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  Private Interest Foundations
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For the information of our local and international clients, we hereby introduce the most important aspects of the legal instrument named Private Interest Foundation, recently adopted in our legislation by means of Law No. 25 of June 12, 1995. Its adoption is due to the great benefits and flexibility that said instrument has had in European jurisdictions, particularly as a mechanism for organizing and planning family and business assets and patrimony.


In the Panamanian legislation, the Private Interest Foundation, hereinafter PIF, is a hybrid or intermediate instrument between a corporation, widely used in our country, and the Trust. We can define it as the donation of a patrimony for specific objectives or purposes in a document named Foundation Charter. The attainment of the purposes of the Foundation is carried out by natural persons being part of the Foundation Council (body equivalent to the Board of Directors of a corporation) and whose names must be indicated in the Foundation Charter, which must be registered at the Public Registry of Panama.

The initial patrimony of the PIF can be increased from time to time by the creator of the PIF, named THE FOUNDER, or by any other person. At the same time, the persons or institutions receiving benefits from the foundation are named THE BENEFICIARIES. The assets or patrimony donated to the PIF becomes and independent patrimony from that of THE FOUNDER, therefore apart from his personal assets, e.g. it is autonomous and acquires independent legal capacity, without being subject to any lien or attachment action directed against THE FOUNDER.

Unlike corporations, the PIF has no partners, participants or shareholders. After its constitution, THE FOUNDER does not acquire such rights in relation to the assets donated or transferred to the PIF.

However, the Law acknowledges the beneficiaries, who are the persons on whose benefit the objectives of the PIF are organized and carried out, within which THE FOUNDER can be included, in the rights and privileges of the PIF.

We must mention that the main difference between PIFs and the Foundations for Charity or Scientific Purposes as we know them in our legislation, is that the latter requires an authorization from a governmental entity, the Ministry of Government and Justice of the Republic of Panama, but PIFs exist or acquire legal capacity through a private act after being duly registered at the Public Registry, provided it has complied with the formalities required by the Law.

It is important to observe that despite the fact that this type of foundations cannot carry out profitable activities, they have important real and practical usages for the community. Being a permanent instrument, it offers the possibility of establishing and following for a long period, including after the death of THE FOUNDER, the ideas and objectives instructed by said person in relation to his assets or patrimony, the destination thereof as well as the planning of the family patrimony.

Law No. 25 of June 12, 1995, whereby the PIF is regulated, establishes in detail how foundations are constituted and its operation. The provisions of this Law have been regulated by virtue of Executive Decree No. 417 of August 8, 1995, whereby the Private Interest Foundation Division is created at the General Directorate of the Public Registry and the registration of the organization, amendment and liquidation of said foundations is regulated.


This juridical instrument introduces several benefits making it an attractive instrument for local or foreign clients, such as:
  • They are exempted from all taxes, contributions or encumbrances in the Republic of Panama (except the payment of the Annual Franchise Tax of US$ 300.00). Therefore, foundations do not pay income tax, capital tax, real-estate tax, inheritance tax nor transfer tax. Also exempted are the titles, deposit certificates, securities, money or shares executed due to fulfillment of the purposes or objectives of the Foundation or its liquidation, in favor of the first kinship parents and the spouse of THE FOUNDER.
  • Total confidentiality and anonymity. The Law on PIF establishes that the members of the Foundation Council, the protectors or inspectors, as well as any person or institution, that due to its duties, obtains information related to the activities, transactions or operations of the PIF, shall always be obliged to maintain strict secrecy. Non compliance of this obligation implies serious criminal and pecuniary sanctions for the infringer.
  • There is no legal requirement to reveal the name of the actual founders or beneficiaries.
  • No annual income tax or financial statements need to be registered.
  • Its organization is a simple and expedites process.
  • Low incorporation and maintenance costs.
  • No legal requirement on maximum patrimony permitted.
  • May carry out any civil or commercial transactions (in a non-customary manner) in any country of the world and in any currency.
  • The Foundation Charter can be executed by the client or by proxy or trustee.
  • Foundations can be re-domiciled and continue existing as Private Interest Foundations in Panama, following a simple procedure of continuation.
  • The assets that constitute the patrimony of the PIF cannot be seized nor attached (except due to negligent acts of the PIF).
  • The forceful legal provisions in relation to inheritance in force in the domicile of THE FOUNDER or beneficiaries, shall not be opposable to the Foundation, nor affect its validity, nor shall impede the performance of its objectives.

