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Starting Up an Offshore Private Foundation Business in Panama. How to Start an Offshore Business in Panama

CREATION OF PRIVATE FOUNDATIONS. CODDAN PROVIDES ESTABLISHMENT OF PANAMA PRIVATE FOUNDATION, Welcome to Coddan online Panama Private Foundation registration agent. We recommend reviewing this site in its entirety, so that you are knowledgeable of Panama jurisdiction and the powers granted to Panamanian Private Foundations. We will guide you through the process of registering your Foundation and establishing your registered identity. Complete and submit a Offshore Foundation application form. Adequate completion and submission of this form, along with the provision of payment, will enable Coddan to establish your proposed foundation within three business days. We will express mail your corporate documents to the mailing address you specify in your incorporation order. Panamanian private foundations usually formed for the non-commercial purposes such as: protection and accumulation of assets, profits, donations, transfer of property, Will, as nuptial contract etc. All the formalities related to its registration and maintenance are minimal. Panama Private Foundation may have accounts in any country and in any bank. If you want to become familiar with the description and the contents of Panama Foundation creation packages, offered by Coddan and to find above, what kind of service is included in this or that Foundation incorporation package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the Panamanian Private Foundation incorporation, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen. Coddan understands that the purposes for establishing a Private Interest Foundation are varied. In some cases, a client's needs may not be suited simply with a Foundation "off the shelf". Attorneys are available to meet with clients to draft the necessary provisions of the Foundation Charter and the subsequent Bylaws (known as "the Regulations") to ensure that the Private Interest Foundation is established in accord with the specific needs of each client.

1. The anonymity and privacy of the beneficiaries is kept, since their names are not registered in any Public Office. 2. No requirements to file annual returns or financial statements; full exemption from taxation of any business activity transacted out of the Republic of Panama. 3. The Panamanian Foundation offers flexibility, to transfer or to administrate a patrimony in favour of the same founder or third parties, families, children or inheritors. 4. Provide a fiduciary structure for the orderly transfer and disposition of the assets to the beneficiaries upon the death of the Founder, keeping control of assets during lifetime. 5. Inheritance laws that apply in the domicile of the founder or the beneficiaries, shall not be effective against the foundation's assets nor may these laws affect the validity or performance of the foundation's objectives. 6. A Private Interest Foundation duly organized in other countries, may be redomiciled in Panama and adopt Law 25 of 1995, as the legal provision applicable to the same, through the registration of its foundational instrument. 7. Its cost is very competitive with respect to those of other foreign jurisdictions. 8. The Panamanian legislation regulating Foundations, confer upon the Foundation excellent mechanisms for the protection of the same against third party claims. 9. The founder may act through a corporation if he desires so. 10. The Foundation allows the investor to perform transactions and investments and to distribute the proceeds generated from the same, with a grade of impenetrability superior to any other type of investment instrument. +44 (0) 207.637.3802 +44 (0) 289.099.8744 +44 (0) 800.081.1510 info@ukincorp.co.uk

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We incorporate offshore International Business Companies (IBC) in BVI, Cyprus, Gibraltar, Belize (also Belize LDC's and Belize Single Cell Companies), Panama (also Panama Foundations - see below), Seychelles, Nevis (LLC's, Foundations, Trusts), St. Vincent (Companies and LLC's), Republic of Ireland (EU low tax country) and onshore in Delaware, Wyoming, Nevada (LLC's and corporations), and the UK (flow through entities). Each offshore tax haven has different strengths and weaknesses with which we are intimately familiar, and so can make appropriate recommendations in respect of your stated objectives.

A Panamanian Foundation is a hybrid between a Trust and a Corporation. Its functions are simply asset protection. It affords this protection by legally owning assets, which cannot be attacked by creditors, or frivolous lawsuits. However, the Panama Foundation cannot conduct day-to-day business, so in the structure that we provide for our clients, the Foundation own Corporations which can conduct day-to-day business. To establish a Panama Foundation, a Founder must fund the entity with assets, which are known as the patrimony. Assets can be anything (real estate, shares, monetary earnings, etc.), including present or future assets. Once this has been done the Foundation becomes irrevocable until the Founder dies or otherwise has expressly provided. For that reason, many offshore investors utilize the Foundation as a "will". In so doing, they are assured of their bequests and prevent their assets from going into probate.

