Private interest foundations in Panama: Practical guide
Concept and Key Features
Autonomous Legal Entity: A Private Interest Foundation (PIF) is a separate legal entity under Law 25 of 1995, capable of holding assets, entering contracts, and operating for non-commercial purposes (family, charitable, religious).
Asset Protection: Transferred assets are shielded from personal creditors of the founder or beneficiaries.
Flexibility: May engage in commercial activities necessary to achieve its objectives, such as owning shares, real estate, or bank accounts.
Key Differences:
vs. Trust: A PIF is a juridical entity, not a contract. The founder retains indirect control.
vs. Corporation: No shareholders, reducing legal risks tied to ownership disputes.
Formation Process
Foundation Charter:
Founding document outlining:
Name: Must include "Foundation" and be unique in Panama.
Minimum Capital: USD 10,000 (no public disclosure of assets).
Foundation Council: Minimum 3 natural persons or 1 legal entity.
Objectives: Broad and non-commercial (e.g., "family wealth management").
Beneficiaries: Designated in a confidential Internal Regulations document.
Notarized and registered in the Public Registry.
Internal Regulations:
Specifies beneficiaries, asset distribution, and operational rules. Remains private.
Asset Transfer:
Assets are transferred per local laws (e.g., Panamanian real estate requires a public deed).
Tax Benefits
Exemptions in Panama:
Formation, amendments, and transfers of foreign-located assets are tax-free.
Income from foreign assets is not taxed in Panama.
Estate Planning: Avoids probate processes, distributing assets per Internal Regulations, bypassing foreign inheritance laws.
Management and Confidentiality
Foundation Council:
Manages assets and executes objectives. May include the founder.
Decisions by majority vote; no public financial reporting required.
Legal Protections:
Foundation assets are immune from personal creditor claims.
Strict Confidentiality: Council members and agents face fines up to USD 50,000 and imprisonment for unauthorized disclosures.
Exceptions: Money laundering or drug trafficking must be reported.