Can you Become the Owner of a Private Interest Foundation in Panama?

Looking for a safe way to protect your assets from your ex-wife, creditors, or intruders? Take a look at the Panama Foundation (or Private Interest Foundation, as we will also refer to it in this article). This is a perfect instrument that has no owner under Panamanian law, and this fact allows the Panama Private Interest Foundation to own shares, real estate, or other assets of foreign corporations, without being owned by any person. You own assets without anybody knowing about it, and they will never find it out. That seems to be exactly what you need, right?

Private Foundations in Panama

The Main Advantages of the Panama Private Interest Foundation

The Panama Private Foundation is an entity with a special legal structure that differs from any other legal entity known in Anglo-Saxon law because:

  1. it is not a legal entity or a group of legal entities (as in the case of a corporation)
  2. it has no owners (shareholders, members, or partners)
  3. it is established for a specific purpose in the interests of a common group of persons, usually families

Such a structure that has no owners helps to avoid the seizure of assets and accounts in the case of litigation. After all, the owner of the assets is not actually the owner of a Panama Private Foundation.

The second important point that makes the use of the Panama Private Interest Foundation interesting is the fact that the structure provides protection from the laws on foreign controlled companies.

The national legislation in many countries requires individuals and legal entities that directly or indirectly own more than 10 percent of a foreign company to submit periodic reports on that property. Late submission or incorrect completion of reports entails penalties.

Therefore, businessmen are often interested in structures that are not legal entities but can be used to own assets at the same time. The Panama Private Interest Foundation is an example of such an institution that we strongly advise you to consider.

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More about the opportunities offered to international businesses in Panama.

Other Strengths of Panama Private Interest Foundation

Like a Trust, a Private Foundation in Panama is a good instrument for assets protection. Your property cannot be seized because it is legally owned by a Trust or Foundation, and so it is 100% protected from possible threats such as disputes during divorce, false claims litigation, creditors, and so on.

Settlement of Inheritance Disputes

Panama Private Interest Foundations can be used for inheritance structuring. Conflicts over inheritance or business do occur, and a Panama Foundation is the instrument that allows you to protect and manage your assets in a way that seems reasonable. The structure provides a simple solution: the founder sets out in the Charter how the assets will be used and distributed among the heirs. They will not have any influence on the actions taken by the Panama Private Interests Foundation (including by filing a claim to court) since the structure is reliably protected by national legislation.

High Level of Information Protection

The Panama Private Interest Foundation ensures the highest level of data confidentiality, taking into account various aspects: information on beneficiaries, protectors, and distribution of assets among beneficiaries. 

The laws that apply to the Foundation protect confidentiality in accordance with local civil law. Any participant, supervisory body, public or private employee who is aware of the Panama Private Foundation’s activities shall comply with the laws of the Republic in order to avoid sanctions or fines.

This is one of the main reasons why businessmen from all over the world opt for Panama as a good place to protect property and select the Private Interest Foundation as a reliable instrument. 

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Reducing the Tax Burden

If the Panama Private Interest Foundation owns property abroad, these assets are exempt from taxation in the Republic thanks to its territorial tax system. In addition, there are no restrictions in Panama on the nationalities of the foundation members (founder, beneficiary, foundation council, or protector).

It is important to note that although Panama does not withhold taxes on foreign assets owned by a Private Foundation, other countries (such as the founder’s country of residence) may request a fiscal compliance document at any time. The probability of compliance check initiation becomes especially high when you want to buy real estate or invest in other jurisdictions outside Panama, so you should be prepared for this.

Panama Private Interest Foundation vs Local Company

A Panama Private Foundation is an entity incorporated under the laws of the jurisdiction that has one peculiarity: unlike an ordinary company, it has no owners in a legal sense.

Registration of a company involves the issuance of shares or participation in the share of capital, and both mean the presence of owners. The establishment of the Panama Private Interest Foundation does not require the issuance of shares or forming of authorized capital. However, an initial contribution is made depending on the country’s requirements.

In fact, the Panama Private Interest Foundation is an autonomous organization that belongs to no one. It is an independent entity that legally owns the founder’s assets. Accordingly, no one can confiscate these assets since the founder does not own them by law: he has access to them by controlling their beneficiaries. This is the fundamental difference that lays the basis for strong assets protection offered by the Panama Foundation.

Practical Application of the Panama Private Interest Foundation

Panama Private Foundation can own any legal assets (shares, yachts, works of art, real estate, brokerage accounts), but it is not authorized to conduct commercial activities. However, this condition does not prevent it from making profits by receiving dividends, royalties, interest, etc. The Panama Foundation can open and use brokerage and standard bank accounts, and therefore receive dividends from passive investments, bonds, shares, etc.