Please note » The prices payable for the items that you order are clearly set out in the web site. There will be no contract of any kind between you and us unless and until we receive payment from you. We act as your agent in the incorporation of offshore companies. We are not able to guarantee that any such filing will be acceptable to Companies Registrar, nor are there any contractual obligation upon us to do so. If Companies Registrar rejects incorporation or other filing, we will credit your account with a full refund and the contract between us will be made void. Companies Registrar does not offer a cancellation facility for the incorporation of companies or the filing of documents. We will be unable to cancel any such submission on your behalf and will not refund any payment you have made. All prices shown at Coddan Web Site are in Great British pounds. Credit cards are the preferred method of payment; we accept VISA, MasterCard and Delta. We can accept payment in UK Pounds Sterling, US Dollars, Euros, Australian Dollars and Canadian Dollars.

Live Help » Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours our business center will be closed. When you click on the button you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is absolutely free! There are no hidden fees. We offer the service as a courtesy to our website visitors. Dear visitors, while having a chat session with a customer, we are frequently requested to give a piece of advice on tax planning or business structuring. We would like to inform you that it is against our principles to provide online advice pertaining to these issues. The points that may be covered during a session include service description, package or service price, navigation at our website, ways of making an order, methods of payment etc. Yet, if you wish us to provide you with advice on tax or business structuring, you should be aware that this service is chargeable. If you have any questions please E-Mail or call us: 0800 081 1510 or +44 (0) 207 637 3881, fax: +44 20 7681 3318.

Please read the following before you get started:

PANAMA AND PRIVATE FOUNDATIONS

The Private Interest Foundation as an entity is the latest attribute established by the Panamanian Legislative Branch to help secure Panama's position as a tax haven. The 1995 legislation was drafted to complement the interests of foreign investors, especially those seeking asset protection. An additional protection provided by the 1995 legislation is that all persons involved in any activities, transactions or operations related to the Foundation are required to maintain full secrecy and confidentiality at all times. The punishment for breach of this duty is six months of imprisonment and fifty thousand-dollar fine, with the potential for further civil liability. This applies to persons involved in any transaction (constitution, amendments, by-laws, etc.) of the Foundation, irrespective of whether they work in the private or public sector. With the proper planning, a Private Foundation can be used as an integral part of estate planning. It is useful to keep in mind that Foundations have been established with the intent to attract capital from foreign investors, and in exchange the investor will receive secrecy on the operations made, asset protection and tax exemptions. In the event of political instability in Panama, the Foundation could relocate to another jurisdiction, subject to such jurisdiction's recognition of the Foundation. In this way the Foundation can protect itself from government instability and the assets can not be expropriated.

A Private Interest Foundation, a legal entity, consists of the following parties: a Founder who establishes the foundation and funds the foundation with assets, referred to as "the patrimony"; and a Foundation Council that administers these assets, consistent with the objectives of the foundation, which are designated in the Memorandum of Constitution by the founder. There are two types of foundations: an inter-vivos foundation, which may be established during the founder's lifetime, and a post-mortem foundation, which is established after his/her death. The Private Interest Foundation, once registered in the Public Registry, is considered an independent, legal person, apart and separate from the Founder.

The Panama Private Interest Foundation is an almost identical copy of the famous Liechtenstein Anstalt, the traditional wealth protection vehicle used by Europe's wealthiest families. It is almost unique and (unlike IBC's) similar legislation does not exist in other offshore centres. The difference of course is that the Panamanian foundation can be set up at much lower cost than the Liechtenstein equivalent - and since you are buying the paper shell you could still hold the actual assets in a Swiss or Liechtenstein bank if you wished - in the name of the Panama foundation.

