Panama


Originally Panama was populated by local Indian population. In 1502 Christopher Columbus explored eastern territories of Panama. In 1510 Vasco Nuñez de Balboa established the first colony here. Explored and settled by the Spanish in the 16th century, Panama broke with Spain in 1821 and joined a union of Colombia, Ecuador, and Venezuela - named the Republic of Gran Colombia. When the latter dissolved in 1830, Panama remained part of Colombia. With US backing, Panama seceded from Colombia in 1903 and promptly signed a treaty with the US allowing for the construction of a canal and US sovereignty over a strip of land on either side of the structure (the Panama Canal Zone). The Panama Canal was built by the US Army Corps of Engineers between 1904 and 1914. In 1977, an agreement was signed for the complete transfer of the Canal from the US to Panama by the end of the century. Certain portions of the Zone and increasing responsibility over the Canal were turned over in the subsequent decades. With US help, dictator Manuel NORIEGA was deposed in 1989. The entire Panama Canal, the area supporting the Canal, and remaining US military bases were transferred to Panama by the end of 1999.

Service packages

Двигайте таблицу
Service item Express Standard Optimum
Company registration
Legal address per year
Secretarial services for the first year
Fees and duties for the first year
Apostilled bound set of incorporation documents
Compliance fee
Nominee service per year
Bank Account Pre-approval
Price

2 700 USD

5 170 USD

5 670 USD

I want to order «»

Contact method: and / or

Core Services

2 700 USD

— Incorporation

including incorporation tax, state registry fee, including Compliance fee

included

— Annual government fees

Stamp Duty and Public Registry incorporation fee

1 490 USD

— Corporate legal services

including registered address and registered agent, NOT including Compliance fee

280 USD

—Delivery of documents by courier mail

DHL or TNT, at cost of a Courier Service

890 USD

— Apostilled set of Statutory documents

Optional services

1 970 USD

Nominee Director

Paid-up “nominee director” set includes the following documents

500 USD

Nominee Shareholder

Paid-up “nominee shareholder” set includes the following documents

Related services

Tax Certificate

Company’s tax residence certificate for access to double tax treaties network

585 USD

Certificate of Good Standing

Document issued by a state agency in some countries (Registrar of companies) to confirm a current status of a body corporate. A company with such certificate is proved to be active and operating.

380 USD

Certificate of Incumbency

Compliance fee

Compliance fee is payable in the cases of: renewal of a company, liquidation of a company, transfer out of a company, issue of a power of attorney to a new attorney, change of director / shareholder / BO (except the change to a nominee director / shareholder)

150 USD

Basic

simple company structure with only 1 physical person

50 USD

For legal entity in structure under GSL administration

additional compliance fee for legal entity in structure under GSL administration (per 1 entity)

100 USD

For legal entity in structure not under GSL administration

additional compliance fee for legal entity in structure NOT under GSL administration (per 1 entity)

250 USD

For client with high risk Status

Cost of incorporation, including first year servicing 2700
Cost of nominee director services per year, including an apostilled set of documents 1970
Cost of nominee shareholder services per year, including an apostilled set of documents 500
Cost of annual service, starting from the second year 1490
Open account in 28693
Incorporation timescale for a turnkey company 3 days
Country 26720

General information shortly

Двигайте таблицу
Total area Population Capital Unemployment Corruption perceptions index rank
75,420 sq. km 3,689,293 (2013) Panama City 4,4% (2012) 102
Location Central America
National currency Balboa/USD
Conditional reduction of currency PAB, USD
Against USD 1
Climate, average max and min t° Tropical maritime; hot, humid, cloudy; prolonged rainy season (May to January), short dry season (January to May); avg. maximum temperature (July) +36°; avg. minimum temperature (January) +28°
Time difference from Moscow - 7 hours
Dialing code +507
State language Spanish
Ethnic groups Mestizo 70%, black, mulatto and sambo 14%; white 10% and Indian 6%
Literacy rate 88%
Credit rating BBB
Government type Democratic republic
Executive branch Head of Government: President, Government: Cabinet of Ministers appointed by President
Legislative branch National Assembly (71 members)
Judicial branch Supreme Court (Corte Suprema de Justicia), four Superior Tribunal, Magistrate courts
GDP per capita rank 60 (2012)

