Panama searches private foundations laws of Liechtenstein, Luxembourg and Switzerland before coming up with a private law Foundation single interest in the law of private interest foundations 1995. Panama differs from the three laws of European countries mentioned above creating a mix between a society, traditional private foundation and a trust.
The purpose of a Panama Private Foundation is to provide asset protection, estate planning, probate avoidance, and eliminates the need to write a will. A Panama Private Interest Foundation is a perpetual entity serving the founder’s heirs forever.
Asset protection is the main aim of creating a Private Interest Foundation Panama. While offshore companies may hold securities of various assets worldwide, a Private Interest Foundation Panama may hold all the shares of these offshore companies acting as a holding company.
Privacy is another important reason for the formation of a Private Interest Foundation Panama. The Panama Foundation is a public entity, none of the directors, officers, beneficiaries, or the names of the actual owner appear anywhere in public and government records.
Estate planning is done by a private interest foundation Panama when founder wrote a private document called The Letter of Wishes that describes who are the beneficiaries, in order to have the private foundation, what events trigger the transfer of ownership of the Panama foundation private beneficiaries and what types of activities of the private foundation may engage in. There is no need to write a will that all assets are held directly or indirectly by the Private Foundation Panama and all the heirs are named as beneficiaries and how they will eventually control the private foundation. future heirs may also be included in the letter of wishes so that it continues to roll over to future heirs. The letter of wishes can be changed by the founder any time during his life. Probate is avoided because the ownership of the asset is ever transferred to heirs, but remains in the hands of the Panama Private Foundation.
Tax planning is a great advantage for the use of a Private Foundation Panama. Panama does not tax income generated outside of Panama to world income is tax free for private foundation. The detention of global income-producing assets by a private foundation are not taxed in Panama means lower income tax by only be subject to tax in the countries where the assets are held.
A limitation of a Private Interest Foundation Panama is the Panama law requires these private foundations set up for non-profit purposes. While a private foundation can not be directly involved in commercial activities profit, private foundation can receive passive income such as dividends, rental income and bank account interest. A Panama Private Interest Foundation may also hold shares in offshore companies doing lucrative business. Law of Panama Private Interest Foundations allows the ownership of shares in the company by the private foundation. Whether these companies are directly involved in commercial activities for profit.