Panamá is a terrific place to incorporate, or create a private interest foundation with both entities granting you loads of benefits whether you’re looking for asset protection, planning to do business within Panamá or abroad, or simply want to get started with estate planning to set yourself / your family up for the longterm future. In this chapter we will review the process & cost of forming both a corporation, and a private interest foundation, as well as the benefits for each. Additionally we’ll discuss methods for asset protection, benefits of owning property under a corporation or foundation, and how these two legal entities relate to business being conducted both within Panamá, and around the world.
Let’s begin with the private interest foundation, which Panamá has based upon the Liechtenstein foundation structure. A Panamanian foundation is an excellent entity to form if you are interested in holding assets under a legal entity with exceptional protection characteristics, while at the same time having the ability to structure how any assets are to be distributed amongst family, heirs, etc as time passes. Forget about lengthy, costly legal disputes, inheritance taxes, and probate. Asset protection with a foundation formed in Panamá is world class, as Panamanian law dictates that any assets (funds, properties, company shares, vehicles, yachts, etc) held in the foundation’s name are non-sequestrable, nor can they have liens put on them. Any conflicts you might find yourself in, will not put any of the assets held by the foundation at risk, regardless of the outcome of any lawsuit, claim, divorce dispute, etc.
The cost to form one of these entities ranges from $1,300 to $2,400 USD depending which attorney or law firm you employee to handle the formation of the foundation. Do some shopping around, and use the advice provided in the Legal Services chapter to decide who you should work with. Each year, to maintain your foundation active you will need to pay a fee of $400 USD, and your appointed legal agent (typically your chosen attorney) who represents (or vouches, so to speak) for your foundation may also charge an annual fee which you should inquire about when shopping around. The complete process of formation should only take a few weeks at most, and will require from you the following:
- Chosen name for the private interest foundation
- Beneficiaries (in other words, the owners of whatever thefoundation holds in its name)
- Council Members (comparable to a Board of Directors):can be any or all of the beneficiaries, or appointed nominees to maintain privacy of beneficiaries
- Passports or Panamanian ID of all council members
While a private interest foundation may not permit you to engage directly in active commercial activities, your foundation is allowed to act as shareholder of a company, both in Panamá and abroad. This means that any dividends or profits generated by said company, would be transferred to the foundation since the foundation is shareholder (owner) of the company. Once those funds are legally held by the foundation, they will be protected by the same policies and legislation that protect your other assets held by the foundation. Keep in mind, a bank account will need to be opened in the name of the foundation if you wish to hold cash funds in the name of the foundation and receive the mentioned protective benefits.Your foundation can also receive income by making investments which produce passive income through mediums such as brokerage accounts, stocks, bonds, equities, or rental property. If your foundation has a specific social, environmental, or charitable purpose, any activities performed or administrated by the foundation which generate a form of profit are also permitted if said profit is then reinvested towards the upkeep of the foundation’s specific purpose, and related activities. Cherry on top of the ice cream: any profits, dividends, or assets received from abroad will be tax exempt in Panamá due to the country’s territorial taxation policies, under which the foundation is governed.
In review, the benefits and uses of a Panamanian Private Interest Foundation are as follows:
– Business / Company owners can protect their interests by transferring the shares into the name of the foundation
– Asset Protection against lawsuits, claims, creditors, divorces, civil conflicts, etc
- Estate Planning
- Holding of all types of assets including property, vehicles, yachts, stocks, brokerage accounts, company shares, etc
- Can be used for pecific social, environmental, orcharitable purposes
- Reduction of Tax Liabilities
- Complete Privacy of Beneficiaries
- Any charitable donations made to the foundation by a business/company are considered tax deductible from said business/company annual gross income
Now let’s move on to corporate entities in Panamá, namely the standard corporation (Sociedad Anónima.) Referred to as an IBC, or International Business Company, Panamanian jurisdiction is an excellent jurisdiction within which to form a company for various reasons and
purposes . With similarities to the policies and structures of incorporation within Delaware of the USA, Panamanian corporations enjoy a range of benefits and advantages while offering shareholders the opportunity of complete privacy if desired. Once formed, your company can engage in business within Panamá, or abroad. It can also acquire and hold assets such as liquid funds, company shares (of another corporation,) vehicles, properties, etc. Hell, your corporation can even be a beneficiary of your foundation.