Corporate info

Двигайте таблицу
Shelf companies permitted Legal system Incorporation timescale for a turnkey company Cyrillic alphabet permitted in company name Local registered office
Yes civil law 3 days No Yes
Types of entity Corporation (Sociedad Anonima); General Partnership; Limited Partnership; Civil Partnership; Commandite Company; Sole Proprietor
Incorporation timescale for a new company 1-2 days
Company suffix Corporation (Corp.), Incorporated (Inc.), or Sociedad Anónima (S.A.)
Sensitive words words which convey that the business of the company is of a licensed nature, such as Betting, Insurance, Financing, Trust or Banking business
Local registered agent Yes
Information to be kept at the registered office accounting books and records (in case of operating in Panama)
Seal required, type of seal not required
Redomiciliation (to, from) permitted permitted

Director and secretary

Двигайте таблицу
Minimum number of directors Residency requirements for directors Corporate directors permitted Disclosure to local agent Disclosure to public
3 No Yes Yes Yes
Directors’ meetings/frequency/location No requirements
Company secretary required Yes
Residency requirements for a secretary No
Qualified secretary required No
Corporate secretary permitted No

Shareholder and beneficiary

Двигайте таблицу
Minimum number of shareholders Residency requirements for shareholders Corporate shareholder permitted Disclosure to local agent Disclosure to public
2 subscribers; 1 shareholder No Yes No No
Meetings/frequency/location No requirements
Beneficiary info disclosure to No

Shares and share capital

Двигайте таблицу
Minimum authorized share capital Minimum issued share capital Minimum paid share capital Authorized capital payment deadlines Bearer shares permitted
No requirements No requirements No requirements No requirements Yes
Issued capital payment deadlines No requirements
Standard currency Balboa/USD
Standard authorized share capital 10000
Standard par value of shares 20
Shares with no par value permitted Yes

Taxes

Двигайте таблицу
Min. rate for corporate tax Capital gains tax VAT Withholding tax Exchange control
25% 10% 7% 10%(5%,20%)/12,5%/12,5% No
Personal tax 0-25%
Corporate tax (in detail) The corporate income tax rate is 25%. If the taxable profit of the company exceeds $ 1.5 million, then it pays income tax or 4.67% of gross taxable income, if the latter amount is greater.
Capital gains tax. Details Gains from the sale of assets are taxed at a rate of 10%.
VAT. Details The tax is similar to VAT. The standard tax rate is 7%. Some goods and services are subject to rates of 10% and 15%.
Other taxes Social contributions, Operations Notice tax, Real estate tax
Stamp duty 0,1%

Accounts

Двигайте таблицу
Requirement to file accounts Publicly accessible accounts Audit required Requirement to file Annual Return Publicly accessible Annual Return
No No No No No
Requirement to prepare accounts No
Double tax treaties network 17
Tax Exchange Information Agreement network 1
OECD member No
Offshore/onshore status according to the RF laws Yes

GENERAL INFORMATION

General info

Republic of Panama is the southernmost country of Central America. Situated on the isthmus connecting North and South America, it is bordered by Costa Rica to the west, Colombia to the southeast, the Caribbean to the north and the Pacific Ocean to the south.
Total area of Panama is 75.517 sq. km. Population of Panama is 3 689 293 people (2013). Most of the population is Mestizo (70%), others include black, mulatto and sambo (14%); white (10%) and Indian (6%).
The capital is Panama.
Official language of Panama is Spanish.
Official currency is Balboa (PAB) and USD. One US dollar is equal to 1 PAB.
Climate of Panama is tropical maritime; hot, humid, cloudy; prolonged rainy season (May to January), short dry season (January to May); avg. maximum temperature (July) +36°; avg. minimum temperature (January) +28°.
Time difference with Moscow is -7 hours.
Literacy rate is 88%.
Calling code of Panama is +507.

History

Originally Panama was populated by local Indian population. In 1502 Christopher Columbus explored eastern territories of Panama. In 1510 Vasco Nuñez de Balboa established the first colony here. Explored and settled by the Spanish in the 16th century, Panama broke with Spain in 1821 and joined a union of Colombia, Ecuador, and Venezuela - named the Republic of Gran Colombia. When the latter dissolved in 1830, Panama remained part of Colombia. With US backing, Panama seceded from Colombia in 1903 and promptly signed a treaty with the US allowing for the construction of a canal and US sovereignty over a strip of land on either side of the structure (the Panama Canal Zone). The Panama Canal was built by the US Army Corps of Engineers between 1904 and 1914. In 1977, an agreement was signed for the complete transfer of the Canal from the US to Panama by the end of the century. Certain portions of the Zone and increasing responsibility over the Canal were turned over in the subsequent decades. With US help, dictator Manuel NORIEGA was deposed in 1989. The entire Panama Canal, the area supporting the Canal, and remaining US military bases were transferred to Panama by the end of 1999.

