A private interest foundation in Panama is a legal entity created under Law 25 of 12 June 1995 (Official Gazette 22804) to dedicate a patrimony to the purposes its founder declares. It has no shareholders: it has beneficiaries. It is used mainly for succession planning and asset protection in Panama. The initial patrimony cannot be lower than the equivalent of ten thousand balboas (B/.10,000, at par with the US dollar). Below: what the law requires, what it costs each year, and how far protection really goes.
What a private interest foundation is (and is not)
Article 1 allows one or more persons, individuals or entities, to create a foundation by dedicating a patrimony to the objectives stated in the charter, and that patrimony can be increased later. Registering the charter in the Public Registry grants legal personality with no further authorization, and serves as notice to third parties (article 9).
It is not a vehicle for running a business. Article 3 is unambiguous: a foundation cannot pursue profit-making purposes, although it may carry out commercial activities on a non-habitual basis or exercise the rights attached to shares in its patrimony, provided the economic result is dedicated exclusively to its purposes. It holds shares, real estate and bank accounts; it does not trade day to day.
The foundation charter and how it is formed
Article 5 sets eleven mandatory items. The most asked about:
- Name: in Latin characters, not similar to an existing Panamanian foundation, and including the word “foundation”.
- Initial patrimony: in any legal tender, never below the equivalent of B/.10,000.
- Foundation Council: full designation with address. Minimum three members if individuals, one if a legal entity (article 17).
- Resident agent: a Panamanian lawyer or law firm, who must countersign the charter before it is registered.
- Beneficiaries: the charter states the method of designating them, not their names, which sit in the private regulations.
There are two routes (article 4): a private document with the founder’s signature authenticated by a notary where it is signed, or appearance directly before that notary. You do not need to sign in Panama. What article 6 does require is protocolizing the charter before a Panamanian notary prior to registration.
Official costs and annual obligations
Article 8 refers to articles 318 and 318-A of the Fiscal Code. Official amounts, professional fees aside:
| Item | Amount |
|---|---|
| Minimum declared initial patrimony | Equivalent to B/.10,000 |
| First annual franchise tax (on registration) | B/.350 |
| Annual franchise tax, following years | B/.400 |
| Late payment surcharge | B/.50 per year or fraction |
| Due date | 15 July (registered January to June) or 15 January (July to December) |
There is also a little-known accounting obligation. Law 52 of 2016, as rewritten by Law 254 of 2021, requires legal entities that exist to hold assets to keep accounting records, retain them five years, and deliver them to the resident agent every 30 April. Failure brings fines and suspension of corporate rights.
How far asset protection actually goes
Article 11 provides that the foundation’s assets form a patrimony separate from the founder’s, and that they never answer for the personal obligations of the founder or the beneficiaries. But the separation is not absolute: the same article allows attachment or precautionary measures for obligations incurred or damage caused in carrying out the foundation’s purposes, and for the legitimate rights of its beneficiaries.
The decisive limit is article 15: creditors of the founder may challenge contributions made in fraud of creditors, and that action expires three years after the transfer. A foundation protects what is contributed before the problem exists, not after.
On succession, article 14 provides that inheritance rules of the founder’s or beneficiaries’ domicile are not enforceable against the foundation, which is why it fits well inside an estate planning strategy.
Governance: council, protector and accounting
Every foundation must have a Foundation Council (article 17). It administers the assets, informs beneficiaries of the patrimonial situation, and delivers whatever the charter or the regulations assign to them (article 18).
The founder keeps legitimate levers: he may sit on the Council, reserve the right to remove or appoint members (article 21), and create a protector whose prior authorization conditions the Council’s decisions (articles 19 and 24). Unless agreed otherwise, the Council renders accounts annually (article 20).
Tax treatment and confidentiality
Article 27 exempts from all tax the acts of formation, amendment and termination, plus transfers of and income from the foundation’s assets, but only where those assets are: assets located abroad; money deposited by persons whose income is not Panamanian-source; or shares and securities of companies whose income is not Panamanian-source. The exemption is conditioned on those cases: Panamanian-source income falls outside. Panama’s treatment also says nothing about reporting duties in the founder’s or beneficiaries’ country of residence, which is a separate analysis.
Article 35 requires confidentiality over the foundation’s operations at all times, and punishes a breach with six months’ imprisonment and a fine of fifty thousand balboas (B/.50,000). That duty yields to information that must be disclosed to authorities and to inspections carried out under the law.
Since 2020 there is an extra layer. Law 129 of 17 March 2020 created the Private and Single Registry of Beneficial Owners, administered by the Superintendency of Non-Financial Subjects. The resident agent must register the beneficial owner within fifteen business days of formation. The system is private and access-restricted, not public.
Frequently asked questions
Do beneficiaries appear in the Public Registry?
The registered charter states the method of designating them, not their names, which sit in the private regulations. The beneficial owner is reported to the Law 129 of 2020 system, access-restricted.
Can the founder keep control?
He may sit on the Council, reserve the right to remove members, and even be named among the beneficiaries. Calibrate it with counsel: excessive control weakens the separate-patrimony argument.
Is it irrevocable?
Yes, except in the three cases of article 12: the charter was never registered, the charter expressly says otherwise, or a ground for revoking donations applies.
Does it help if I already face a lawsuit?
It is the wrong instrument. Article 15 lets creditors challenge contributions made in fraud of creditors for three years. The protection works only if structured in advance.
Conclusion
The private interest foundation is a solid tool for what it was designed to do: separate a patrimony and order a succession. Its limits are in the law too: no profit purpose, no protection for contributions made in fraud of creditors, and accounting and beneficial ownership duties on top. If you are weighing it against a Panama trust, let us review your case first.