The Panama Private Interest Foundation may also own one or more real estate objects around the world. If you lease them, all profits will be charged to the account in Panama, and you will have a completely legal source of income.

You may as well take a look at Panama itself as it is a very interesting country in terms of tourism business development. There are many beaches and beautiful landscapes here, and the Panama Canal is yet another opportunity to consider.

Structure of the Panama Private Interest Foundation

The Panama Foundation was initially based on the Liechtenstein Foundation structure. However, Panama is a more readily available instrument for property protection, and the absence of inheritance taxes adds to its appeal.

As mentioned above, the Panama Foundation is not a legal entity but a written agreement on how property is to be handled. It has its own assets and responsibilities which differ from those of the founder, protector, or beneficiaries. This ensures reliable protection of Panama Private Foundation’s assets against seizure, including real estate, bonds, stocks, precious metals, etc.

Panama Private Interest Foundation members:

  • Beneficiaries of the foundation: the founder transfers a letter with instructions on the ownership and disposal of assets, as well as their transfer to beneficiaries, to the private foundation. These instructions are not publicly available. Beneficiaries can be replaced at any time. The beneficiary is not regarded as an owner, and the foundation is not in any way liable for his debts
  • Founder of the foundation — the founder of the Private Interest Foundation is not the owner or regulator of the foundation
  • Members of the Nominal Council of the foundation are nominees similar to the board of directors in a Panama corporation. They must also issue a general power of attorney to act freely on behalf of the foundation
  • Protector of the Foundation is a natural person or legal entity who has powers as part of a trust but is not a trustee. The protector usually monitors, supervises, or controls the trust management by the trustees (but does not own it!).

Cooperation with a Panama Private Foundation is usually based on a written contract where the main responsibilities are listed, including signature on bank accounts, accounting, as well as recording and verifying the fulfillment of the foundation’s general objectives.

These contracts are also signed by members of the Foundation Council, notarized and apostilled.

The Main Differences Between the Panama Private Interest Foundation and the Trust

The Panama Trust and the Private Foundation are almost identical entities since both instruments are based on the principle that assets formerly owned by a person are transferred to another person or entity in favor of a third person.

In fact, there are three key players in these Panamanian structures:

  • the original owner of the assets
  • the custodian of the assets
  • the beneficiaries

However, despite the similarity of the main components, there is still one basic difference between the Panama Private Interest Fund and the Trust:

  • A Trust is an agreement between two people, the settlor (owner of the assets) and the trustee (custodian of the assets)
  • A Private Foundation is an entity with a special organizational and legal structure which obliges it to register in the jurisdiction in accordance with local laws. 

Therefore, the internal structure of these instruments looks like this in a more detailed analysis:

Key memberTrustPanama Private Interest Foundation
the original owner of the assetssettlor of the trust/intermediaryfounder
asset custodiantrusteea person that has a relevant status and is registered in the jurisdiction
beneficiaryany person named in the trust deedany person specified in the Foundation’s Charter

In the Foundation, the founder makes the first contribution whose amount depends on the jurisdiction. In Panama, for example, the first installment equals $10,000 in cash or in company shares. As soon as it has been paid, the assets can be handed over to the Private Foundation to be managed in the interests of a third party (beneficiary). 

Any founder’s family member or friend, or any person he chooses, can become the Foundation’s beneficiary. The decision to appoint this or that person a beneficiary is made by the founder and is recorded in the Panama Foundation’s Charter. 

Operation of the Panama Private Interest Foundation

1

Registration of the holding company in any free zone of Panama.

2

Establishing a branch of a trading company abroad to get profit. If it is properly structured, the tax payable will amount to 0%.

3

Engagement of experts to assist in the preparation and submission of audit and tax reports, as well as in transfer pricing between cross-border companies.

4

The company is put under the control of the Foundation, which will ensure a high level of business confidentiality.

Such a structure enables you to protect assets, ensures confidentiality, and also resolves the issues connected with business inheritance. No one can trace any connection between the Foundation and the assets owner, which is exactly what many wealth owners are looking for. And all of that becomes possible just because a Panama Private Foundation does not have an owner! 

“Can you become the owner of a Private Interest Foundation in Panama?’ – we asked at the start. And you see that the answer is negative: no, you cannot become an owner of a Panama Foundation, but you can have exclusive opportunities thanks to this fact!

If you are interested in establishing a Panama Private Foundation to keep your assets in order, please contact us by e-mail: info@offshore-pro.info. Our experts will help you ensure reliable protection and confidentiality of your business.

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