Foundations and Trusts are two of the main weapons in asset protection and estate planning. Both of them enable the endowment of an estate to be administered according to the wishes of a Settlor or Founder, and in favour of the appointed beneficiaries. In both structures once the assets are transferred, they cease to be part of the Settlor or Founder's estate, and goes on to be administered by the Trustee in one case and the Foundation Council in the other.

While the spirits of the private interest Foundation and the Trust are similar, and frequently both are used together for asset protection and estate planning, there are also some differential features to consider. For instance, a Foundation is based on Civil Law, and it is constituted by means of a public legal document, and filed with a Government entity. Trusts, on the other hand, are based on Common Law, and are established through a private contractual document that does not need to be filed with a public entity.

As a reminder, the difference between Common Law and Civil Law is that the former is based on common knowledge, therefore subject to diverse court interpretations and rulings, while the latter is based on codes, written documents, and it takes a legislative action to modify it. Civil Law is less flexible than Common Law.

The purpose of asset protection, both domestic and offshore, is to preserve a clients wealth and to insulate it from third party creditors including government creditors (whether known or unknown). There are certain issues that need to be considered by an advisor when recommending the laws of a particular jurisdiction. These include, the absence of recognition and enforceability of foreign judgments; the presence of a limited period for a creditor to commence a proceeding to set aside a fraudulent transfer; the presence of spendthrift beneficiary provisions; the certainty of a court accepting jurisdiction; a classification of what kinds of assets would be subject to a fraudulent conveyance action; and confidentiality and privacy.

Private Foundation. Free name check and advice on your chosen name. Advice on forming your private foundation, what constitution and objects, Founding Charter in original Spanish language and its English translation. Agent and registered office first year. Certificate of Incorporation in original Spanish and in certified English translation document. 3-5 days private foundation incorporation service which enables you to appoint protector & council details straight away. This procedure applies to all or packs with the payment of all government fees. This pack is sent directly to you via DHL. THE FOLLOWING UPGRADES CAN BE ADDED TO THE ABOVE PACKAGE: 1. Foundation Pliers Seals - £20.00. 2. Apostilled Certificate of Incorporation - £110.00. 3. Nominee Foundation Council for 12 months - £115.00. 4. Nominee Protector service for 12 months - £253.00. 5. Apostilled Certificate of Good Standing £140.00. +44 (0) 207.637.3802 +44 (0) 289.099.8744 +44 (0) 800.081.1510 info@ukincorp.co.uk

Additionally, Article 15 of the Private Foundation Law provides that the creditors (including spouses) of the client shall have the right to contest the endowment or transfer of assets to a foundation where such transfer constitutes an act to defraud creditors. However, the right to sue creditors shall lapse three years from the date of the endowment or transfer of assets to the foundation. Article 160 of the Panama Banking Law states that funds in Panama are fully subject to the principle of free will and a system of free disposal of property, even where legislation on inheritance and/or marriage of the titleholder's, the founders, the settlers or the beneficiary's country of nationality or domicile, provides otherwise.

In addition to all these provisions, international court sentences cannot be upheld by Panamanian courts if those resolutions contradict local laws. Moreover, a trust cannot be set aside, only "transfers" can, and the transfer of assets can only be set aside by third parties if the assets have been fraudulently transferred to the trustee or retained by the trustee to the detriment of such third parties' rights. The burden of the proof lies on the plaintiff and "bad faith" must be proven.

Panamanian trust law specifically explains that a trust must be considered to have been correctly created if it complies with Article 9 of the trust law (that is: names of settler, trustee and current/future/eventual beneficiaries; substitutes, if any; list of initial assets; express declaration by the settler; powers and duties of trustees; prohibitions and limitations; rules on accrual, distribution, income and proceeds; place and date; registered agent in Panama; domicile; governing law; correctly performed transfer of assets; and authentication of signatures). Therefore, there are no legal grounds for setting aside a trust that has been duly documented. However, an exception to this is made in the event of a "fraud".