Government Type

By government type Panama is a democratic republic.
Head of State is a President. The President is elected for a five-year term.
Executive power is exercised by the Cabinet of Ministers which is appointed by the President.
Legislative power belongs to the National Assembly (Asamblea Nacional), which consists of 71 members and is elected for a 5-year term.
Judiciary power is composed of Supreme Court (Corte Suprema de Justicia), four Superior Tribunal and Magistrate courts.

Economy

The economy of Panama is a fully dollarized free market economy with a history of low inflation. It is based mainly on the services industry, heavily weighted toward banking, commerce, ship registration, and tourism. The hand-over of the canal and military installations by the US has given rise to new construction projects. These industries comprise two thirds of Panama’s GDP and provide employment for about two thirds of workers.
Panama’s GDP (PPP) in 2012 was 16.6 thousand dollars and ranked 16th in the world.
Industry gives 17% of GDL (18% of employees), agriculture – 6% of GDP (15% of employees).
The main agricultural crops are bananas, rice, corn, coffee, sugar, vegetables.
The country's industry include construction, manufacturing of aircraft spare parts, cements, drinks, adhesives, and textiles. Also the leading exports for Panama are bananas, shrimp, sugar, coffee, and clothing.

CORPORATE INFORMATION

Legal system

The legal system of Panama is based on Roman law being a part of specific Latino American group.
The main source of civil law in Panama is Civil Code of Chile (1857) adopted in Panama with some changes.
Due to close economic relations with the US commercial law of Panama is greatly influenced by English common law. This relates to Negotiable Documents Law (1917), Trust Law (1984), Corporations Law (1927).
Basic corporate Law of Panama is found in the Corporations Law (1927) and some provisions of Commercial Code.

Types of entity

Under Panamian legislation, the following types of commercial entities may be established in Panama to carry on business:
  • Corporation (Sociedad Anonima);
  • General Partnership;
  • Limited Partnership;
  • Civil Partnership;
  • Commandite Company;
  • Sole Proprietor.

The corporation limited by shares is the most frequently used corporate form in Panama, and is the usual choice for an offshore operation.

REGISTRATION

Company name

The name of the corporation must end in any of the following words or abbreviations: Corporation (Corp.), Incorporated (Inc.), or Sociedad Anónima (S.A.). Names in a foreign language are permitted.
Company name should not be identical or similar to the existing names. Name(s) available may be reserved, if desired, for a renewable period of 30 days at a cost of US$50.00 each.
It is not possible to use any words which convey that the business of the company is of a licensed nature, such as Betting, Insurance, Financing, Trust or Banking business.

Registration

The following steps are required to incorporate a Panama company:
  • Hire a registered agent;
  • availability of names must be cleared for use by the Public Registry
  • notarize articles of incorporation;
  • register at the Mercantile Division of the Public Registry and pay Annual Franchise Tax;
  • obtain a notice of operation (“aviso de operación”) through the “Panama emprende” website;
  • request an employers’ inscription number from the Social Security Administration.

The last two steps are not required from offshore companies.

Local registered office

Each Panamanian corporation must have Panamanian registered office address. Principal office address (business address) of the corporation may be in any country. Companies operating locally must maintain here all records and books; which may be kept manually, mechanically or electronically. If a Panama company does not operate locally (having an office in Panama through which international operations are directed, which does not constitute "doing business in Panama" under Panamanian income tax law), such company can maintain its books of accounts in any manner desired and anywhere in the world.

Local registered agent

By law every corporation must have resident or registered agent.

Seal

Under Panamian law, a company is not required to have a corporate seal.

Redomicile

Redomiciliation to Panama of foreign corporations is allowed, regardless of provisions in this respect in the country of origin. Redomiciliation of Panamanian corporations to other jurisdictions accepting such redomiciliation, is also allowed, if it is so stipulated in the articles of incorporation.

