Our firm also assists clients in the formation of private interest foundations, which are excellent vehicles for estate planning and asset protection; minimization or deferral of tax liability; confidentiality on the transfer of assets, limiting the effects of professional liability, anticipating government confiscatory measures and similar conservation measures, among other matters.
The following are a few of the main features of the private interest foundations:
The foundation can be formed by one or more natural or juridical persons either personally or through third parties, with an initial patrimony of no less than US$10,000, which does bit have to be deposited in advance.
The foundation becomes a legal entity once the charter has been recorded at the Public Registry Office
The foundation charter can be drafted in any language that uses the Latin alphabet
It is a nonprofit organization that may, nevertheless, engage in commercial activities on a non-habitual manner or exercise rights deriving from titles representing the capital of business companies held as part of the foundation's assets provided that the economic proceeds derived therefrom are used exclusively towards the purposes of the foundation.
The foundation is irrevocable unless otherwise provided for in the foundation charter.
Assets must be endowed for a specific purpose.
The foundation charter must contain general information to wit: name (which must include the word "foundation"), purposes, initial patrimony, members of the Foundation Council, domicile, duration, etc.
Members of the foundation, public servants, or private sector employees must keep their knowledge of the activities, transactions, or operations of the foundation confidential.
The administrative body is the Foundation Council, having the powers established by the founder in the foundation charter. The Foundation Council must be composed of at least three individuals which do not have to be residents or citizens of Panama nor domiciled in the country or one juridical person.
Detailed information about the names, percentages and other particulars regarding the beneficiaries can be included in the foundation charter or in a separate document called “Regulations” which is of a private nature and as such does not have to be recorded at the Public Registry Office.
The foundation charter or its regulations may provide for a supervisory body either in the form of a "protector," "auditing company," "custodian" or any other.
The foundations can be created by means of a private document. Even foundations with mortis causa effect can be created by private document without need for a will.
For all legal purposes, the assets of the foundation constitute an estate separate from the founder's personal assets. Therefore, they may not be seized, attached, or subject to any lawsuits or precautionary seizures, except for obligations of the foundation or legitimate rights of the foundation's beneficiaries. In any case, such assets will not respond for the personal obligations of the founder or beneficiaries.
All non-Panamanian source assets (offshore) and the income arising therefrom are exempt from all taxes, contributions, rates, lies, or imposts of any kind or description.
A foreign foundation may re-domicile in Panama through a Certificate of Continuation. By the same token, Panamanian foundations may transfer their domicile or assets to another country if so provided in the foundation charter or its Regulations.
The rules of "forced heirship" of other countries will not be enforced against the foundation.
Our partner, Dr. Julio C. Contreras III, participated actively in the drafting of the laws, which regulate the formation of Private Interest Foundations.