With respect to private foundations, the rule is similar. Private foundations cannot be set aside as long as they are registered at the Panamanian Public Registry as a separate body corporate. Private foundations in Panama are handled by attorneys-at-law, whose information is "privileged" according to Panamas Judicial Code and Penal Code, except for matters on capital laundering, drug trafficking and terrorism, and Panama's Supreme Court have firmly rejected international judicial requests from the plaintiffs' forum in a number of cases. If the case is not related to capital laundering, terrorism or drug trafficking, the request must be connected with a crime committed within the Republic of Panama and relate to "patrimonial matters".

It is also the case that the courts in certain jurisdictions are becoming increasingly more demanding regarding the issue of "control". Furthermore, one of the most important issues is "confidentiality", as an executory process can be avoided if lists of assets have never been disclosed to potential creditors. It is therefore wiser to keep liquid assets and full administration in financial centers, which provide "secrecy provisions". But those legal provisions are not enough. It is always wiser to also hold "overseas control", with full offices and staff located overseas with electronic filing solutions. This will enable beneficiaries to remotely view their private foundation (and subsidiaries to the private foundation) documents and other relevant documentation remotely.

Panama can now offer secure archive solutions for international clients, advisors, brokers etc. It therefore has the infrastructure to support its private foundation. 1,902 private foundations were formed in Panama in 2003. Going on total figures to date, that number will be considerably higher in 2004. Documents that establish a Foundation and a Trust also differ. For instance, a Foundation charter needs not elaborate on the rights and obligations of the Council, while a Trust deed has to be very specific and clear regarding the rights and obligations of the Trustee.

In a Foundation assets are placed to the Foundation's name at the time of the transfer, while in a Trust, it is the Trustee who receives the assets to his or her name. The rights and obligations of the Settlor and Founder also differ. A Founder retains in general more rights than a Settlor. For instance, the Foundation Charter grants the Founder the liberty to remove or change members of the Council without effect on the estate. Since the Foundation Council reports to the Founder and/or beneficiaries, these can control the operations of the Foundation through the Council, and if it were the case, even bring legal action against said Council.

This is different in the case of a Trust, where the Settlor loses all rights as soon as the estate falls under administration of the Trustee. The Settlor of a Trust cannot change the Trustee unless a breach of the specifications of the Trust deed, or contractual Trust document, has taken place. If this situation took place, the estate would need to be transferred to the new Trustee. In a Trust, there is a document called the "Letter of Wishes", whereby the Settlor expresses how he or she would like to see the assets administered in favour of the beneficiaries, but the Trustee actually has no obligation to comply with these wishes. The beneficiaries are the only ones entitled to bring legal action against the Trustee, not the Settlor in this case.

As for administration fees, those of an estate in a Foundation are low, while in a Trust, the Trustee fees depend on the value of the estate: the heftier the estate, the bigger the fees. Successful asset protection and estate planning structures are able to combine these two entities in order to achieve the goals and objectives of individuals. We hope this information has been useful and if we can be of further service, please feel free to contact us.

Why Establish a Trust or Foundation? A trust or a foundation enables assets, which individuals may prefer not to hold themselves, to be accommodated in an effective legal structure. It will allow the grantor to make provision for beneficiaries with complete confidentiality. In the most suitable jurisdictions there is no requirement for trusts or foundations to be registered with any authority, therefore only the trustee and the settlor need to know of its existence.

A trust is irrevocable if it is not possible for the settlor to terminate the trust without the approval of the trustee. Discretionary means that only the trustee is authorised to determine who the beneficiaries are and the amount they will receive; in other words, the settlor loses control over the trust capital. The settlor can, however, make his wishes known in respect of the beneficiaries in a "Letter of Wishes", as well as the amount of their acquisitions, the time of acquisition, etc. In addition, he can include specific provisions in the trust deed but still the trustee has the ultimate control over a discretionary trust. Special powers can be given to a Protector to oversee the actions of the trustees or board of directors of the foundations. These may include powers to remove and appoint trustees or investment advisors and a veto over proposed distributions.