COMPANY STRUCTURE

Directors

The law requires a minimum of three directors, which may be natural persons or juridical entities. Residents of any country may be appointed as directors.
If so desired, the services of directors and/or officers are provided for a yearly fee by local attorneys and management companies.
The Board of Directors appoints officers such as President, Secretary and Treasurer. Officers shall be individuals as well. Officers may be residents of any country. One person may hold more than one officers positions. No officer needs to be a director.
There are no requirements to meeting of Board of directors.
Names of directors appear in public records.

Secretary

For Panamian corporations there must be a secretary. Secretary is appointed by the Board of directors. Secretary should be an individual and can also be a director. There are no requirements to the residency and qualification of the secretary.

Shareholders

A Panamanian corporation is formed by two persons (called Subscribers) or Nominees who execute legal documents called the Articles of Incorporation. Those documents are filed with the Panama Public Registry office. After the corporation is formed, only one shareholder will be required. Shareholders can be individual or juridical entity of any residency.
Annual meetings are not required. Board of directors may decide to conduct an annual meeting of shareholders. Such a meeting shall be held within Panama unless otherwise stated in the Articles of Incorporation or By-Laws. If so, shareholders' meetings may be held by telephone, telefax or other electronic media. Written minutes detailing how the communication was made and the resolutions adopted must be drawn and signed by all involved.
Information about shareholders is not filed with the Public Registry Office and not available to the public.

Beneficiary

Information on beneficiary is not disclosed.

Share capital and shares

Shares can be of various classes, can have par value or not, may be registered or bearer. There is no minimum capital, and no paying-up rules, except that no-par-value and bearer shares must be fully-paid when issued. Strict regulations now apply to bearer shares: the registered agent must keep the bearer share certificate in safe custody and must notify the Registrar about such shares.

TAXATION

Personal taxes

Panama has a territorial principle of taxation: only income generated in Panama is taxed.
The tax rates are progressive:
  • Income up to USD 11,000 – 0%
  • From USD 11,000 to 50,000 – 15%
  • Over USD 50,000 – 25%

Gains from the sale of assets are taxed at the rate of 10%.
When selling securities, the buyer is subject to withholding tax on the transaction amount at the rate of 5%, this tax can then be credited against income tax (or refunded).
When selling immovable property, the buyer is subject to withholding tax on the transaction amount (or cadastral value, if higher) at the rate of 3%, this tax can then be credited against income tax (or refunded).
For certain categories of taxpayers (developers, etc.), the rates are different.
Immovable property transactions are also usually subject to immovable property transfer tax at the rate of 2%.

Corporate income tax

Panama has a territorial principle of taxation: only income generated in Panama is taxed.
The corporate income tax rate is 25%. If the taxable profit of the company exceeds USD 1.5 million, then it pays either normal corporate income tax or 4.67% of gross taxable income, whichever is higher.
At the municipal level, a local tax is levied on gross income. The tax depends on the type of activity, but usually does not exceed USD 2,000 per month for each activity.
Dividends from Panamanian sources are subject to withholding tax, generally at the rate of 10% (no corporate income tax is payable when dividends are received). There are various exceptions. If a company has both taxable and non-taxable income, it can potentially apply a 5% withholding tax rate in relation to dividends. If the company has bearer shares, then the tax rate rises to 20%. If a company distributes less than 40% of its after-tax profit, then it must pay in advance a dividend withholding tax on the difference between 40% of its after-tax profit and the distributed dividend.
Gains from the sale of assets are taxed at the rate of 10%.
When selling securities, the buyer is subject to withholding tax on the transaction amount at the rate of 5%, this tax can then be credited against corporate income tax (or refunded). When selling immovable property, the buyer is subject to withholding tax on the transaction amount (or cadastral value, if higher) at the rate of 3%, this tax can then be credited against corporate income tax (or refunded).
For certain categories of taxpayers (developers, etc.), the rates are different.
Immovable property transactions are also usually subject to immovable property transfer tax at the rate of 2%.

CFC rules

None.

Withholding tax

The standard withholding tax rate for dividends is 10%, in some cases the rate of 5% or 20% applies.
Royalties, service fees and interest are taxed at the rate of 12.5%. With royalties and service fees, this tax may be avoided if the paying company does not deduct them as expenses for corporate income tax purposes.

Movable goods and services transfer tax (ITBMS)/VAT

This tax is similar to VAT.
The standard tax rate is 7%.
Some goods and services are taxed at the rates of 10% and 15%.

