The primary objective of any succession planning or philanthropic enterprise strategy should be the protection of the wealth and assets that will be used for charitable purposes. A common strategy involves the moving of assets to a jurisdiction different to that of a home country as many advantages can be gained by doing so, such as privacy and confidentiality or legitimate tax efficiency.
Panama is an excellent option to provide these advantages and has long been a popular jurisdiction for those seeking the optimum strategy for their asset protection, succession planning and charitable aims with the Panamanian Interest Foundation particularly providing a host of attractive benefits.
This article aims to explore those benefits so that you may consider the potential of the Panamanian Private Interest Foundation`s suitability to be the perfect vehicle for your charitable goals and succession planning.
The Panamanian Private Interest Foundation was originally based upon the Private Interest Foundation models found in the jurisdictions of Liechtenstein, Luxembourg and Switzerland because the Panamanian government took these models as the base in order to offer a more modern, flexible and affordable asset protection and estate planning vehicle with the motive to be highly attractive to those persons interested in offshore investment.
Privacy and Confidentiality
For those seeking privacy in their financial affairs, the Panamanian Foundation offers 100% confidentiality from the public as beneficiary details are not required to be disclosed in any public document. The only disclosure of a foundation´s beneficial owner details are contained within the regulations of a foundation, which is a private supplementary document, and the Private Unique Registry of Beneficial Ownership by means of Law 129 of 2020. Important to keep in mind that in Panama there are strict laws concerning the protection of data, with sanctions such as financial penalties and/or imprisonment for any breaches of these laws.
The Many Uses of the Panamanian Foundation
Succession Planning
The Panamanian Foundation structure has been a highly popular and flexible means of establishing succession planning, particularly for Latin Americans and Continental Europeans, as it offers organisation, control and the holding and protection of the family patrimony for the founders and beneficiaries of the foundation. For inheritance purposes, the family patrimony can be structured in a way that the assets will be passed on to the heirs under specific instructions and conditions set down by the founder, such as management of the assets and investment advice provided by the appointed foundation council.
This may be of particular interest in the case that the beneficiary, or beneficiaries, are minors, elders or disabled persons where there would be the need to manage the assets and arrange for payment of living, medical, education or necessary expenses.
Ownership of Assets as a Holding Entity
By Panamanian law, foundations are prohibited from carrying out any commercial activities, but can serve as passive holding entities. This being so, they can own assets located anywhere in the world, including corporations that may or may not carry out commercial activities. This facility is of great interest to those who wish to control and maintain ownership of their corporation but wish to segregate their business affairs. Any legitimate assets can be held in a foundation, such as share of corporations, as well as bank accounts, investment accounts and real estate.
Flexibility of the Panamanian Foundation
Other common uses of a foundation include, but are not restricted to, the following;
- As an alternative and efficient substitute for a will or marriage contract.
- As an instrument for the administration and maintenance of pension funds.
- To protect a family business so it may continue for future generations.
- As a legal entity to receive commissions, royalties or interest payments.
- As a means of granting periodical allocations of benefits to future generations rather than making a full distribution of assets at one time.
- To protect persons such as minors, elders or disabled persons incapable of managing their assets.
- To hold and protect intangible assets such as patents, copyrights, franchises, trademarks, brand names and software.
- To conduct and carry out scientific, philanthropic, religious and humanitarian purposes, or to manage funds or assets for the benefit of these activities, and which we explore further below.
Charitable Goals
Over the last century charitable entities, such as foundations, have driven positive change on a global scale.
Foundations, usually, are created to exist in perpetuity so that their assets can be controlled and passed over to following generations to support the values and aims of the founder and continue the charitable work, thus leaving a lasting legacy.
However, the formation of a charitable foundation in, for example, the US or Europe, can be challenging in that it may involve a high amount of red tape, and significant levels of oversight and supervision.
Conversely, a Panamanian Foundation offers an opportunity for the philanthropist to establish a charitable structure with minimal governmental oversight as long as the contributions are legitimately sourced and from a jurisdiction outside of Panama.
Potential tax savings.
A Panamanian Foundation may also provide potential personal tax efficiencies such as:
- Reduce income tax for each year contributions are made
- Avoid capital gains taxes dependent on nature of assets contributed
- Reduce inheritance taxes, and
- Grow charitable funds in a tax-advantaged jurisdiction
It is important to highlight that where the above tax advantages provided through the use of a Panamanian foundation is perfectly legal and can be beneficial, one must abide by the country´s regulations. Paying lower taxes does not mean paying no taxes at all. Always seek the appropriate tax advice of specialists in the relevant countries before making decisions about your assets and plans.
Creating a Panamanian Foundation for charitable purposes.
A formal Panamanian charitable foundation can be formed and registered as such with the government, but they can be costly to incorporate and involve significant complexity. It is for this reason that the most common approach is to adapt a regular Panamanian Interest Foundation to include charitable purposes (often described as a “mixed foundation”).
This so-called mixed foundation approach is far less complex, more cost-effective and is easily accomplished by customizing the foundation´s regulations to include philanthropic, and perhaps, religious, educational, scientific and humanitarian goals to help those who are less fortunate.
Topaz Services can ensure that a detailed set of bye-laws are designed, outlining the foundation´s operations, how and when it is funded, terms and conditions surrounding distributions and what organisations or projects will benefit from these distributions. In addition, details surrounding succession could be included to ensure the foundation´s perpetuity.
A Panamanian mixed foundation is an excellent and flexible instrument that enables you to achieve your goals of doing good for society, protecting your assets and providing for your future generations.
How Topaz Services can help you
Since 1981, Topaz Services has been providing quality advice and expertise for over forty years and our experience in managing corporations and foundations, including charitable foundations in Panama is accompanied by the reliability, understanding, personal approach and responsibility you could expect from a British-run professional company.
As a privately owned family firm, we fully understand the importance of privacy and confidentiality when it comes to family wealth management and business matters.
Orphanages, children’s hospitals and homes for the disabled and disadvantaged are just some of the charities that benefit from donations made on behalf of ourselves and our clients. By clicking on the below link you can see a selection of the many testimonials we have received.
Our Charitable Work
Setting up a Consultancy appointment
At Topaz Services, we have that essential combination of minds are able to offer co-ordination of bank and investment accounts, administration, accounting or simple bookkeeping and, if necessary, introductions to other professional service providers.
We provide solutions and design structures to fit your needs, simplifying the complex and offering our clients the full package and not just a product.
If you are considering Panama as a jurisdiction for your personal or business affairs but would like to seek some guidance from an experienced and professional local source you can book an appointment with us on the “Contact us” link above.
Your appointment can be in person at our offices on Avenida Balboa in Panama City or by video or telephone.
We always adhere to our primary objectives; to act in the best interest of our clients and maintain the highest quality levels of service. We do not accept commissions from any third parties so that clients always understand that we give impartial advice and our team of experts, with proficiency in Spanish and English, as well as our long-established local network of recommended service providers, can be of invaluable assistance.