Advantages of a Trust or Foundation. A trust or foundation is able to operate in a tax free environment. This means that it is usually possible, with careful planning, to enhance the value of the assets held by a trust or a foundation by accumulating income and capital gains free of tax. Most civil law systems of continental Europe, Japan, and Latin America have forms of forced heirship rules. Offshore trusts or private foundations may be an effective way to avoid heirs' claims, and, at the same time, provide tax-free lifetime and death benefits to beneficiaries chosen by the grantor. Also, trusts and foundations may provide a wealthy individual with greater privacy than he or she would have with respect to probate in his or her home country.

An offshore trust or a foundation also provides excellent asset protection. Because the trust/foundation is governed by the laws of the jurisdiction under which it is formed and where it is administered, it serves as a shield to protect the grantor's assets against unreasonable litigation and unjustified claims.

Making the Right Choice. Trusts and foundations are among the most flexible and efficient legal structures. However, the law of trusts and foundations is a complex field and there are many fundamental issues to be considered, for example onshore legal recognition, domicile, banking secrecy laws, taxation, place of administration, location of assets held by the trust/foundation, residence and citizenship of the beneficiaries and trustees, and the situs and governing law of the trust/foundation. Choosing the right trustees is important because the trustees have significant fiduciary duties to the beneficiaries. Choosing the appropriate jurisdiction is important because the jurisdiction's banking, privacy and tax laws may impact the effectiveness of the trust or foundation. Coddan is in the best position to assist you in finding the best solution for your individual situation.

By aiming to realise practical solutions based on solid research, specialisation and international practice, Coddan attracts clients who are accustomed to expecting the best. All our consultants focus on their core areas of expertise and can therefore assure you of a single standard of service - first class throughout. We analyse each client's situation carefully, point out available options, develop a plan of action and make it happen. By working closely together as a team, our consultants ensure that their knowledge and experience are shared so that the specific details of each client's case are considered from all relevant perspectives. No matter how complex your needs are, the global network of Coddan will be able to advise and assist you. Coddan provides all clients with individual advice and comprehensive, yet cost-effective solutions. Please contact us for more information and individual advice.

CODDAN OFFERS PANAMA PRIVATE FOUNDATION FORMATIONS FROM - £700.00

Panama Private Foundation Package - £700.00. We form foundations with you as the first protector, and council. Should you wish to incorporate an offshore company or foundation, Coddan is able to offer a substantial savings. Coddan is a provider of offshore corporate, financial and electronic commerce services based in the Republic of Panama. We can incorporate a new Panamanian Foundation - as well as a corporation. International investors, financiers and businessmen find Panama an ideal foreign base country for worldwide operations and transactions. Panama taxes according to the territoriality principle (that is, it does not tax foreign-source income), only the income produced locally is taxable, disregarding the citizenship of the taxpayer. Dividends are not included as income subject to income tax. Panama is a well-conceived and developed offshore center that caters to the international community. With a strategic geographical location, the ability to quickly form a corporation, and freedom from local taxes on offshore operations, Panama is an excellent location for conducting legitimate business.

If you require additional services such as nominee council or protector the following packages have been prepared to simplify our pricing structure. Select the company formation package (our incorporation form allows you to add more services than a form ad) that meets your requirements and contact our team of advisors on + 44 (0) 207.637.3802 (or +44 (0) 800.081.1510) or complete the enquiry form.

Many clients are interested in setting up a type of entity that offers true asset protection and are not necessarily interested in operating a formal business entity with that structure. To state this another way, some clients may be investigating the idea of an offshore corporation or trust structure, but in reality there may be a better vehicle to choose if asset protection and tax savings are the two primary goals. One such vehicle is the Panamanian Foundation. The Panamanian Foundation structure was codified into law in 1995. While this structure is a fairly new entity for Panama, the Foundation structure itself has existed in Liechtenstein for quite some time and the Panamanian structure was in fact modeled after the Liechtenstein legislation. Some advantages a Panamanian foundation has over a Liechtenstein foundation include; it is far less expensive to create and maintain, and it offers more flexibility.

