The Best Confidentiality in Latin America: The Panamanian Foundation
Panama offers us great asset protection tools so we
can be safe rather than sorry. In this country you can create great structures
like the Sociedad Anonima or the freezone companies, all of this within a great
framework of tax optimization thanks to the country´s territorial tax system.
These are undoubtedly great structures that can help you develop your business
beyond what you could ever imagine, but, what would happen if you find yourself
going through an unpleasant situation, like a bad divorce, or chased by
creditors under false accusations?
Nobody likes to think that these things are possible,
but the truth is that they are, and you may one day wake up to find you have
lost in one day everything you have worked so hard for your entire life.
Fortunately, Panama offers a great asset protection tool: The Panama
Foundation.
So, don´t be sorry, be safe, and the Panama Foundation is going to help you preserve your assets.
The Panama foundation is based on the Liechtenstein
foundation, but Panama is a more cost-effective option and does not levy any
form of inheritance tax. This structure is the perfect asset protection tool
and so far no court or government has been able to set it aside.
All the assets under the foundation can´t be seized, including real estate, bonds, shares, precious metals and others.
The foundation can be controlled by a protector, which
can be a physical or legal entity under the authority of the person who
established the foundation, thus protecting the beneficiaries´ interests.
In a practical sense, there are not many differences
between a trust and a foundation, and the Panama foundation is solid as a rock
when it comes to protection and confidentiality.
Difference between a foundation and a trust
The trust and the foundation are practically the same
structure as they are both based on the principle that the assets, previously
owned by a person, are transferred to another person or entity for the benefit
of a third party.
- The original owner of the assets,
- The custodian of the assets,
- The beneficiaries
This is basically how a trust and a foundation work in
practical terms. But these structures have some differences.
The trust is an agreement between two people, a settlor (owner of the assets) and a trustee (custodian of the assets), while a foundation is a legal entity and as such must be registered in a jurisdiction and under the laws of this jurisdiction.
This is how the three players would look in each case:
Trust
- Original owner: the settlor
- Custodian of the assets: a person called the trustee
- The beneficiaries (any person thus appointed in the
trust deed).
Foundation:
- Original owner: the founder
- Custodian of the assets: a legal entity called a
foundation and registered in a jurisdiction
- The beneficiaries (any person thus appointed in the
foundation charter).
In a foundation, it is the founder who does the first
contribution, the amount of which depends on the jurisdiction. In Panama, for
example, the first contribution must be 10,000 USD in cash or in the form of
company shares.
Now, the assets belong to the foundation and will be
managed for the benefit of a third party (called the beneficiaries).
Who are the beneficiaries? That is for the founder to decide and is established in the foundation charter. The beneficiaries can be the founder’s family members or friends, whoever he or she chooses.
What is a foundation useful for?
A foundation, like a trust, is an asset protection
tool. The assets cannot be seized because they legally belong to the trust or
the foundation, being 100% protected from possible threats like divorce
disputes, false claims, creditors and others.
Foundations can also be used for inheritance purposes.
Let´s suppose you have worked very hard your entire life to build your
business, you have set up a whole structure to optimize your taxes and at the
same time be in compliance with international regulations. But what will happen
when the time comes for you to retire?
Imagine that your heirs enter into conflict over their heritage, over business management or other issues. Luckily, the foundation structure provides an easy solution, because, as the founder, you can establish how exactly the assets will be used and distributed.
By choosing the Panama foundation, you can rest
assured that your assets are highly protected by the laws of Panama, and nobody
will be able to seize them or use them under other terms than the ones you
stipulated.
Panama foundation: confidentiality
The Panama foundation has the highest levels of
confidentiality, considering different aspects: the information of
beneficiaries, protectors and the asset distribution. The Foundation legislation
protects confidentiality under penalties of civil law. Any member, supervisory
bodies, public or private officers who have knowledge of the foundation’s
activities are subject to strict confidentiality by law.
This is one of the main reasons wealthy Latin American
(and not only) families choose Panama as an asset protection destination, using
the Panama Foundation as a structure. With all the dangers in Latin America for
wealthy families (kidnapping, extorsion, false claims), they are at ease knowing
that their assets and personal information are protected by the Panamanian law
and the Foundation structure.
Great tax optimization tool
If the Foundation holds assets abroad, then these
assets are exempt of taxation in the republic of Panama, thanks to its
territorial tax system. There are no restrictions as to the nationality of the
founder, beneficiary, foundation council or protector. Although not strictly
necessary, we recommend establishing tax residency in Panama for a more solid
tax optimization strategy. It is important to notice that, although Panama will
not levy taxes from the foreign assets owned by the foundation, other countries
such as your original country of citizenship, may ask at some point for a tax
compliance document. Especially if you want to buy properties or invest in
other jurisdictions outside of Panama.