Social security contributions

Social security contributions are payable on employment remuneration at the rate of 9.75% by employees and 12.25% by employers.
In addition, a contribution to educational insurance is payable on employment remuneration at the rate of 1.25% by employees and at the rate of 1.5% by employers.
Employers also pay professional risk insurance premiums, the premium rates vary by industry and range from 0.33% to 6.25%.

Operations Notice tax

This annual tax is levied at the rate of 2%, with a minimum tax amount of USD 100 and a maximum tax amount of USD 60,000.

Immovable property tax

Property owners pay an annual immovable property tax at rates up to 1%.

Stamp duty

Some commercial contracts are subject to US$0.10 per US$100.00 value.

Tax Agreements

Panama has tax agreements 28 urisdictions:
17 DTCs: Barbados, Czech Republic, France, Ireland, Israel, Italy, Korea (Republic of), Luxembourg, Mexico, Netherlands, Portugal, Qatar, Singapore, Spain, United Arab Emirates, United Kingdom, Vietnam.
1 TIEA: United States.

Exchange control

Foreign exchange transactions can generally be made without restrictions.

ACCOUNTS

Financial statements

There are no statutory requirements of accounting and audit for Panama offshore companies. It's totally up to the corporate directors, what kind of records they would like to keep. If a Panama company does not operate locally (having an office in Panama through which international operations are directed, which does not constitute "doing business in Panama" under Panamanian income tax law), such company can maintain its books of accounts in any manner desired and anywhere in the world.

Annual Return

Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
  • Incorporation information (registration date, registered address);
  • Information about directors and their resignation;
  • Information about secretaries and their resignation;
  • Information about registered capital, nominal value of shares and amount of issued shares;
  • Information about shareholders and share transfer.

In Panama companies are not obliged to prepare or file Annual Return.

Tax returns

The tax year coincides with the company's financial year, which must not exceed 12 months.
The corporate income tax return must be filed within three months of the end of the reporting period.
The final tax is due not later than three months after the close of the reporting period.
Three advance tax payments are made during the year.

SPECIAL LEGAL ENTITIES

Foundations

A Panama Private Foundation is an excellent entity for achieving asset protection and confidentiality. These are excellent vehicles for tax and inheritance planning structures.
The private interest foundation could be defined as a legal entity created to acquire certain patrimony which must be managed and protected according to the founder’s will.
The assets of the foundation are the result of a transference made by the founder or third parties to the foundation, to the interest of a person or group of persons named beneficiaries. A foundation can hold any assets, including cash deposited in bank accounts, holder of shares, bonds, real estate, etc., in any part of the world. The provisions regarding who are the beneficiaries, the assets and forms of distributions of assets are established in a private document named Foundation’s Regulation, not for public record, and can be amended exclusively by the client.

Applicable Law
The Panama private interest foundation is governed by Law 25 of June 12 1995.

Formation
According to Law 25, one or more natural or legal persons may create a private interest foundation. In order to form the private interest foundation, an initial patrimony is necessary to accomplish the objectives established in the constitutional documents. There are two main documents in the creation of the private interest foundation: the foundation charter and the regulations.
Foundation charter
Article 5 of Law 25 provides that following information must be contained in the foundation charter:
  • The name of the foundation, in any language using the Latin alphabet, the name shall not be the same or similar to that of a pre-existing foundation of the Republic of Panama so as not to lend itself to confusion. The name shall include the word "foundation" in order to distinguish it from natural persons or from different types of juridical persons.
  • The foundation's initial patrimony, expressed in any currency being legal tender, which in no case shall be less than a sum equivalent to $10,000.00.
  • A complete and clear designation of the member or members of the Foundation Council, to which the founder may belong, including their addresses.
  • The foundation's domicile.
  • The name and address of the foundation's resident agent in the Republic of Panama (a lawyer or a law firm), who shall countersign the Foundation Charter prior to its registration at the Public Registry.
  • The purpose of the foundation.
  • The manner in which the beneficiaries of the foundation are designated.
  • The reservation of the right to modify the Foundation charter.
  • The duration of the foundation.

  • The use to be made of the foundation's assets and the manner in which is estate is to be liquidated in the event of dissolution.

  • Any other lawful clauses deemed expedient by the founder.

Regulations
The foundation charter is the framework designed by the founder which outlines the general aspects, structure and purposes of the entity. These matters are further detailed in a document called ‘the regulations’. This is a confidential and private document which sets out a detailed description of the intention and will of the founder as previously outlined in the foundation charter. The document comprising the regulations need not be registered with any public office; therefore, the information contained therein may remain confidential under the control of the foundation’s administrators. The regulations may contain, for example, a complete description of the deposit accounts, assets and the method of their distribution among the beneficiaries, along with a complete identification of the beneficiaries and the protector.

