Panama
Foundation Information
Private
Interest Foundations History
The creation of the concept "Foundation" began during
the Roman Empire, under the influence of Christianity. The Catholic
Church was considered a divine foundation, and the various sub-organizations
within the church had the legal control for administrating its'
patrimony. The original foundations were not created for serving
a private need for a specific individual or family, rather they
were formed for serving the needs of a community. Several centuries
later, the legal entity denominated as a "Foundation"
continues to exist and is widely used and accepted around the globe
for personal and private needs.
The concept of
a "Private Interest Foundation" began when the Principality
of Liechtenstein created the "Law of Persons & Companies",
the 20th of January, 1926 (Personen und Gesellschaft Recht - P.G.R.),
which created the "Family Foundation", (for the private
benefit of the members of one or more families) and the "Mixed
Foundation" (for the private benefit of not only families,
but also for other persons or institutions).
Historically,
wealthy families in Europe have established Family Foundations incorporated
in the Principality of Liechtenstein (a Neutral jurisdiction for
purposes of wars, etc.) for the purpose of estate-planning necessities,
to ensure the safe transition of assets to the family's beneficiaries.
Today, Liechtenstein Foundations can cost upwards of US$25,000 to
incorporate, and up to US$10,000 per year to maintain.
How
use a Foundation
The Panama Private Interest Foundation is a legal entity that was
developed based on the Private Interest Foundation models from three
different jurisdictions including the Principality of Liechtenstein,
Switzerland, and Luxembourg. The Panamanian Government carefully
designed the Panama Private Interest Foundation with the intentions
of creating a more modern, more flexible, and more affordable estate
planning vehicle for people from around the globe. The assets of
the Panama Private Interest Foundation take on a separate legal
identity from the personal assets of the Founder, Protector, Council,
or Beneficiaries.
Panama Private Interest Foundations may be established for the benefit
of a person or persons, a family, or a specific social purpose.
Panama
Private Interest Foundations are used by people who wish to control
and maintain ownership of foreign corporations, however, they do
not wish to own their corporations themselves directly, due to the
Controlled Foreign Corporation (CFC) rules in their
home countries. Several highly taxed countries such as the UK, Canada,
USA, Australia, New Zealand, France, Italy, Spain, etc. have CFC
rules which require that their citizens submit declarations (reports)
to the appropriate tax authorities, in which they declare that they
are the shareholders of such foreign corporations.
Instead of holding
the corporations' shares in their personal name or in bearer form,
they establish a Private Interest Foundation in Panama that holds
or owns the shares of their foreign corporation(s), thus avoiding
the CFC reporting rules. Hence, the advantage of using the Foundation
as a shareholder for their corporation is to remove ownership from
one's personal name (or through a Bearer Share arrangement), and
transfer ownership to the name of a foreign entity which does not
have owners, rather has privately appointed beneficiaries, which
are anonymous. In this way, there is no question as to who owns
the company, since the company's shares are issued to the Foundations'
name.
More
advantages of utilizing the Foundation
The Panama Foundation can be useful in transferring funds offshore
or receiving funds from offshore. In some cases, people use Panama
Foundations as vehicles for these purposes. Some people donate their
funds to their Panama Foundations and later use the Foundation to
give educational or special grants to their children, grandchildren,
or any one else they choose. The advantage in this case, is to avoid
fiscal regulations surrounding donations, where some governments
impose "gift taxes" and exhaustive reporting requirements.
When opening corporate bank accounts or investment accounts, the
financial institutions require that you reveal the beneficial owners
of the corporation. Through the Foundation ownership strategy, one
can state that the Foundation is the owner of the corporation. Again,
the objective is to remove ownership from their personal name, to
the name of a foreign entity whose ownership is anonymous.
In general, Private
Interest Foundations may not engage in habitual profit-making commercial
activities as a corporation can. Nevertheless, they may carry out
commercial activities from time to time, as long as the profits
of those activities are used for the objectives of the foundation.
For example, a Private Interest Foundation may engage in banking
or investment activities, such as investing in bank time deposits
(Certificates of Deposit - CD's), stocks, bonds, mutual funds, options,
money markets, etc. so long as the proceeds from these investment
activities are for the benefit of the beneficiaries of the Foundation.
Contact
us: info@panamalegalconsultants.com
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