Panama Foundation + Panama company: an unbreakable structure
We have established that the foundation is a legal
entity, registered under a jurisdiction´s legislation. But what is then the difference between a
foundation and a company?
The answer is quite simple: A company has owners, but
a foundation is not owned by anyone.
Let´s explain further. When you register a company the
first thing that needs to be done is to issue shares, therefore the
shareholders will be the owners of the company.
When you establish a foundation, on the other hand,
you don´t need to issue shares, but you need to make an initial contribution
depending on the country´s requirements.
A foundation is an autonomous entity, owned by no one.
The Panama foundation is an independent structure that
legally owns your assets. According to this, nobody can seize your assets
because you don’t legally own them, but you can still control who will benefit
from them.
Panama Foundation: what can I do in a practical sense?
The Panamanian foundation can hold any legal assets
(bonds, works of art, real estate, brokerage accounts) but is not allowed to
carry out any commercial activities.
What does it mean? Can I use my foundation for other
purposes other than asset protection?
Well, while your Panama Foundation is not allowed to
carry out commercial activities, it can, however, receive profit from
dividends. It can have brokerage and regular bank accounts, which means it can
receive dividends from passive investment, bonds, equities, etc.
Your Panama Foundation can also own one or several
apartments. If you give these properties for rent, you can benefit from the
rent profits, in a completely legal and convenient way. Remember we are talking
about a country with very fertile soil for tourism business. Panama is full of
tourists that come all year long to visit the breathtaking Caribbean and
Pacific beaches, the mountain landscape and delicious coffee in Volcan and
David, the interesting and cosmopolitan lifestyle of the capital city.
Moreover, many Europeans and Americans choose Panama as a touristic destination
because the prices are low for their standards.
Imagine this: Your foundation owns three apartments,
one in Pedasi, another one in El Cangrejo and a third one in Boquete. You can
rent these properties and the profit will be safe and sound under the
foundation.
Creditors? They won’t be able to touch them.
An angry ex-spouse or lover? She won´t be able to put
her hands on them.
Spoiled and troublesome heirs? They will have to use
the profits only as established in the foundation charter.
The unbreakable structure
And now, the best part. We have established that the
Panama foundation can receive profit, including profit from a company. We have
also established that the foundation can own assets and this includes shares
from a company.
This way, we close the perfect circle to form the
perfect asset-protection-tax-optimization structure.
Let´s paint the whole picture of what your life can be
like in Panama.
- Firstly, you
establish the center of operations in any of Panama´s freezones
- Secondly, you
establish branches in other countries where you will do the trading and earn
the profits. If properly structured, you will tax at a 0% rate.
- With the help
of Mundo Offshore´s experts, carefully structure your audit reports and tax
reports and transfer pricing between your cross-bordered companies.
- Put the company
under the foundation´s control and ownership, and sleep at ease knowing that your
structure is protected by one of the strongest and most confidential
legislations in the world.
- Properly establish your residency and tax residency and enjoy a cold Balboa or a cold Panama (national beers) in Casco Antiguo or the Calzada de Amador.
Congratulations! Now that the circle is closed, you
are the owner of a strong and confidential UNBREAKABLE structure.
Panama or Liechtenstein?
Liechtenstein is considered the perfect jurisdiction when it comes to establishing a foundation. In terms of confidentiality and asset protection there is one jurisdiction that comes close: Panama. Actually, Panama´s foundation was entirely based on Liechtenstein’s, with similar structures and characteristics.
However, with the same advantages, Panama offers a much
more cost-efficient foundation, and opens a whole world of possibilities thanks
to the country´s advantages. Panama is a powerful business center thanks to the
Panama Canal, its strategic location as bridge of the Americas, tax incentives
and territorial tax system and Freezones.
Mundo Offshore chooses Panama over Liechtenstein and
in this section we will explain why. Firstly, let´s look at this comparison
chart we have prepared for you.