Registration
The private interest foundation may be created by means of a private or public document; however, in order to become a legal person, the charter must be registered at the Panamanian Public Registry. Registration at the Public Registry also implies publicity before third parties. For the purpose of registering the entity, the foundation charter must be executed in a public deed before a notary public in Panama. Once the public deed is executed, the document must be filed at the Public Registry. The registration procedure may take one to two business days.

Purposes
In general, the purpose of the private interest foundation is to acquire patrimony that is to be managed and protected according to the will of the founder. Thus, the founder determines the specific objects of the foundation. There is wide range of possibilities from which to choose, from the support of family interests, to the dedication of all benefits to a charitable institution. Law 25 is very flexible as to the purposes for which a private interest foundation can be set up, imposing restrictions only in respect of certain commercial activities. Private interest foundations are not meant to pursue commercial purposes; however, they can perform mercantile activities on an occasional basis.
Likewise, the private interest foundation may exercise its rights as a holder of securities in mercantile companies. In any event, the results and profits from such commercial activities must be applied exclusively to achieve the objects of the private interest foundation.

Funds
There are no restrictions on the source of the patrimony of the private interest foundation. In this respect, Article 16 of Law 25 states that the patrimony of the private interest foundation may flow from any legal activity. Likewise, it may be integrated by goods of any nature, present and future. Further, the patrimony may be formed of periodical amounts contributed by the founder or third parties. The amounts may be transferred by means of a public or private document.
As stated by Law 25, the initial foundation’s patrimony must be at least US$10,000. Although there is an express duty to state the initial foundation’s patrimony in the registration charter, such patrimony may be materially transferred after the private interest foundation has acquired legal personality, at which point the founder or any third parties that have undertaken to contribute goods or assets to the foundation’s patrimony should formalize the transfer. All goods and assets forming the foundation’s patrimony are regarded as separate from those forming the founder’s patrimony.

Organization
As required by law, a private interest foundation can be created by one or more natural or legal persons, whether national or foreign, either personally or through third parties. Such individual or legal body is recognized as the Founder. The founder is the primary figure in the constitution of the foundation and can determine its intentions relating to the organization, purposes, patrimony, distribution of assets, supervisory organs, dispute resolution methods and so on. All these aspects can be set out in the foundation charter and further detailed in the regulations. Once the private interest foundation is formally registered, the founder’s role is limited to certain functions such as the removal or appointment of members of the foundation council (if agreed in the constitutional documents), and the revocation of the private interest foundation (where it was created to be effective after the death of the founder). Nevertheless, the founder can have other roles within the private interest foundation as a member of the council, beneficiary, protector or any other charge designated in the foundation charter or in the regulations.
The foundation council is the supreme body of the private interest foundation, in charge of the administration and management of the entity. Its main task is to carry out the purposes and objects of the foundation. The general obligations of the foundation council are listed in Article 18 of Law 25 as follows:
A detailed description of the duties and responsibilities of the foundation council must be set out in the foundation charter and regulations. In Panama, the foundation council must be formed by a minimum of one member where that member is a legal person, or a minimum of three where they are natural persons. There are no restrictions on the nationality of the members.
An optional organ within the private interest foundation is the supervisory bodies. Supervisory bodies may be natural or legal persons, national or foreign. As with the foundation council, the role of the supervisory bodies is to ensure that the purposes and objects of the private interest foundation are carried out as provided by the foundation charter and the regulations.
The powers of the supervisory bodies may be elaborated in the foundation charter and the regulations. The most common supervisory body in the private interest foundation is called the ‘protector’. The general powers of the protector are often set out in the foundation charter, while its identity and special powers are frequently described in the regulations. One of the most common and important powers of the protector is to confirm the acts adopted by the foundation council. The founder can become the protector of the private interest foundation.

Beneficiaries
The foundation is required by law to identify the beneficiaries in the foundation charter or to describe the process of their appointment. The founder may also be appointed as a beneficiary of the private interest foundation. The beneficiaries are entitled to the following rights:
  • to receive benefits, profits and interest according to the method of distribution set forth in the foundation charter and the regulations; and

  • to challenge acts of the foundation council if is not taking good care of the affairs of the private interest foundation and its objects or purposes.

