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Panama Private Interest Foundation
Panama Private Foundation (hereinafter known as
PIF) has its origins in the Law 25 of 1995, which
in turn was inspired in the PGR or better known
as the “Liechtenstein Persons and Company
Act”, that contains one of the first references
to the private non profit foundations. In Panama,
this and the most recent innovations in the Anglo-Saxon
Trust enabled the creation of the Private Foundation
utilizing the best features and characteristics
of both worlds.
A
PIF is a legal entity that can be created by either
a natural person or a corporation that later transfers
part or all of his/her assets to the Private Foundation
so they can be managed and protected in favour
of the Beneficiaries.
USES OF PIF
Family support
Tax purposes
Protection and management of assets
Educational purposes Testamentary purposes
Life annuity purposes
Charitable purposes
To receive and manage capital and titles
For the purpose of serving as guarantee or collateral
For the management of insurance
We
must comment that several or all uses mentioned
above can be given to a particular PIF, there
are no restrictions as to the objects or uses
one PIF can be given. For example, one PIF can
be created to protect assets, but also with a
testamentary use or in any case, with all the
above-mentioned uses. However, a PIF cannot engage
in commercial or for profit activities as a day-to-day
activity.
ADVANTAGES
They provide a fiduciary structure for the orderly
transfer and disposition of assets to beneficiaries
upon the death of the Founder, keeping control
of the assets during lifetime They may be established to have effects from
the date of their constitution or after the
death of the Founder
According to Law 25 of 1995, inheritance laws
that apply in the domicile of the Founder or
the Beneficiaries, shall not be effective against
the Foundations assets nor may these laws affect
the validity or performance of the Foundations
objectives
Foundations are established to carry the specifics
goals set out in the Foundation Charter and
may additionally undertake sporadic commercial
activities, exercise rights pertaining to their
holdings, own property, contract obligations
and take part in administrative or judicial
proceedings
A Private Interest Foundation should be established
with a patrimony destined to fulfill its objectives,
which shall be no less than US$10,000.00.
Said patrimony may be increased by additional
contributions of the Founder or third parties
and does not have to paid in part or in full
before the incorporation
The assets of the Foundation become legally
independent and do not form a part of the private
estate of the Founder. Such assets are not sizeable
and may not be subject to any precautory action
or measure, unless such action or measure pertains
to obligations incurred or damages arising from
the fulfillment of the Foundations objectives;
Notwithstanding the creditors of the Founder
or of a third party shall have the right to
contest the contribution or transfer of assets
to a foundation when such transfer constitutes
an act in fraud of the creditors. The rights
and actions of such creditors shall lapse at
the expiration of three (3) years, counted from
the date of the contribution or transfer of
the assets to the foundation was done
According
to article 27 of Law 25 of 1995, Private Interest
Foundations are exempt from payment of any taxes,
contributions, duties, liens or assessments
of any kind arising from the acts of constitution,
amendment or extinction of the same, as well
as acts of transfer or encumbrance of the Foundations
assets and the income arising thereof, when
related to assets localized abroad; Money deposited by natural or juridical
persons whose income does not derive from
a Panamanian source is not taxable in Panama
for any reason; Shares or securities of any kind issued
by corporations which income is not derived
from a Panama source, or which are not taxable
for any reason, even when such shares or
securities are deposited in the Republic
of Panama.
The
transfer of unmovable property, titles, certificates
of deposits, assets, funds, securities or shares
carried out by reason of the fulfillment of the
objectives of the foundation or the termination
of the same, in favor of relatives within the
first degree of consanguinity or the spouse of
the Founder shall also be exempted from all taxes.
INFORMATION OF PUBLIC AND PRIVATE KNOWLEDGE
The
only information made public are the names of
the Founder, the member (s) of the Foundation
Council and the name of the Protector, this last
if it is so established on the Foundation Charter,
as the Protector can be appointed by means of
a private and confidential document.
The
Foundation Regulations are for internal purposes
of the Foundation and are not a matter of public
records. Information regarding names of beneficiaries
and of the protector and method for distribution
of assets can be contained within the Regulations,
thus will not be publicly disclosed.
CONFIDENTIALITY
The
Law 25 of 1995 innovates in this field when it
stipulates on Article 35 that all the members
of the Foundation Council, Protector, public or
private servants that have knowledge of the activities,
affairs, transactions and operations of the PIF
must maintain reserve and confidentiality at all
moments. Violation of these Articles carries a
sanction of 6 months of jail time and a fine of
Fifty Thousand Dollars (US$50,000),
without prejudice to the civil liabilities.
PRIVATE FOUNDATIONS vs. TRUSTS
Private Foundations and Trusts
have clear differences:
PIF’s are based on Civil Law and they are
constituted by means of a public legal document
and filed for registration, it is in fact, an
existing legal entity, whereas a Trust is based
on Common Law and are established by means of
a private contract that does need to be filed
with any government agency, it is not an existing
legal entity, it is in fact a legal contract.
Another difference is that the Foundation Charter
does not need to specify the rights and obligations
of every party involved that can be done by means
of a private and confidential document, while
a Trust deed has to be very specific and clear
regarding the rights and obligations of the Trustee.
In a PIF the 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.
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.
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If you have questions about Panama Private Interest Foundations please contact us.
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