Private Foundations

The law

Private Foundations (“foundations” or “foundation”) in Panama came to life by means of Law No. 25 of 1995, based on the most part on Law No. 19 of 1926 of Liechtenstein, which popularized family and charity foundations in Europe.


A foundation is a legal entity that is created by means of a document called Foundation Charter by one or more individuals or legal entities called Founders, who obligate to transfer, to the foundation, assets of any kind that, under the management of a governing body called Foundation Council, that will be subject to the realization of specific purposes of private interest for the benefit of one or more private persons or legal entities called Beneficiaries, who can be the Founders themselves, designated in the Foundation Charter or in a private document called Regulations, thus preserving the Beneficiaries identity, private.

A foundation incorporates aspects of both trusts and corporations providing its users with a unique and secure estate planning device:

The fact that a foundation has beneficiaries like a trust and does not have stockholders like a corporation allows the foundation to be used in place of a will for all assets that are transferred to it by the founder or third parties.


Through the formation of a foundation, the founder or founders establish, permanently, or for a definite term, the destination of the foundation’s assets, indicating the ends towards which such assets must be used, as well as their beneficiary or benefciaries. Hence, for example, the foundation may provide that the founder, in his lifetime, will be the only beneficiary of the foundation and that, after his death, the beneficiaries will become the persons he so designates, specifying the assets of the foundation or the portions thereof that correspond to each beneficiary. The possibilities in this respect are endless.

The Foundation Charter

The Foundation Charter (similar to certain extent to the Articles of Incorporation of a corporation) is the document through you form a foundation and the following is the minimum information that must be included in it:

  1. The foundation’s name, written in any language with the Latin alphabet. It must include the word “Foundation” (in the chosen language) to distinguish it from other types of legal entities.
  2. The foundation’s initial capital. It must be at least US$10,000.00 or assets valued at such minimum. You do not need to transfer the initial capital on the formation of the foundation; transfer can take place on a later date.
  3. The members of the Foundation Council, which may be one or more individuals or at least one legal entity. If it only has one member, that member must be a legal entity. If composed by two members, its members can be two legal entities or one legal entity and one individual. If composed by individuals only, it must have at least three members. Its members may be citizens of any country and may have their residence anywhere. They must be 18 years old or older
  4. The foundation’s domicile, which can be located in any part of the world. The foundation can have its domicile in Panama even when the foundation conducts part or all of its activities in other countries.
  5. The foundation’s Resident Agent who countersigns the Foundation Charter who must be a lawyer or law firm duly admitted to practice law in Panama.
  6. The purpose of the foundation, which can be described in a specific or general manner; you can state it with greater precision in the regulations of the foundation.
  7. The beneficiaries can be included in the Foundation Charter or in the regulations. If named in the regulations, their identity will remain private or anonymous.
  8. Whether the foundation is revocable or irrevocable. For the foundation to be revocable, the founder must express this in the Foundation Charter.

For the foundation charter to be amended or modified, this must be stated so in the Foundation Charter. For a foundation to be subject to amendments the founder must express this in the foundation charter.

The duration of the foundation. It can be of perpetual or definite duration. Usually it is set to be perpetual since you can dissolve it with anticipation.

The foundation charter must indicate the destination of the foundation’s assets and the manner of their liquidation, in the event of dissolution.

The Foundation Charter may include other rules deemed convenient by the founder.

The Capital of the Foundation

The capital of the foundation can consist of assets of any kind such as bank accounts, securities, real estate, art, jewelry, royalties, etc. The foundation may own shares and other securities of business corporations, but the foundation cannot dedicate itself to carry out such business activities on a regular basis, as would a company that requires a commercial license to operate.

The capital or assets of the foundation are an estate separate and distinct from those of the founders and beneficiaries. Said assets may not be subject to legal seizures, attachments or subject to any personal legal action against the founders or beneficiaries.

The Founder

One or more individuals or legal entities of any nationality and with residence anywhere can act as founder of a foundation. The founder may be part of the Foundation Council, may be a beneficiary and a protector of the foundation.

The Foundation Council

Unless otherwise stated in the Foundation Charter or in the Regulations of the foundation, the Foundation Council will have the following general obligations and duties:

  1. Manage the assets of the foundation according to the law, the foundation charter and the regulations.
  2. Carry out any act that is convenient or necessary to the accomplishment of the purpose of the foundation.
  3. Inform the beneficiaries of the state of the affairs of the foundation, as established in the foundation charter or the regulations.
  4. Deliver to the beneficiaries of the foundation those assets and proceeds granted to them according to the foundation charter or the regulations.
  5. To carry out all acts and contracts required by the law and other regulatory provisions of the foundation.

The Protector or Supervising Committee

The founder may name a Protector or Supervising Committee for the foundation. Unless otherwise stated in the Foundation Charter or in the Regulations, the protector may have the following general obligations and duties:

  1. Insure the compliance of the purposed of the foundation and protect the rights and interests of the beneficiaries.
  2. Require the foundation council to present and justify accounts.
  3. To modify the purposes and objectives of the foundation, when deemed impossible.
  4. Designate members of the Foundation Council due to absences or the end of any council member’s term.
  5. To increase or reduce the number of members of the foundation council.
  6. To countersign the acts or resolutions adopted by the foundation council.
  7. To act as custodians of the assets of the foundation and to insure their use to the ends set forth by the Founders.
  8. To exclude any beneficiary and add others according to the foundation charter or the regulations.
  9. Have veto power over Foundation Council decisions.

The Regulations

The regulations are private by-laws of the foundation issued by the founder or by the private person or legal entity that the founder so designates for this purpose. The regulations may contain any other provisions that need not be in the foundation charter, such as other duties and rights of the foundation council, the designation of the protector and his faculties, the designation of the beneficiaries and their benefits, a detailed description of the purposes of the foundation and the causes of dissolution, to mention a few.


The acts of organization, amendment or termination of the foundation, as well as the acts of transference or transmittal or encumbrance of the assets of the foundation and the income they generate, or any other act in connection therewith, shall be exempt from all taxes, contributions, duties, liens or assessments, provided they relate to the following:

  1. Assets located or economically exploited abroad (not in Panama).
  2. Bank deposits in Panama or abroad.
  3. Shares or securities of any kind, issued by corporations or the like whose income does not derive from a Panamanian source or is exempt from taxes, regardless of the fact that such shares or securities are deposited in Panama.

Foundations must pay the Panamanian Government a small fee at the moment of registration and an annual duty of US$400.00 during the foundation’s existence.


It is not necessary to travel to Panama to form a foundation. For those who do not live in Panama they may have a Panamanian lawyer or law firm present the Foundation Charter before a Panamanian Notary Public. The time required to register a foundation in the Public Registry Office is approximately one working week.

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