Obtain a Panama Foundation
A Foundation is a self-owning legal entity: it has managers but no owners.
Foundation
In other words, a Foundation is a mean of giving separate legal personality to certain defined assets (as opposed to a company, which gives legal personality to a group of people).
It is then managed by a Council of Members, normally appointed by the original Founder. Its aim must be to achieve a certain specific purpose – for example to manage wealth of certain named beneficiaries.
Time Frame
The final approval of the permanent residency, by law, should take less than Thirty (30) working days. We can begin the process even before the applicant comes to Panama through the use of a Power Of Attorney, given that all obligations and requirements are fulfilled.
ADVANTAGES AND DISADVANTAGES
- Exchange Controls: Panama has no exchange controls, since the currency in circulation locally is the US Dollar. Given the country’s strategic location with respect to shipping and trade, Panamanian
banks generally accept wire transfers in any currency, although it is not possible to have accounts in all currencies. - Beneficiaries: Any person (natural or legal, minor or of legal age) may be a beneficiary of the Foundation. It is possible to establish a corporation or legal entity as the beneficiary of the Foundation,
or a group of persons, should the Foundation be used for management of a Pension Plan or other type of Employee Benefits. - Perpetuity: A Foundation may be established as a perpetual legal entity. Beneficiaries may be appointed those, who are yet unborn. Unlike a common law trust, it is not necessary to establish a time limit or establish a date according to “lives in being” or an event which will terminate the existence of the Foundation.
- Donations: Any donations which are made to the Foundation are not taxable in Panama, nor are any benefits paid out by the Foundation to a beneficiary. However, if the beneficiary is in Panama and
is considered to be “working” for the Foundation and earning a salary or other regular monthly income, this income will be subject to the usual Panamanian income taxes.
FOUNDATION
STATUS
Foundations are registered at the Public Registry as a legal entity.
PUBLIC INFORMATION
All information contained in the Foundation Charter, which is presented to the Public Registry (as well as any amendments thereto) are available to the Public. This includes all of the details indicated below.
NAME REQUIREMENTS
The name must include the word “Foundation” or “Fundación”. It may be in any language, but must be in the Latin alphabet.
AUTHORISED CAPITAL
A Foundation should have a minimum authorized capital of $10,000.00. It is not necessary to establish an authorized capital in accordance with the assets which are later donated to the Foundation, so most
Foundations are left with the original authorized capital of $10,000.00. It is necessary to capitalize the Foundation with the minimum of $10,000.00, but the law does not establish a time limit for how quickly this
capitalization must be completed. The law does not establish any “maximum” for the authorized capital, which leaves the capital entirely to the discretion of the parties.
DEFINITIONS
FOUNDER
The Founder is the person (natural or legal) that decides to establish the Foundation. It is possible for the Founder to give a Special Power of Attorney to the lawyer or another person to appear in the Foundation Charter as the Founder, in order to maintain the anonymity of the Founder. The Founder is the person who has all of the powers (originally) to establish the rules relating to the Foundation, such as who will be on the Foundation Council, whether the Foundation will have a Protector, and who the beneficiaries of the Foundation will be. It is also possible for the Founder to transfer his rights, powers, and duties to another person, whether irrevocably or not.
The founder has powers to remove the members of the Foundation Council and to appoint new members, on condition that there are provisions to do so in the Foundation Charter.
FOUNDATION COUNCIL
This is the Board of Administrators of the Foundation, who are responsible for the day-to-day management and policy decisions with respect to the assets owned by the Foundation.
The foundation council, however, may only act after obtaining permit from a protector or other supervisory body appointed by the founder.
The Foundation Council may be composed of:
- minimum three natural persons, of legal age, of any nationality or place of residence; or
- a corporation or other legal person; or
- a mix of legal and natural persons.
The Foundation Charter should include the addresses or places of residence of the Foundation Council
Member(s).
OFFICERS
A Foundation may have a President / Secretary / Treasurer and such other officers as deemed necessary or convenient. It is not necessary, however, to appoint these persons as officers in the Foundation Charter.
They may be appointed on an Ad-Hoc basis as and when necessary.
PROTECTOR
Protector can be either a natural person or a legal entity. The Foundation may or may not appoint a Protector. The Protector may be appointed in the Foundation Charter, in which case the identity of the Protector will be publicly available. This provides certainty for the Protector and anyone dealing with the Foundation, but does not protect privacy or anonymity. It is also possible to appoint the Protector in the Regulations, which are not available to the public.
SHAREHOLDERS
A foundation does NOT have shareholders, as it is not subject to “ownership” in the typical sense. It is much more akin to a Trust, in that it has beneficiaries.
BENEFICIARIES
The Foundations Beneficiaries may be appointed in the Regulations or Private Document (similar to a letter of wishes).