The beneficiaries may either complain directly to the foundation council or bring a claim before the court of the place where the private interest foundation is domiciled.

Resident Agent
Like any other Panamanian legal entity, private interest foundations must state the name and domicile of a lawyer or law firm within the territory of Panama. This resident agent will prepare the foundation charter and represent the entity in the registration process. The resident agent will also assist the tax authorities in the collection of the annual government fees payable by the private interest foundation.

Types of Private Interest Foundations
Mortis-causa private interest foundation
Under Article 4 of Law 25, it is possible to form a private interest foundation to take effect after the death of the founder (a ‘mortis-causa’ private interest foundation). In order to do so, the founder may choose one of the following methods:
  • a private document executed by the founder and subsequently authenticated by a notary public; or

  • direct appearance before a notary public to execute the documents of the private interest foundation.

Law 25 expressly provides that a private interest foundation created by these methods need not comply with the formalities required for the granting of a will.
Irrevocable private interest foundation
As a general rule, private interest foundations are irrevocable, unless otherwise provided in the foundation documents. The irrevocability of the private interest foundation affords both the entity itself and interested third parties confidence that they are dealing with a functional institution duly recognized by private and public authorities, and capable of assuming obligations and exercising its rights.
Revocable private interest foundation
As provided by Article 12 of Law 25, a private interest foundation is revocable if:
  • the foundation charter has not been registered before the Public Registry;

  • the foundation charter expressly allows for revocation; or

  • there are grounds for to revocation of the donations - for example, an attempt to commit a crime against the life of the founder.


Tax Exemption
The private interest foundation benefits from certain tax exemptions. Provided the assets of a private interest foundation are located outside Panama, income from a foreign source or which is non-taxable in Panama and securities issued by corporations with foreign-source profits are not taxable in Panama.

Continuation
Law 25 provides that a private interest foundation constituted under the laws of a foreign jurisdiction may be continued in Panama, provided that the entity files: a certificate of continuation; a copy of the original foundation deed; and a power of attorney granted to a Panamanian lawyer who will conduct the registration process before the local authorities.
According to Article 29 of Law 25, the continuation certificate should contain the following: the name of the private interest foundation and the date of its constitution; details of its record or deposit at the registry of its country of origin; an express declaration of its wish to continue its legal existence as a private interest foundation; the requirements set forth in Article 5 of Law 25 for the constitution of private interest foundations.
All previous debts and other obligations acquired by the private interest foundation remain effective, and the entity is still liable for such after registration of the continuation under the laws of Panama.
In the same way, a private interest foundation duly formed under the laws of Panama may be continued under the laws of a foreign jurisdiction, according to the rules established in its foundation charter and the regulations.

Dissolution
Law 25 sets out a list of circumstances that may constitute grounds for the dissolution of the private interest foundation:
  • The expiry date established in the foundation charter has passed;
  • The foundation’s objects have been duly fulfilled or realization of these objects is impossible;
  • The foundation has become insolvent;

  • All assets of the foundation have been lost or extinguished;
  • The foundation is a revocable private interest foundation; or
  • Any other cause duly established in the foundation charter or in the law has occurred.

In order formally to dissolve a private interest foundation that has been registered with the Public Registry, the foundation council must issue a resolution which is authenticated by a notary public and submitted to the Public Registry. After completion of the registration process, an announcement should be published in a local newspaper announcing the formal dissolution of the private interest foundation.

Foundation vs. Other Legal Instruments
While the Panama private interest foundation shares some of the characteristics of other legal institutions, such as the corporation and the trust, there are also important differences.
  1. Legal forms. The corporation is a legal entity which can acquire obligations and exercise rights. Likewise, the Panama private interest foundation may become a legal entity through registration of the foundation charter with the Public Register. In contrast, the trust is a contract between the settlor and the trustee to administrate the assets of the former for his benefit or that of other identified beneficiaries.
  2. Means of administration. While the corporation is managed by a board of directors, the foundation is administrated by a foundation council. In both entities the administrative body may be formed by natural or legal persons. In the corporation, the board of directors must have at least three members, while in the foundation the foundation council may have just one member as long as this is a legal person. In the trust, the administrative body is known as the trustee, and can be a single legal or natural person.
  3. Ownership of assets. In the corporation, the profits produced from the company’s assets are, in principle, distributed to the shareholders. In the private interest foundation and the trust, the profits are directed to beneficiaries duly identified by the founder or settlor, as the case may be.
  4. Purposes of the entities. The corporation and the trust may engage in commercial or mercantile activities, while such activities are restricted in the case of the private interest foundation.
  5. Transfer of assets. In the corporation and the private interest foundation, the assets are transferred in favor of the legal entity; in the trust, the assets are not transferred and the settlor retains property rights over them.


