The Panamanian private interest foundation is a very interesting entity, and arguably the best of its kind in the world. Functionally, it acts as a cross between a trust and a corporation; however, it is quite different from either of these. Rather than being the legal personification of a person or group of persons (as with a corporation), it is a legal entity that does not have owners (share-holders, participants or partners) and it traditionally has a specific purpose for the benefit of an individual or group.

While one might associate the idea of a foundation with humanitarian or scientific activities, for example, the Beneficiary of a Panamanian foundation can be a single person --- including the Founder him/herself.

In fact, it is the broad definition of a Beneficiary that makes the Panama private interest foundation such a useful tool. While it can not be profit-oriented, or engage in ‘habitual’ commercial activities, the Panama Private Interest Foundation can acquire and own assets of all kinds (including shares of a corporation, trusts, real estate and more), hold bank accounts, and take part in activities to further its own aims.

Setting up a foundation needs only $10,000 to start. Like a corporation, three council members are named in the foundation’s charter, but unlike a corporation, there are no shares and no owners. More assets and funds can later be transferred in, and invested (always to further the foundation’s aims).

What happens to those assets and their profits can be made absolutely private. In fact, the privacy of all the foundation’s activities and operations are explicitly protected by law, with severe penalties for any breaches. The identity of the Founder, too, can remain completely anonymous, if desired.

Importantly, the assets of the foundation are considered explicitly separate from those of the Founder, and can’t be seized or frozen to satisfy the founder’s personal obligations --- even if the founder is the beneficiary of that foundation.

Finally, the assets of the foundation can be disposed of as simply, or in as great detail, as you wish. It can act as an absolutely binding last will and testimony, immune from the typical disputes these undergo, and have any number of stipulations. This offers clear advantages for international estate planning with regards to privacy, anonymity and protection to the Protectors, Founders and Beneficiaries of the Foundation.

A Panama Private Interest Foundation comes into existence upon registration in the Public registry. No approval from any public authority is required (Law No.25 of Jun 12, 1995 regulates Panama Private Interest Foundations).

Panama Private Interest Foundations - Useage

Panama Private Interest Foundations may be established for the benefit of a person(s), family, or specific social purpose; in so doing, several advantages can emerge which make the Foundation useful far beyond its primary aim. The following are some of the more commonly-used advantages.

Foreign Corporation Rules - Quite often, Panama Private Interest Foundations are used by people who are subject to Foreign Corporation (CFC) rules in their home countries. Several heavily-taxed countries such as the US, Canada, UK, Australia , New Zealand, France, Italy and Spain, among others, have CFC rules which require that their citizens submit tax declarations to the appropriate authorities, in which they declare that they are the shareholders of foreign corporations.

By establishing a Private Interest Foundation in Panama that holds or owns the shares of their foreign corporation(s), rather than holding the corporations shares in their personal name or in bearer form, CFC reporting rules can be avoided. Using the foundation as shareholder for their corporation removes ownership from one's personal name, transferring ownership to a foreign entity with privately appointed, anonymous beneficiaries.

Asset Protection - A Foundation's assets cannot be frozen, sequestered or subject to embargos except where the Foundation itself is in contravention of the law. Given there is no owner of a Foundation's assets, these assets cannot be used to satisfy any personal claims against you. The only instance in which any portion of the Foundation's assets can be withheld are to satisfy contractual obligations held directly by the Foundation; for example, in the case of a breach of contract on a real estate purchase . Otherwise, assets transferred to the Foundation are safeguarded by law from all external claims.

Personal Compensation - Making use of your Foundation's assets can be quite simple. By appointing yourself to a consulting or management position within the Foundation, by means of a formal written agreement signed by Council members, you can stipulate your compensation, including living accomodations, health care, travel expenses, legal expenses, expense account and more. This ensures that you are able to enjoy the use of your assets, without subjecting them to taxation.

Banking - In many cases, when opening corporate bank accounts or investment accounts, financial institutions require you to reveal the beneficial owners of the corporation. Again, using the Foundation removes ownership from one's personal name to that of a foreign entity with privately appointed, anonymous beneficiaries, for greater privacy and confidentiality in your banking affairs.

Transferring Funds - The Panama Foundation can be useful in transferring funds offshore or receiving funds from offshore.

Family Donations - Some people donate their funds to their Panama Foundations and later use the Foundation to give educational or special grants to their children, grandchildren or anyone else they choose. Some governments impose "gift taxes" and exhaustive reporting requirements when making donations; in this case fiscal regulations surrounding donations are avoided as Panama has no such requirements.