The Panamanian foundation offers the best of a trust and the best of an offshore corporation. While the foundation cannot technically engage in business activities, it can own the shares of a company engaged in business activities. It is also permissible for the foundation to engage in any activity, which will increase the value of assets. This means that a foundation can be the owner of bank accounts, securities brokerage accounts and real estate holdings. Since there are no shares of ownership in a Panamanian foundation, the founder does not own the foundation and as such gains important tax reporting and protection benefits with this.

In reality, there are quite a number of practical uses and strategies for the Panamanian Foundation. As an asset protection vehicle, there is probably no better entity in any jurisdiction at the present time for this purpose. For more information on how to use a Panamanian foundation as part of an overall asset protection strategy, and to hear about ways we have assisted other clients, please contact our office.

When the name "Foundation" is mentioned one almost immediately thinks of the traditional non-profit organization, whose purpose is wholly charitable and which is used primarily in the interests of social welfare. Foundations may be created as Private Foundations or as Public Foundations. A Public Foundation may be created for a charitable purpose, and its endowment can only be used for the furtherance of that purpose. Foundations of this nature are common in the United States of America, as well as in Europe - wherein an endowment is established to ensure that a particular charitable cause is guaranteed financial support and proper management of the funds in question.

Private Foundations, whether these be for a family or for a group of people, took on a new form in 1926, when the Principality of Liechtenstein adopted the Law of Persons & Companies and specifically created the Family Foundation and the Mixed Foundation. Foundations have also been used in Switzerland, Austria and Luxembourg. In 1998 the Netherlands Antilles adopted amending legislation which allowed for the creation of private foundations.

In 1995, the Panamanian Legislature adopted Law No. 25, introducing the Private Interest Foundation as a legal entity. Panama designed the Foundation based on the other models, with intentions of creating a more modern, flexible and affordable estate planning vehicle. It is an excellent medium for preservation of assets, with sufficient flexibility to enable it to be used for family, religious, public or charitable purposes and to administer, invest or preserve assets for a prescribed class of beneficiaries.

Possible uses of a Foundation are: Asset Protection - to protect assets against excessive taxation, creditor claims, political instability or forced heirship rules. Business - to manage profit sharing or pension plans for employees; to hold shares, participation or interests in public or private companies; to collect royalties. Charitable Purposes - to carry on scientific, philanthropic, religious, humanitarian or educational purposes, or to manage funds or assets for such purposes. Family - to protect closely held businesses, providing continuity into 2nd and 3rd generations by preventing property-splitting; to protect minors, disabled persons or those incapable of managing their own assets; to manage payment of income or distribution of assets to family members or to provide for their education, housing or maintenance. Investment - to invest in shares, bonds, mutual funds, bank deposits or other assets; to own real estate or other assets of considerable value - such as works of art.

A Foundation cannot be established for commercial or profit-making purposes. Where a business is to be undertaken, it is appropriate for the Foundation to own the shares of the company which runs the business. The Foundation should not own and run the business directly. A Foundation may, however, receive passive income - such as from rental properties or dividends.

INTRODUCTION TO THE PRIVATE USE PANAMA FOUNDATION

The concept of a "Foundation" began during the Roman Empire, under the influence of Christianity. As an example, the Catholic Church was considered a divine foundation, and the various sub-organizations within the church had the legal control for administrating its' patrimony. The original foundations were not created for serving a private need for a specific individual or family, rather they were formed for serving the needs of a community. Several centuries later, the legal entity denominated as a "Foundation" continues to exist and is widely used and accepted around the globe for personal and private needs.

The concept of a "Private Interest Foundation" began when the Principality of Liechtenstein created the "Law of Persons & Companies", the 20th of January, 1926 (Personen und Gesellschaft Recht - P.G.R.), which created the "Family Foundation", (for the private benefit of the members of one or more families) and the "Mixed Foundation" (for the private benefit of not only families, but also for other persons or institutions).

Historically, wealthy families in Europe have established Family Foundations incorporated in the Principality of Liechtenstein (a Neutral jurisdiction for purposes of wars, etc.) for the purpose of estate-planning necessities, to ensure the safe transition of assets to the family's beneficiaries. Today, Liechtenstein Foundations can cost upwards of US$25,000 to incorporate, and up to US$10,000 per year to maintain.

