from the Trustee, the Panama Foundation is the owner of its

own assets which are separate from the Founder‟s, whose assets are

managed by others. The Panama Foundation is a distinct legal entity

which is neither a trust nor a corporation but combines the best useful

elements of both. It is a legal entity whose existence, identity and

assets are entirely separate from those of its Founder(s) or of any

other person, and it can purchase, own, hold and manage assets of any

kind in its own name anywhere in the world and hold title to property,

including real estate, banks, stocks and bonds, investment and

securities accounts, patents, personal assets i.e. airplanes, cars,

ships/yachts etc., royalty rights, collectibles i.e. coins, art etc.,

distribute income, act as a holding company of subsidiaries or any


other type of asset, provided that commercial/business transactions are

secondary to the Foundation‟s main purpose and provided that the

profits/proceeds of those activities are used for the Foundation‟s

purposes/objectives. Because it is a separate legal entity with its own

legal personality which enables it to transact and hold assets, it can

also sue (and be sued) in its own name.

Unlike a Trust, the Panama Foundation‟s legal status is established via

registration of the Foundation “Charter” at the Panama Public

Registry creating a clear, separate and autonomous estate whose

assets, once transferred, cannot be used to satisfy the debts of the

Founder(s), beneficiaries, creditors or third parties and cannot be

attacked, seized, encumbered or attached unless it can be proven that

the assets were derived from a criminal or fraudulent act and claims of

fraudulent conveyance/transfer must be made within a three year

statute of limitations period. It can also assist in setting up estate

planning structures to prevent succession and hereditary disputes, and

forced heirship rules or claims/judgments against the Foundation

assets. Aside from protecting you against a foreign attack on your

assets, it also protects you from any possibility that Panama might

ever change its laws regarding foreign ownership.

The Panama Foundation can be a corporate entity without publicly

known beneficiaries. The management, administration and

distribution of assets or resulting interest/profits are determined via

privately documented „Regulations‟ (similar to By Laws).

Beneficiaries can be designated either in the „public‟ Charter, or the

private Regulations, or in a Letter of Wishes which is also a separate,

simple private document. Anonymous ownership and control is

ensured via the „private‟ documents which are not publicly recorded

or registered. The Foundation Charter does require registration at the

Public Registry.

Control and administration of a Panama Foundation is provided by the

“Foundation Council” (similar to a Board of Directors), which can be

located anywhere, unlike various other jurisdictions that have local

residency requirements. The Foundation Council requires a minimum


of three individuals or one corporate member, all or any of which may

be nominees (which our firm can provide). Unlike a corporation, the

Panama Foundation has no owners/shareholders or directors. It does

not issue share certificates or any other participation title as it is a

legal entity that functions for the benefit of its beneficiaries.

Beneficiaries may be anyone or any entity and may be anonymous (a

valuable asset protection feature for business purposes). Officers

and/or a corporate seal are optional if desired. Ready-made/”shelf”

Foundations are available.

A Protector may be appointed to oversee/authorize the actions of the

Foundation Council.

Once endowed, the Foundation‟s assets do not become the property of

any beneficiary until distributed. The assets, which are separate from

the Founder(s) or any other person, are managed by others, ensuring

the Foundation‟s duration, which may be perpetual or for a prescribed

period. The Foundation provides anonymity to its beneficiaries and

its Founder(s) and may be Revocable or Irrevocable.

The Panama Foundation offers multiple tax advantages and provided

as long as the income generated by its assets is not from a

Panamanian source, it is exempt from income, estate, inheritance,

property, capital or capital gains, interest income, gift, succession,

sales, inventory, stamp, transfer to/from beneficiaries and other

taxes/levies of any kind.

SUMMARY OF FACTS AND FEATURES

The Panama Private Foundation has the following legal advantages

that make it attractive for offshore structures:

o It creates an Estate/Assets comprised of

donations/endowments.


o The Foundation is established as a corporate entity with a

distinguishing registration number and its assets constitute an

independent/autonomous estate.

o The Foundation protects the Founder(s)' hereditary wishes

and provides several layers of confidentiality, privacy and

anonymity.

o The Foundation's assets cannot be used to satisfy debts of the

Founder(s), beneficiaries, creditors or third parties and

fraudulent conveyance claims must be made within three

years. It can also be structured to include arbitration

provisions.

o The Foundation may not have primary profit-making goals

but can lawfully engage in any commercial transaction(s)

benefitting its purposes/objectives. No commercial business

license is required.

o It may be revocable or irrevocable, and perpetual or

limited/have a prescribed period.

o It is not subject to any form of taxation, assessment or levy in

Panama (except for an annual fee at the Public Registry called

'Annual Franchise Tax' to maintain its good standing of

$350.00 for the first year, $400.00 thereafter), provided that

income from contributions originates outside the fiscal

territory of Panama. There is no tax reporting requirement.

o Foundations may be re-domiciled to (and from) Panama via

simple procedures.

