Panama: Foundations In Panama


Foundations are incorporated and regulated in Panama by Law 25 of June 12, 1995 (the "Foundations Law") and are commonly referred to as Private Interest Foundations ("PIF").

Like a company, it is an incorporated entity, having its own legal personality, which means it can hold assets, transact and sue in its own name.


A PIF is popularly used for succession and asset protection purposes and as a part of larger offshore structures for corporate transactions. Commonly a PIF is established by an individual donating assets (the "Founder"), which are applied by the Council in accordance with the Charter and Regulations for the benefit of certain Beneficiaries.

The PIF itself may not engage in regular trade or commerce, but can do so by way of an underlying company.

A Summary of the Main Advantages

  • Confidentiality – a PIF offers privacy and anonymity, as there is no requirement to disclose beneficiaries, file annual returns or financial statements. The Regulations are a private document;
  • Taxation – fully exempt from Panamanian tax on any non-Panamanian assets, income or transactions;
  • Administration – straightforward and cost effective in comparison with other jurisdictions, such as Liechtenstein and the Channel Islands;
  • Currency – a PIF may transact in any currency;
  • Flexibility - Founders, members of the Council and the Protectors may be corporations or individuals of any residency;
  • Accounting – there is no prescribed standard and the books may be kept in Panama or abroad;
  • Asset Protection - a PIF's assets may not be used to satisfy the Founder's or the Beneficiaries' obligations. Favourable asset protection provisions are incorporated within the Foundations Law; and
  • Forced heirship – may not be used to challenge the validity of the PIF or prevent the fulfillment of its objectives.

The Founder

The Founder is the person who establishes the PIF. Key characteristics include:

  • the Founder can be an individual or a corporation;
  • there can be multiple Founders;
  • the Founder may establish the PIF during his lifetime or after his death;
  • there is no requirement for an initial donation and any donations made can be revocable or irrevocable; and
  • a Founder can be a Council member, Beneficiary and a Protector.

The Council

The Council is similar in many ways to the board of a company, with members of the Council being viewed as the equivalent of directors. It is responsible for administering the assets of the Foundation and carrying out its objects such as to benefit a Beneficiary or to carry out a specific purpose which does not need to be charitable.

Members of the Council can be individuals or a corporation and there is no requirement to be resident in Panama. In the case of individuals, the minimum number of Council members is three and for a corporation it is just one. Any changes to the members of the Council must be registered with the Mercantile Registry of Panama.

The Protector

A PIF is not required to appoint a Protector.

Any appointment can made in the Charter or the Regulations and can be for an unlimited or finite period of time. Unless named in the Charter, the identity of the Protector is not publicly available.

A Protector is generally responsible for ensuring that the Council carries out its functions. The Regulations may provide the Protector with various powers including the power to appoint and remove Council members and to approve or disapprove specified actions of the Council.

A Founder, a Beneficiary or a third party individual or corporation can be appointed as the Protector.


Beneficiaries are the individuals or entities, which can benefit from the PIF. The Regulations can set out under what circumstances a Beneficiary may benefit. A Beneficiary may not sell, pledge or otherwise encumber his interest in the PIF.

Registered Agent

All PIF's require a Registered Agent in Panama. The Registered Agent generally deals with all correspondence with the Mercantile Registry of Panama and the payment of the annual franchise tax.

Documentation and Incorporation

The establishment of a PIF requires the presentation of the Charter to the Public Registry of Panama. The Charter is a public document, which must include the following: (1) the name of the PIF; (2) the names and addresses of the Council members; (3) details of the Registered Agent; and (4) details of the Founder (which can be a nominee company in order to maintain confidentiality).

The Charter does not need to include details of the Beneficiaries.

The Regulations is a private document, which is not filed with the incorporation application. It is comparable to the articles of association for a company and generally deals with, amongst other matters, the establishment of the Council, the appointment of the Protector and under what circumstances a Beneficiary may benefit.

The duration of a PIF may be for an unlimited or limited period of time.


From a Panamanian perspective, a PIF is exempt from all taxes, contributions, fees or duties. The only charge is the annual fee which is USD$400.

Distributions made to both Panamanian residents and non-Panamanian residents are exempt from Panamanian tax as long as the PIF consists of only non-Panamanian assets and income. If a PIF consists of Panamanian assets or income then it may be liable to tax in Panama.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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