Panama is an international center for banking, insurance, finance and shipping. Hundreds of thousands of corporations from around the world are established here, and enjoy Panamaís offshore tax-free status and strict regulatory and confidentiality protection.

      Some nine years ago, the Panamanian government enacted a new law (Law #25 of June 12, 1995) establishing the formation of Panamanian Private Foundations.   The law is based on similar Panama's Banking District legislation regulating private foundations in Switzerland and Liechtenstein, but with several innovative improvements.

Since the lawís enactment, thousands of Private Foundations have been established and are in operation for clients around the world.   The Panamanian law governing the establishment and operation of Private Foundations is simple, yet complete.   It affords the Private Foundation the legal security of established judicial and confidentiality protection, while allowing for complete and unrestricted action by the Foundationís founders and beneficiaries.


     Panamanian Private Foundations operate very much like a trust.   Normally, Foundations are endowed with a patrimony (liquid or non-liquid assets) which is held in trust by the Foundation.   This endowment is thereinafter disbursed to the beneficiaries as stipulated by the founder.   The founder can also be a beneficiary of the Foundation.

Once an asset (liquid or non-liquid) is endowed to the Foundation, it becomes a part of the Foundationís patrimony, and is legally separate and apart from the founderís estate.   Third parties, such as governments or creditors, may not attach liens against the Foundationís assets for personal obligations of the founder, except in the case of fraudulent or criminal activities.

Upon establishment of the Foundation, the founder (or the founderís designate, heir or assign) exercises complete control over the Foundation.   The Foundationís designation of beneficiaries, distribution of patrimony, etc., can be changed as often as desired at the discretion of the founder.  


     Panamanian Private Foundations are proven legal entities utilized by thousands of individuals and families around the world to protect assets and to provide for the planned, orderly transfer of patrimony from one generation to another.  

The Republic of Panama levies no taxes on foreign income derived fromPanama's Banking District - Bay of Panama Foundation assets, nor does it tax interest income generated from monies deposited in Panamanian banks.   Panama only taxes domestic income from active business enterprise.   The U.S. dollar is Panamaís national currency, thus eliminating monetary devaluation risk.

The Foundation is duly registered in Panamaís Public Registry, thus ensuring its legal status.   However, the Foundationís internal Regulations are privately held by its founder, thus ensuring its confidentiality. Assets placed in the Foundation become its sole property and are legally autonomous from the founderís estate.   Thus, third parties, such as governments or litigants, cannot attach the Foundationís assets, except where the assets were derived from fraudulent or criminal activities.



The law requires that the initial capital pledged by the Foundation shall be not less than $10,000.00.   This amount does Garibaldo Law Offices - 8th Floor not have to be paid in to the Foundation in advance.   Thereafter, the Foundation can receive additional liquid or non-liquid assets from its founder or third parties.

Panamanian Private Foundations enjoy very low filing and annual fees.   As with Panamanian corporations, Foundationsí initial registration fees depend on the original capital pledged by the Foundation.   Thereafter, the Foundationís annual franchise fee is $250.00, regardless of the amount of capital in the Foundation.

No taxes are levied on foundation assets or income, as long as that income is derived outside the Republic of Panama.   Additionally, interest income on a Foundationís bank deposits within the Republic of Panama are also tax free.     


A Foundation is formed via a Foundation Charter, which is a legal instrument similar to articles of incorporation.   The Charter is required to state certain basic information such as Foundation name, initial capital, Foundation Council membersí names, Resident Agent in Panama, etc.*   The Charter is registered in Panamaís Public Registry and is issued a ďPublic Registry CertificateĒ and is thus established as a legally-recognized Private Foundation.   Thereafter, it can accept assets, open bank accounts, and begin operations.

As stated above, the Charter must list members (minimum of three) of the Foundation Council, who are appointed by the founder.   The Council serves as an active or passive board of directors, at the discretion of the founder, who can also serve on the Council.

Concurrent with the Charter, a confidential internal document known as the Foundation Regulations is created.   The Regulations, which are similar to corporate bylaws, normally name the beneficiaries and their rights to Foundation assets, terms of disbursement, etc.*   The Regulations are not registered with the Public Registry, and are not revealed to third parties (govít. agencies, etc.) except at the discretion of the founder.



The Foundation operates similar to a trust or holding company.   It cannot be used simply to operate a business or for purely commercial enterprise.   Assets, both liquid (bank transfers, stocks, bonds, etc.) and non-liquid (real estate, real property, titles, etc.)   are transferred into or deeded to the Foundation.   They then become the sole property of the Foundation.   The assets can and normally do generate income (interest on deposits and bonds, stock dividends, real estate appreciation, etc.)

The founder names the beneficiaries (and can in fact be a beneficiary), establishes the terms and conditions of asset disbursement, and appoints Council members, outside auditors, etc. via the internal Regulations.   The founder can change thePanama's Supreme Court Regulations in whole or in part via amendments to the Regulations, at the founderís sole discretion.

Disbursement and distribution of assets are made according to the Regulations.   The Foundation is perpetual unless closure provisions are specifically stated in the Regulations, i.e., upon the founderís death and subsequent disbursement of all assets.



Foundations, like trusts, are used to protect assets and to allow for the planned, orderly distribution of said assets to beneficiaries.    These Foundations have been called ďthe perfect living willĒ.

Panama Skyline - Bay of PanamaMost Foundations are set up as instruments for the programmed disbursement of assets from one generation of family members to another.   The assets can be managed and distributed by fiduciaries named by the founder, and the disbursements can be specifically tied to the founderís wishes, i.e., for beneficiariesí education or health expenses, general living expenses, etc.

Foundations can contribute to other entities such as charities, institutions, churches, etc., at the behest of the founder.   Foundations can also be set up as retirement annuities for the founder as beneficiary.   Others set up unfunded Foundations as a ready precaution against potential contingent liabilities.

* see Foundation Requirements Document 
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