Costs for creating a corporation in Panamá range from $800 to $1,600 depending on the attorney or firm you employ to handle the incorporation process for you. There is a $300 annual fee paid to the government to maintain your corporation active. Your resident agent (like the foundation) may also charge you an annual fee as well, but should be no more than $150. Be sure to speak with a few different attorneys/firms to receive a variety of quotes, and make sure you receive a clear and concise explanation of what exactly will be done and provided in exchange for your payment, and what your future obligations will be to said attorney/firm once they have formed your corporation for you. Certain firms/attorneys will charge the minimum fee but half ass the incorporation procedure, doing nothing more than registering your corporation but leaving plenty of loose ends and missing paperwork / other important materials.
The incorporation process can take up to 2 weeks to be completed, so plan ahead and start the process early if you plan to purchase a property, or acquire any asset under the corporation name, as you will not be able to engage in these transactions until your corporation is duly registered within the Public Registry of Panamá.
The following will be required for the formation of a corporation in Panamá:
– Chosen name of company
– 3 Individuals (or Corporations/Foundations) to hold the Board of Directors positions: President, Secretary, Treasurer (can be appointed nominees)
– Passport / Panamanian ID / Registration number (for companies, foundations, etc) for each person/entity holding a position on the Board of Directors
– A breakdown of who the shareholders will be, and how the shares will be distributed
– Passport / Panamanian ID / Registration number of each person or entity that will receive shares of the company
– A brief description outlining the activities and services that will be performed by the corporation, in other words, its intended use
Once you have formed your corporation, you can apply for business permits and engage in business activities within Panamá. You can also use this corporation to engage in business activities throughout the world. Aside from standard business activities, your corporation can make investments, purchase shares of other companies, acquire and hold properties, sell property, rent property, as well as acquire nearly every type of asset you can imagine. Keep in mind that even though your corporation may be based in Panamá, if you are doing business in Canada for example, you may be required to acquire a Canadian business permit for the local region where you are performing said business activities or services.
One of the best advantages of incorporating in Panamá is the country’s territorial taxation system which renders all profit/income generated from activities and services performed outside of Panamá (including neighboring countries of Costa Rica & Colombia) tax exempt within Panamá. As an example, you form a corporation in Panamá, open a corporate bank account, and begin to invest internationally in the real estate market, and maybe even dabble in development/construction throughout North America. Any income generated from these activities which are occurring outside of Panamanian boundaries, will be tax free when that money makes it way to your corporate bank account in Panamá. Another example, you form a corporation in Panamá, and you begin to offer software design and development to companies around the world. Whether you develop said software in Panamá, or India, if your client is receiving and using the product outside of Panamá, the payment that client sends you in exchange for the service provided is also tax free! Granted, you will also need to research the taxation policies of each country you plan to do business in, but choose the right country and you may end up with completely tax free profits. At a minimum, you can avoid double taxation from two separate countries.
While a corporation does not offer the same asset protection as a private interest foundation, it does add a layer of protection nonetheless. You can also maintain complete privacy of shareholders if desired. Nominees can be appointed to hold the board of directors’ positions, and since shareholders names are not made public within the Public Registry, privacy laws in Panamá practically render the individuals/entities with shares or interest in the company completely anonymous.
In summary, the benefits and uses of a Panamanian corporation are as follows:
– Able to conduct business activities / services within Panamá, or internationally
– Any income generated from activities/services conducted outside of Panamá is not taxed by Panamá
– Limited personal liability for activities and services performed by the corporation
– Able to acquire and hold assets such as real estate, equity, securities, vehicles, yachts, commodities, etc
– Offers a layer of asset protection
- Shareholders can remain anonymous if desired
- Board of Directors can be made up of appointed nominees
- Corporations can be beneficiaries of foundations
- Can open corporate bank accounts world wide under corporation name
- – Relatively easy, & quick to dissolve the corporation
As you can see, there are loads of benefits and advantages to incorporating, or forming a private interest foundation in Panamá to accomplish your goals. Whether those goals include the acquisition of real estate, development of real estate, general acquisition of assets, opening a business, asset protection and privacy, reducing your tax liabilities, or environmental/social charitable purposes, the Panamanian corporation or private interest foundation will provide you an excellent platform to work with to meet those goals. Take the time to figure out what your needs are, what your goals are, and your intended uses so that you can make the correct decision as to whether an IBC, or private interest foundation best suits you. And hey, if you simply can’t make up your mind, or find yourself wondering if you will need one of each, then create one of each! There are plenty of ways a corporation and foundation can interact with one another, not to mention create mutual benefits for one another. Play around with the possibilities, and enjoy the benefits!