Panamanian Corporations | Private Interest Foundations

Panama, being the first country to introduce and adequate legislation permitting the creation of offshore companies, offers any investor who desires to establish a business whether in Panama or abroad the possibility of establishing a corporation with taxable advantages.

According to Our Corporate law, two or more persons, even though not citizens or residents of the Republic of Panama, may organize a local corporation known as “sociedad anónima”(stock company) for any lawful purpose.

Some advantages for establishing Panamanian Corporations are the following:
1. Shares may issue to the bearer or in nominative form.
2. Shares may be issued in any currency.
3. There is no minimum capital required, and may be issue with or without nominative value.
4. The corporation may have offices anywhere in the world.
5. There is no need to file annual reports or income tax returns.
6. Income from foreign operations is tax exempt.
7. Shareholders meetings and Board of Directors meetings may be held in any part of the world.
8. There is no requirement to hold regular or annual directors or shareholders meetings.
9. Panama has no exchange controls or money restrictions.
Regarding the tax regime imposed to such companies, Panama income tax is levied only upon “income” derived from operations performed within the territory of the Republic of Panama. Income obtained from sources or activities Performed outside Panama are not taxable under our law.

Private Interest Foundations

Panama, as offshore center, besides establishing corporations, offers the services for incorporating private interest foundations.

A Private Interest Foundation is a legal entity widely used for family affairs and capital planning. Its object is the acquisition of assets to be administered and conserved in the will of the founder. Its consequential effects may take place during life or after death.

The Private Interest Foundation is considered by many as a merge between a trust and a corporation. Nevertheless, unlike the trust, the private interest foundation is not a contract due that since the date of her registration in the Public Registry obtains a legal standing making her liable against third parties. On the other side, unlike the corporation, the private interest foundation lacks an owner or shareholder. It is incorporated through the will of the founder and in favor of the beneficiaries.

Some advantages and characteristics of the private interest foundations:

1. They offer a fiduciary structure for ordered transfers and active disposal of assets to the beneficiaries after the death of the founder maintaining critical control of the assets.

2. The assets of the foundation become legally independent and do not form part of the private patrimony of the founder. Such assets cannot be seized or be subject to any action or preventive measure, except when such action or measure relates to the obligations or damages resulting from the execution of the foundation’s objectives.

3. Private Interest Foundations are exempted from taxes resulting from its constitution, amendment or dissolution, likewise, from the transfer or mortgage of the foundation’s assets and the income resulting from these transactions.

4. The foundations incorporated according to the laws of a foreign country may still continue operating in Panama much in the same way that the foundations incorporated according to Panamanian Laws continue operating according to the laws of other countries.

5. The foundations also produce a relationship of confidentiality and reserve equivalent to the relationships of codified accounts likewise as the fiduciary relationship.