  1. It can be organized by any natural or juridical person or by proxies.
  2. It is non-profitable, but it may engage in commercial activities in a non-customary basis. For example, it can act as shareholder of holding companies.
  3. It can be organized to become effective from the time of its organization or after the death of THE FOUNDER.
  4. The Foundation Charter and its amendments may be prepared in any language using the Latin alphabet. If prepared in a language other than Spanish, the Foundation Charter or its amendments must be notarized, together with its translation into Spanish by an Authorized Public Translator of the Republic of Panama.
  5. According to the provisions of Article 5 of the Law, the Foundation Charter shall include the following:
    • The name of the foundation, which shall not be the same or similar to that of a pre-existing foundation in Panama.
    • The initial patrimony, expressed in any legal currency, which in no case shall be less than a sum equivalent to Ten Thousand Dollars of the United States of America (US$10,000.00). This requisite has no implication with the assets or patrimony that would later be transferred to the foundation.
    • The designation, including complete name and address, of the member (s) of the Foundation Council, who shall be not less than three (3).
    • The domicile of the foundation.
    • The name and domicile of the resident agent who shall be a Panamanian lawyer or Law Firm.
    • The purposes of the foundation.
    • The beneficiaries of the Foundation (if THE FOUNDER wishes to stipulate them in the Charter).
    • The mechanism to amend the Foundation Charter.
    • The duration.
    • The use and manner of liquidation of its patrimony, in case of dissolution.
  6. Every Foundation and its amendments are subject to Registration Fees and an Annual Franchise Tax, as corporations.Likewise, they are subject to limitations and restrictions to impede illicit transactions (money laundering) contained in local regulations such as Decree 468 of 1994 (“know your client”).
  7. The registration of the Foundation Charter at the Public Registry confers the PIF legal capacity. Further, it serves as a publicity mechanism before third parties. However, the PIF organized by a private document is valid, provided it is authenticated before a Public Notary and being effective after the death of THE FOUNDER, even if the PIF has not been registered at the Public Registry before the death of THE FOUNDER.
  8. For all legal purposes, the property of the PIF shall constitute a patrimony separate from that of THE FOUNDER and said property cannot be seized, attached nor be subject to any lien or action, except for liabilities incurred or for damages caused in the execution of the purposes or objectives of the PIF, or for legal rights of its beneficiaries. The PIF is not liable for personal obligations of THE FOUNDER or its beneficiaries.
  9. PIFS are irrevocable, except:
    • When the Foundation Charter has not been registered at the Public Registry.
    • When revocability has been expressly established in the Foundation Charter.
    • For any cause of revocation on donations.
    • When the PIF has been created to be effective after the death of THE FOUNDER, in an excluding and unlimited manner.
  10. Laws on Inheritance in force at the domicile of THE FOUNDER or the beneficiaries are not opposable to the PIF.
  11. Property of any nature, present or future, from any legal business, can be transferred to the PIF. Further, THE FOUNDER can assign an initial patrimony to the PIF and once the PIF is organized, he can transfer other property or assets, that way THE FOUNDER´s total capital would not be made public by appearing at the Public Registry.
  12. The Foundation Council shall be responsible for the administration as well as the fulfillment of the purposes and objectives of a PIF. Further, the members of the Foundation Council shall be subject to previous authorization of a protector, committee or any inspection body appointed by THE FOUNDER or by the majority of the founders.
  13. The Foundation Council shall report to the beneficiaries on the administration and transactions of the PIF and its assets, and if pertinent, to the inspection body as well at least annually.
  14. In the Foundation Charter, THE FOUNDER reserves the right for itself or for third parties to remove the members of the Foundation Council, as well as to appoint or add new members. If not provided in the Foundation Charter, the members of the Foundation Council shall be judicially removed, by means of a summary proceeding, in certain circumstances contained in article 22 of Law No. 25 of June 12, 1995.
  15. Foundations organized pursuant to a foreign law, could adopt the Panamanian law, issuing a Certificate of Continuation which shall include:
    • Name of the Foundation and date it was organized.
    • Registration data or registration deposit from the country of origin.
    • Express declaration of its intention to continue its legal existence as a Panamanian Foundation.
    • The requirements established in article 5 of Law No. 25 for the organization of Private Interest Foundations (duration, purposes, etc.). Further, the following documents must be attached: Copy of the Original Articles of Incorporation of the Foundation indicating its intention to continue its existence in Panama, together with any amendment and Power of Attorney granted to a Panamanian lawyer.
  16. Any controversy, not having a special proceeding indicated in the Law, shall be resolved by a summary proceeding.

    However, an arbitration clause can be agreed in the Foundation Charter or in the Regulations of the Foundation.


The flexibility of the PIF permits several usages depending on the purpose of the client. However, the must common scenarios are:

  • As a planning vehicle for the distribution of the family patrimony.
  • For the continuance and conservation of the family business.
  • To act as an administrator for plans on workmen’s distribution of profits and workmen’s pension plans.
  • As a shareholder and holder of other properties of private companies. In these cases, the PIF works as a holding.
  • As a means to collect royalties and other types of credits.
  • As a means to invest in time deposits, shares, bonds and other securities.
  • As owner of real or personal properties, such as art works.
  • For the operation of bank accounts, being a safe and discrete means for numbered accounts.
  • For the protection of assets, since Foundations of this kind cannot be seized or attached.
  • For the protection of helpless persons, such as minors and persons unqualified to manage their own property or exposed to loosing their patrimony.

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NOTE: The information herein provided could have varied due to recently approved regulations. Therefore, we suggest you contact our office for a formal legal opinion.

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