The Founder (or the Protector or Foundation Council) may establish whether the beneficiaries have a specific right (for example, to receive an annual income of $50,000.00), or whether they are simply potential beneficiaries of the Foundation, to receive income or benefits from the Foundation at the discretion of the Founder/Protector/Foundation Council. The beneficiaries are not considered by law to have a legal interest in the assets of the Foundation, as they are simply beneficiaries and not “owners”. This can be very important when establishing a Foundation to ensure that a spendthrift beneficiary is not given control of the assets.
Any beneficiary who suffers violation of his or her rights by the protector or the foundation council, may directly take a legal action.
REGISTERED AGENT AND REGISTERED OFFICE
A Foundation must have a Registered Agent, which must be a lawyer or law firm in Panama. The Foundation may have its office anywhere in the Republic of Panama or overseas.
BYLAWS
The Foundation Bylaws (Regulations) are not publicly available, nor any of their contents. This may include information regarding how the assets of the Foundation are to be managed, how beneficiaries may be
appointed or removed, or any other administrative information. The Protector may be appointed in the Bylaws.
PRIVATE DOCUMENT
This is often referred to as the “Letter of Wishes”, in which the Founder (or Protector) identifies who the beneficiaries of the Foundation are, and their entitlements with respect to the assets or income of the Foundation.
MINUTES
All minutes from meetings are privately held by the Foundation, and do not need to be filed at the Public Registry, unless the Minutes include some amendment to the Foundation Charter, in which case an extract of the relevant part of the amendment must be filed.
RECORDS & ACCOUNTING
All financial records and other corporate books are completely private.
Unless otherwise provided for in the foundation charter or its regulations, the Foundation Council must render an accounting of its activities to the beneficiaries and, when applicable, to the supervisory body. If the
foundation charter or its regulations stipulate nothing in this regards, the rendering of accounts must be done annually. If the accounts 90 rendered are not objected within the term established in the foundation charter or
its regulations, in lack of it, it shall be deemed as having been approved within ninety (90) days from the day it was received, for which purpose, record of this term shall be made in the report rendering the accounts.
Such period having lapsed or the account approved, the members of the Foundation Council shall be exempted from liability for their administration, unless they had failed to act with the diligence of a bonus paterfamilias.
Such approval does not exonerate them before the beneficiaries or third parties having an interest in the foundation, for damages caused due to gross negligence or fraud in the administration of the foundation.
SHELF FOUNDATIONS
Shelf Foundations: while it is possible to establish Shelf Foundations, it is not our practice to do so, since each Foundation is established according to the particular needs of each client.
TAX REGISTRATION
It is necessary to register the Foundation with the Tax Department in Panama after incorporation, in order to ensure that in the following years the Annual Renewal Fees (Tasa Única) are correctly applied to the Foundation, so that it is kept in Good Standing.
TAXES & DUTY
- Capital Duty: There is no Capital Duty payable on the Foundation, although at incorporation the Public Registry Fees for incorporation are established according to the amount of the authorized capital.
- ARF: Every year the Foundation must pay the Annual Renewal Fees, including the Government Fees of $300.00 (Tasa Única).
- Tax Returns: Panamanian Private Interest Foundations are not required to prepare or file annual tax returns in Panama, unless they receive income from a source in Panama (for example, from rental properties).
- Tax Treaties: Panama is not a member to any double tax treaties, nor does it have any
arrangements for the exchange of information with other tax authorities internationally. This may or may not be to the benefit of a beneficiary. - Property Taxes: Where a Panamanian Foundation owns real estate in Panama, it will be subject to Property taxes, like any other person in Panama.
- Transfer Taxes: Where a Panamanian Foundation transfers land in Panama, this transfer is not exempt from the land transfer tax (2%). While property in Panama may be donated to the Foundation, this donation will still be subject to the 2% land transfer tax. Nevertheless, any donations or transfer made to the Foundation of other types of assets (money, securities, etc.) are not subject to transfer taxes. Any donations made to the Foundation of assets which are not located in Panama are not subject to transfer taxes of any nature.
DOCUMENTS
DOCUMENTS, REQUIRED FOR PANAMA CORPORATION REGISTRATION
- Completed Order Form and KYC form;
Each Founder/Officer must provide the following documents to complete Foundation registration: - A certified copy of passport or another acceptable ID document;
- A copy or original of a document proving address, such as a utility bill or bank statement with the
address on it; - A copy or original of a reference letter from the bank/lawyer/accountant.
DOCUMENTS PROVIDED UPON FOUNDATION INCORPORATION
- Notarized statutes (articles) in Spanish;
- Registration in public registry, with registration certified by stamps;
- Registration tax (tasa unica);
- Appointment of Protector and Standard Internal Regulations;
- Certified English translation (upon request);
- Certificate of Good Standing (upon request).
ANNUAL RENEWAL FEE
Foundation must be renewed every year. There are two periods for renewal that depend on the incorporation date.
» 1st period has to be paid from January 15 until June 15. This apply to the companies incorporated from January 1 until June 30
» 2 period has to be paid from July 1 until December 31; this apply to the companies incorporated from July 1st Until December 31.
The annual fee includes a government fixed tax, plus the fee for the registered agent and registered office services.