Last Will and Testament - The Panama Foundation can also act as an absolutely binding last will and testament, free from the typical legal disputes that can plague an ordinary will. The Letter of Wishes can outline exactly how the assets are to be disposed of on the event of your death, and can be kept utterly confidential until that time.

The Greater Good - The Panama Foundation can also be used for the more traditional purposes of a foundation: whether scientific, educational, religious, humanitarian or philanthropic, its assets can be used to further goals and activities of your choosing.

Offshore Foundation Formation Services - What Should You Receive?

The following is a description of the various elements of a Panama Private Interest Foundation, and what you should receive upon registration:

Founder - the person or entity that establishes the Foundation in the Public registry of Panama . A law firm is generally the Founder of each Foundation that is established, since it is the law firm that goes to the public registry to incorporate the Foundation. The Founder has no influence with or control over the Foundation, and is recognized only as the individual who presented the Foundation articles in the public registry when the entity was originally registered.

Council - The Foundation's Council serves the same purpose as the board of directors on a corporation. The council members are each registered in the public registry with their names, addresses and identifications as council members to the Foundation.

A law firm generally appoints a "Nominee Foundation Council" to fill the council positions for additional privacy and confidentiality. When a nominee council is appointed they provide you with pre-signed, undated letters of resignation from each nominee council member so that you can replace the council at any time. The nominee council has no control over the Foundation or any of its assets.

Protector - The Protector is the person or entity who ultimately controls the Foundation and all assets held within it. The Protector is appointed by the Foundation Council when the Foundation is created, however, once the Protector is empowered, the Protector can then remove the council members at any time without external consent.

The Protector can be appointed privately, through a Private Protectorate Document, signed by the Foundation Council. Hence, the Protector can maintain this position free of public knowledge. Generally you will be appointed as Protector of the Foundation through a notarized Private Protectorate Document so that you maintain complete control over the Foundation in a private and anonymous manner.

Once the Protector is appointed, this position can be removed or reassigned in accordance with the Protector's wishes. A Protector is not required and if you prefer, you can choose to not use a Protector or to use a nominee Protector.

Beneficiaries - Unlike a corporation that issues share certificates to certify the owners' identity, the Panama Private Interest Foundation has only Beneficiaries, and hence no shares. The Foundation's Beneficiaries are appointed by the Protector through either a simple, privately written Letter of Wishes or through a more formal set of Foundation By-Laws (written with the assistance of a Panamanian Attorney).

The anonymity of Beneficiaries is maintained since the contents of the Letter of Wishes or By-Laws may remain private and need only be known to interested parties. Also, a Panama Foundation may be set up so that the Protector is the sole beneficiary until his or her death at which time the Foundation continues for the benefit of other Beneficiaries.

Letter of Wishes - The Letter of Wishes is a simple letter written by the Protector which specifies exactly how the Foundation's assets should be handled or distributed upon a triggering event (this can include, but is not limited to, the death or incapacity of the Protector). The Letter of Wishes should also state whether the Foundation should continue, whether a new Protector should be appointed, or if the Foundation should be dissolved upon the death of the Protector.

There is no specific format that the Letter of Wishes must be written in and it can be written or changed at any time after the Foundation is incorporated per the Protector's wishes. The Letter of Wishes can be held privately or can be registered publicly. Generally, most prefer to keep the Letter of Wishes private so the Beneficiaries and Protector also remain anonymous.

Foundation By-Laws - The Foundation does not need to have By-Laws since a Letter of Wishes is legally sufficient for expressing the Protector's requested testamentary instructions. However, if one wishes to have a more formal Foundation testamentary document written and signed by a Panamanian attorny and notarized by a Panamanian notary then one can enlist the help of a Panamanian attorney to draft the Foundation By-Laws.

The Foundation's By-Laws essentially handle the same function as the Letter of Wishes since the By-Laws should specify exactly how the Foundation's assets should be handled or distributed upon a triggering event. The By-Laws should also state whether the Foundation should continue existing or be dissolved upon a triggering event. There is a specific format for the By-Laws, however the contents can be changed at any time after the Foundation is incorporated per the Protector's wishes.

The By-Laws can be held privately or can be registered publically. Once again, most prefer to keep the Letter of Wishes private so the Beneficiaries and Protector also remain anonymous.

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