|
Panama |
Liechtenstein |
What
law applies? |
Private Interest
Foundation Law 1995. |
Persons and Companies Act 1926 (as amended). |
What is the
regulatory board? |
Panamanian
Government Public Registry. |
Liechtenstein Office of Land and Public
Registration. |
What is the
initial asset required? |
USD 10,000 (cash or assets). However, a foundation can be set up without assets
if there is a commitment that assets will be transferred after the foundation
is set up. |
CHF 30,000 (cash or
assets). |
How much is
the registration fee? |
USD 350. |
Up to CHF 700, depending on the type of foundation. Private interest foundations merely deposit the foundation charter with the Public Registrar (for declaration purposes). Charitable foundations (as well as combined) only
come into effect when they are entered on the Public Registry. |
How much is
the annual fee? |
USD 400. This must be paid to the government as
Annual Corporate Franchise Tax. |
0.1% of the nominal capital and net asset value or a minimum of CHF 1,000. 0.075% on net asset value above CHF 2,000,000. 0,05% on net asset value of CHF 10,000,000 and
above. |
Who can be
the regulated person? |
An attorney or law firm needs to be the Resident
Agent, who must countersign the foundation charter before its registration in
the Public Registry. |
The representative has to be at least one member of
the council with a qualified professional background and residence in the
territory. He or she will be authorized to manage and represent the
foundation. |
Who can be a
council member? |
Any person (individual or corporate body) domiciled o resident anywhere in the world can be a council member. The minimum number for corporate bodies is 1, and 3
for natural persons. |
Same as above. |
Is there a
guardian or protector? |
It is an optional role in charge of advising over
the foundation’s activities. In case there is appointed, it should be
stipulated in the foundation charter. The founder or
council can decide the specific powers. |
The protector is the representative of the beneficiaries and ensures that the board is acting according to the purpose of the foundation. It is not mandatory and should be defined in the
statutes. |
Can
it be migrated? |
A Panamanian foundation may migrate to another
jurisdiction. |
A Liechtenstein Anstalt or Stiftung may continue in
a foreign jurisdiction. However, there is a charge of CHF 600 to complete
this process. |
Can
it be merged? |
There is no ability for a Panamanian foundation to
merge with any other entity. |
There is no ability for an Anstalt or Stiftung to
merge with any other entity. |
What are the
beneficiaries’ rights to information? |
The rights of the beneficiaries are set down in the foundation by laws or by resolutions passed by the foundation’s council. If a beneficiary suffers a violation of his or her
rights by a supervisory body, he or she may directly bring a judicial action
before the proper court in the foundation’s domicile. |
The information rights of beneficiaries can be
legally restricted by transferring those rights to other bodies (such as an
internal controlling body) to carry out supervisory duties. In such cases,
the rights of the beneficiaries can be limited to a minimum (their own
rights, the foundation’s purpose, the organization of the foundation). In the case of charitable foundations, the
beneficiaries have no information rights as these are generally under
authorities’ control. |
Is there any
information publicly available? |
The charter is the only document that is publicly
available, which details: •
Name of the foundation. •
Initial patrimony. •
Purpose, duration, and domicile of the foundation. •
Assets’ distribution on liquidation or dissolution
of the foundation. •
Name and address of council members and details of
the Resident Agent. |
The charter (known as the statute) is the only
document that is publicly available, which details: •
Name of the foundation. •
Initial dedication. •
Foundation’s purpose. •
Date of establishment and duration. •
Appointment and functioning of the foundation
council. •
Identity of founder or agent. |
Are
charitable purposes allowed? |
Yes, it is possible to have a charity foundation. |
Yes, it is possible to have a charity foundation. |
What role can
be played by a corporate body? |
A corporate body can act as founder or a council
member. |
A corporate body can act as the founder, council
member, or the protector. |
It is easy to see the big difference regarding costs,
Panama offering a much more cost-effective solution.
It is important to consider that in order to register
the foundation in the first place, the European country asks for three times
the money (30,000 CHF against 10,000 USD).
And this is only for the registration costs, the maintenance
fees are also considerably higher. Take the registration fee, for example. In
Panama we find a 350USD fee, while Liechtenstein has a fee up to CHF 700,
which, according to today´s exchange rate is equivalent to 717.89 USD.
You can also see a 400 USD annual fee against
Liechtenstein´s 1,025 USD as a minimum (according to the exchange rate at the
time of writing).
Otherwise, from the chart you can easily infer that
both structures are very similar.
We recommend Panama because of the great opportunities
the country offers to combine different tools and create a super powerful
structure, like the one described before.
Who we are
Mundo has a distinguished partner which is also our parent company, a consultancy firm that was established in the Caribbean in 1994 and
has grown into one of the leading providers of citizenship by investment and
wealth management services.
Our experts have wide experience in asset protection
tools like the Panama Foundation or the Nevis trust, and also corporate and
family office services worldwide, having offices all around the world including
Latin America, Europe, the Middle East and Asia.
Our goal is to provide a plan which will help our
clients to create the safe structure they are looking for, in order to protect
themselves and their families in times of distress and uncertainty.
Asset protection and tax optimization are important
goals to keep in mind during troubled times, but the most valuable asset a
person can have is freedom. Freedom of speech, freedom to travel, freedom to
live in safe surroundings. Mundo and this firm work together with this
philosophy in mind, and this is the basis of our practice.
Our experts have wide experience in asset protection
and wealth management, and this is why we can help you achieve your financial
and personal goals.
If you want to establish a Panamanian foundation and
protect your assets from the evils of today´s world, please contact us and ask
for a consultation with our experts.
$170,000
$2,500,000
$350,000
$1,400,000
$395,000
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