Confidentiality
Law 25 sets out a duty of confidentiality. This compels the foundation council and the supervisory bodies, as well as any public or private persons that acquire information about the transactions or operations of the private interest foundation, to keep such activities and information confidential. Violation of these rules is punishable by up to six months’ imprisonment or a fine of $50,000, without prejudice to the corresponding civil remedies.

Advantages of Foundation
The advantages of the Panama Private Interest Foundation include the following:
  • The foundation is a recognized legal person.
  • The foundation’s patrimony cannot be seized, attached or be subject to any lawsuits for debts or obligations of the founder, beneficiaries or other bodies within the foundation.
  • The registered foundation charter contains generic information. The rules of distribution of 
the assets; the name of the beneficiaries and other confidential information is kept in a 
document in custody of the foundation’s administrators.
  • The founder maintains the assets entirely under his control.
  • The foundation is confidential and can be set up quickly.
  • May have one or several founders, and founders may be individuals or companies.
  • Foundation’s assets located outside Panama as well as its profits are tax exempt.
  • The foundation patrimony is not affected by the inheritance rules.
  • The Foundations constituted according to the laws of a foreign countries, can continue their 
operations in Panama. Similarly, the foundations constituted according to the Panamanian Laws, will be able to continue operations according to the laws of foreign countries.

International law relations

Двигайте таблицу
Party to the Hague Convention (Apostille) Legal system Double tax treaties network OECD member Offshore/onshore status according to the RF laws
Yes civil law 17 No Yes

Public authorities and legal acts

Двигайте таблицу
List of laws and regulations
Act name Scope of law
Law No 32 of 1927 corporations
Law No 25 of 1995 foundations
Law No 4 of 2009 limited companies
Tax treaties entered Barbados, Czech Republic, France, Ireland, Israel, Italy, Korea (Republic of), Luxembourg, Mexico, Netherlands, Portugal, Qatar, Singapore, Spain, United Arab Emirates, United Kingdom, Viet nam
Tax Exchange Information Agreement (TEIA) United States
List of state regulatory authorities
Panama Government https://www.presidencia.gob.pa/en
Ministry of Economy and Finance http://www.mef.gob.pa/es/Paginas/home.aspx
Register of Companies http://www.registro-publico.gob.pa/
Business in Panama http://www.businesspanama.com/index.php
Bank of Panama https://www.banconal.com.pa/

    Consultants

    YOUR CONSULTANT

    If you are ALREADY a GSL customer

    Write or call now

    Sign up for a consultation

    c  !

    Your question was successfully sent to the GSL office.

    — In the near future you will receive a detailed answer to it. Typically, the response rate does not exceed 24 hours.

    — If your question is urgent, you can always contact me on the office or mobile phone number listed on the site or chat on Skype.


    Regards, If you are ALREADY a GSL customer YOUR CONSULTANT

    Contact method: and / or

    Aniko Sebok

    GSL Law & Consulting Lawyer, Head of UK GSL office

    Office phone:

    +44 207 002 1307

    Write or call now

    Sign up for a consultation

    c  !

    Your question was successfully sent to the GSL office.

    — In the near future you will receive a detailed answer to it. Typically, the response rate does not exceed 24 hours.

    — If your question is urgent, you can always contact me on the office or mobile phone number listed on the site or chat on Skype.


    Regards, GSL Law & Consulting Lawyer, Head of UK GSL office Aniko Sebok

    Contact method: and / or

    Valerija Filipova

    GSL Law & Consulting Lawyer, London Office

    Office phone:

    +44 207 822 8592

    Office phone:

    +44 207 822 8594

    Write or call now

    Sign up for a consultation

    c  !

    Your question was successfully sent to the GSL office.

    — In the near future you will receive a detailed answer to it. Typically, the response rate does not exceed 24 hours.

    — If your question is urgent, you can always contact me on the office or mobile phone number listed on the site or chat on Skype.


    Regards, GSL Law & Consulting Lawyer, London Office Valerija Filipova

    Contact method: and / or

    I want to order «»

    Contact method: and / or
    RU EN