The Republic of Panama inspired in the laws of Liechtenstein adapted the European model to create a Private Interest Foundation more modern and flexible, with clear advantages for the protection of assets and international tax planning and empowered to carry on transactions.

The Panama Private Interest Foundation is a type of entity that is a cross-breed between a trust and a corporation, however, it is neither. A Foundation is an entity that is different from any other legal entity known in Anglo-Saxon law because it is not the legal personification of a person or group of persons (as with a corporation), rather 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 a general group of individuals.

The Private Interest Foundation is a juridical person, which is equipped by its Founder with determinated assets which constitute a separate patrimony of the Foundation, after their transference. These properties are managed by a Foundation Council, which is named by the Founder with the purpose to accomplish the objectives of the Foundation.

A Private Interest Foundation, as juridical person with its own patrimony, has the capacity to execute rights and acquire obligations. The Private Interest Foundation do not have shareholders or members. It is created by a declaration of the Founder and generally has as purpose the preservations of an established patrimony for benefit of the Founder or third determinated persons.

The Private Interest Foundations are instruments for the planning of family successions, may act as shareholders of assets and help to preserve the patrimony for beneficiaries generations. Panama has a long reputation for providing offshore services to the international community. In an effort to provide additional opportunities in this area, Law No. 25 of 1995 was enacted. Said Law contains the procedures and requisites for the creation of Private Interest Foundations in the Republic of Panama.

USES OF PANAMA FOUNDATIONS

Panama Private Interest Foundations may be established for the benefit of a person or persons, a family, or a specific social purpose. Private Interest Foundations may be used as a tax and estate planning device with the following advantages:

In general, Panama Private Interest Foundations are used by people who wish to control and maintain ownership of foreign corporations, however, they do not wish to own their corporations themselves directly, due to the Controlled Foreign Corporation (CFC) rules in their home countries. Several highly taxed countries such as the UK, Canada, USA, Australia, New Zealand, France, Italy, Spain, etc. have CFC rules which require that their citizens submit declarations (reports) to the appropriate tax authorities, in which they declare that they are the shareholders of such foreign corporations.

Instead of holding the corporations' shares in their personal name or in bearer form, they establish a Private Interest Foundation in Panama that holds or owns the shares of their foreign corporation(s), thus avoiding the CFC reporting rules. Hence, the advantage of using the Foundation as a shareholder for their corporation is to remove ownership from one's personal name (or through a Bearer Share arrangement), and transfer ownership to the name of a foreign entity which does not have owners, rather has privately appointed beneficiaries, which are anonymous. In this way, there is no question as to who owns the company, since the company's shares are issued to the Foundations' name.

Another advantage of utilizing the Foundation as a shareholder applies in the following scenario: In many cases, when opening corporate bank accounts or investment accounts, the financial institutions require that you reveal the beneficial owners of the corporation. Through the Foundation ownership strategy, one can state that the Foundation is the owner of the corporation. Again, the objective is to remove ownership from their personal name, to the name of a foreign entity whose ownership is anonymous.

The Panama Foundation provides additional advantages other than just ownership. For example, the Panama Foundation can be useful in transferring funds offshore or receiving funds from offshore. In some cases, people use Panama Foundations as vehicles for these purposes. 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 any one else they choose. The advantage in this case, is to avoid fiscal regulations surrounding donations, where some governments impose "gift taxes" and exhaustive reporting requirements.

In general, Private Interest Foundations may not engage in habitual profit-making commercial activities as a corporation can. Nevertheless, they may carry out commercial activities from time to time, as long as the profits of those activities are used for the objectives of the foundation. For example, a Private Interest Foundation may engage in banking or investment activities, such as investing in bank time deposits (Certificates of Deposit - CD's), stocks, bonds, mutual funds, options, money markets, etc. so long as the proceeds from these investment activities are for the benefit of the beneficiaries of the Foundation.

They provide a fiduciary structure for the orderl