Anonymity: Can be structured to provide

anonymity to its Founder(s), Beneficiaries,

Protector(s) and others.


Law does not require the name(s) of the actual

Founder(s), Beneficiaries, or Protector(s) to be

revealed. Our firm can provide relevant

nominee/attorney-in-fact services for your

specific structuring requirements for both the

Foundation Charter and all other related

documentation.

Speedy formation procedures, easy

administrative and ongoing requirements,

reasonable formation and maintenance fees.

Confidentiality: Law mandates that the Foundation

Council, Protector(s), Supervisory Bodies,

Registered Agent or any person that obtains

information relating to the activities, transactions or

operations of the Foundation maintain strict

confidentiality even following its termination. In

addition to civil liability for damages, breaches may

result in imprisonment for up to six months and

penalties up to US$50,000.

Minimum capitalization requirements and no

restriction on maximum assets allowed. A

minimum equivalent to US$10,000 of assets must

be donated/endowed to the Foundation, but this

need not take place at formation time. There is no

further public record of donated assets other than

this initial minimum amount, so the Foundation's

total assets remain confidential.

Documents and Records: No requirement to file

annual income tax returns or publicly file financial

statements. Books and accounting records (if any)

may be held in Panama or elsewhere.


Law does not require annual meetings of the

Foundation Council, Founder(s), Protector(s) or

any Supervisory Bodies.

Founder(s) and Foundation Council Member(s)

may hold their meetings anywhere in the world

and may be represented by proxy.

There are no limitations regarding the

maximum number of Founder(s), Beneficiaries

or Protector(s). Regarding Foundation Council

Members, the law requires a minimum of three if

natural persons/ individuals, or one if a corporate

entity - our firm can provide nominees for either

case.

Founder(s), Member(s) of the Foundation

Council, Beneficiaries and Protector(s) or

Supervisory Bodies may be individuals/natural

persons or corporations of any nationality,

domiciled anywhere in the world.

Founder(s) need not be Foundation Council

Member(s).

Founder(s), Protector(s), Foundation Council

Member(s) or Supervisory Bodies may be

Beneficiaries.

No limitation regarding perpetuities, accrual

of capital or other restrictions.

The U.S. Dollar circulates freely as legal

tender in Panama, and rigorous bank secrecy


laws are in effect. Panama is also a strong and

stable democracy with an impeccable

reputation and a long history as a prime

offshore center for international business.

PURPOSES AND USES OF THE PANAMA FOUNDATION

There are numerous reasons for using a Panama Private Foundation,

the most common of which are noted below. The Foundation may be

established to achieve any one or more of the following goals:

Domestic/Family/Other Persons:

To protect minors, disabled persons or those incapable of

managing their own assets and/or those at risk of losing

their assets.

To protect the continuity and control of family businesses for

future generations by preventing estate fragmentation by

outsiders.

To ensure and manage payments of grants, income or

distribution of assets to current and/or future family

members (or other individuals or institutions), and/or

provide for education, maintenance, housing and other

expenses that can mitigate or negate fiscal gift tax

regulations surrounding donations, and exhaustive

reporting requirements elsewhere.

Fines Caritativos/Sociales:

To attain scientific, humanitarian, philanthropic, educational,

religious or charitable objectives or to manage funds and/or

assets for these purposes.


Asset Protection:

Substitute for a Will to protect assets from complex

inheritance procedures, succession or forced heirship rules for

inter vivos or mortis causa estate planning.

Substitute for marriage articles, marriage/other prenuptial

agreements/contracts.

To protect assets against excessive taxation, creditor and/or

forced heirship claims, and against political or economic

instability.

Any other asset protection structure.

Business and Investment: (provided that proceeds are used for the

Foundation‟s purposes).

To manage employee profit sharing and/or pension plans.

To manage bank accounts and to transfer funds offshore or

receive funds from offshore in the name of a foreign entity

whose ownership is anonymous.

To hold shares, interests and stocks of private or public

companies (act as a holding company) which removes

ownership to a foreign entity whose owners/ i.e. the

beneficiaries, are anonymous.

To engage in banking or investment activities i.e. time and

bank deposit accounts, CD's (Certificates of Deposit), stocks,

bonds, mutual funds, options, money markets or other

securities or assets.

To collect royalties and other types of proceeds.


To own real estate, patents or other valuable assets such as art

work, coins, yachts.

REQUIREMENTS FOR ESTABLISHING A PANAMA

FOUNDATION

A. FOUNDATION CHARTER:

The Foundation Charter is the constitutional document that must be

registered at Panama‟s Public Registry and needs to include the

following information (details that we require to establish your

Foundation):

The Name of the Foundation, which may be in any language

but must include the word „Foundation' (in any language with

characters of the Latin alphabet). Certain name restrictions apply

i.e. any name that indicates "Banco", 'Bank',

"Fideicomiso/Fiduciario", 'Trust/Trustee', 'Insurance/Assurance',

"Seguros", etc.

The Foundation's domicile/address (which may be located

anywhere).

The Foundation’s duration, i.e.:

Perpetual or

Limited/prescribed period of time

Name and address of the Foundation's Registered Agent,

which must be a Panama law firm or Panamanian lawyer.

Our firm provides this service.

The Foundation's initial assets (minimum: equivalent of

US$10,000).


Particulars of the Foundation Council member(s) - names

and addresses. Only one member is required if using a

corporate entity, but if appointing natural persons (of legal

age), a minimum of three are required. Our firm can provide

nominee(s).

The Foundation's purposes, which can be stated generally

and then detailed further in the Regulations. We recommend

our firm's standard Foundation Charter.

Naming the beneficiary(ies) or detailing the method of

determining them in a separate, private/unregistered

document (Regulations or Letter of Wishes) that provides

anonymity.

Details outlining how the Foundation's assets are to be used

and distributed and how the Foundation is to be dissolved and

liquidated, the right to amend the Foundation Charter and

how that will be accomplished, plus any other lawful clauses

deemed expedient. We recommend our firm's standard

format.

Whether the Foundation is to be:

Revocable, or

Irrevocable

Additional services you may require i.e. issuance of

Foundation Regulations (Revocable or Irrevocable),

appointment of optional Supervisory Bodies (i.e. Protector,

Auditor), Foundation seal, nominee/attorney-in-fact services,

issuance of general or specific power(s) of attorney,

additional copies, etc.

For most structures, clients use one of the standard broad

Foundation Charter formats prepared by our firm. For

speedier formation and anonymity purposes, Foundations are


generally irrevocable but should clients need a revocable

Foundation for their structure, that requirement should be

detailed in the Charter, prior to its registration. We have

prepared standard formats for both cases. Registration

formalities for a Revocable Foundation Charter require some

(minimal) extra „legalization‟ steps by the client prior to its

registration.

If separate, additional or special clauses are required for your

Foundation‟s specific structure, our team of professionals can

assist with advice and/or drafting your additional or special

provisions together with providing any further advice or

products you may require for more complex structures.

B. REGULATIONS (similar to By Laws):

The Foundation Regulations are not mandated but are recommended

for planning purposes for the management, administration and

distribution of the Foundation‟s assets. They can be private and

confidential and do not have to be publicly recorded. They should

(privately/confidentially) stipulate the following:

The actual assets of the Foundation.

Specific powers/duties of the Foundation Council and/or

causes for their removal.

The Foundation's administration/management method.

Identifying the Foundation's Beneficiaries or methods of

determining them, as well as the nature of the

benefits/distributions corresponding to each of them.


The naming/appointment of regulatory/Supervisory Bodies

i.e. Protector(s), Auditor(s) etc. and their specific powers.

The rules for submitting the Foundation's accounts.

Method for determining how beneficiaries may be added,

removed or replaced.

How remunerations are to be paid.

Further details (aside from those noted in the Charter) of how

the Foundation assets may be liquidated.

For most structures, clients use one of the two standard Regulations

formats prepared by our firm (Revocable or Irrevocable), but we can

also assist with advice and/or drafting any additional or special

provisions you may require in your Regulations.

A G L O B A L A P P R O A C H T O L E G A L S O L U T I O N S

www.mossfon.com

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Panama Private Foundations booklet – English

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