Services · Trusts & private foundations

Panama private foundation

How a Law 25 foundation actually works, what the public registry shows and what it costs to run. Open pricing.

A Panama private foundation (Fundación de Interés Privado) is a legal entity with no members and no shareholders. It has no owner in the ordinary sense: the founder endows it with assets, those assets leave the founder's personal estate, and a foundation council administers them under rules the founder wrote in advance. Its closest civil-law relative is the Liechtenstein foundation; its closest common-law relative is a discretionary trust. The Panamanian version is cheaper than both, which is why tens of thousands of them exist after thirty years.

Below: how the foundation works under Law 25 of 12 June 1995, what is actually visible in the public registry, who files beneficial ownership data and where, how Panama's territorial tax system applies, why the foundation is usually paired with an operating company, and why banks and tax authorities look at Panamanian structures far more closely in 2026 than they did ten years ago. For a comparison across jurisdictions see offshore private foundations.

How the foundation works under Law 25 of 1995

Law 25 of 12 June 1995 is a standalone statute, not a chapter of the civil code. That matters: the foundation is governed by its own charter and its own regulations, and general succession and gift rules apply only in the gaps. This autonomy from the founder's home succession law is the main reason the Panamanian form gets chosen.

The foundation is set up without a profit motive. Article 3 bars it from habitual commercial activity but expressly allows it to carry out commercial transactions on a non-habitual basis and to hold shares and participations in companies, taking income from them. That is the legal root of the foundation-plus-company architecture described further down.

The minimum patrimony is 10,000 balboas, and the balboa is pegged one to one to the US dollar. It can be contributed in any currency, in cash, securities or property. In practice the foundation is registered with a stated capital and funded later, but the stated amount is an obligation of the founder towards the foundation, not a decorative line in the deed.

Legal personality arises on registration of the charter with the Panama Public Registry. From that moment the assets are a separate patrimony: under article 11 they do not answer for the founder's personal obligations and cannot be seized for his debts, save for the foundation's own obligations and the rights of beneficiaries.

By default the foundation is irrevocable. Article 12 allows three exceptions: the charter has not been registered; revocability is expressly stated in the charter; or one of the grounds for revoking a gift applies. Plenty of structures are drafted as revocable for flexibility, and that choice quietly destroys creditor protection and all but guarantees that a foreign tax authority will look straight through the foundation to the founder.

Two provisions make Law 25 recognisable. Article 14: forced heirship rules in force at the domicile of the founder or the beneficiaries cannot be raised against the foundation and do not affect its validity. Article 15: creditors may challenge a transfer of assets to the foundation as a fraudulent conveyance, but their claim lapses three years after the transfer. Both work in a Panamanian court. A court where the asset sits, or where the heir is domiciled, may reach a different conclusion, and that limit belongs in the plan from day one.

Charter, regulations and the foundation council

The foundation runs on two layers of documents, and the difference between them is the whole practical story.

The charter (acta fundacional) is a public document. It is filed with the Public Registry and anyone can pull it up online. Under article 5 it states the name, which must contain the word fundación, the initial patrimony, the composition of the council with names and addresses if the members are individuals, the domicile, the name and address of the resident agent together with the agent's signature, the purposes, the way beneficiaries are to be designated, the duration, and how assets are dealt with on dissolution. The foundation can be created by private document with the founder's signature notarised, or by public deed.

The regulations (reglamento) are private and filed nowhere. This is where the beneficiaries appear, along with their shares, the conditions and triggers for distributions, the mechanism for replacing beneficiaries, and the founder's letter of wishes. The regulations can be amended without touching the registry and without leaving a public trace. The public charter is the shell; the private regulations are the substance.

The foundation council must have at least three individuals of any nationality or residence, or a single legal entity. It administers the assets, carries out the purposes and accounts to the beneficiaries and the supervisory body; where the charter and regulations are silent, it accounts annually. Because the council appears in the registry, nominee councils are standard practice. The trade-off is plain: formal control sits with people you would not otherwise appoint as fiduciaries, and the bank will still want to know who actually decides.

The protector (a supervisory body in the wording of the statute) is optional but almost always necessary. Its powers are built to fit: a veto over distributions, the right to replace council members, sign-off on major investments, interpretation of the founder's wishes after death, the right to appoint a successor protector. If the protector is appointed in the regulations rather than the charter, the name never reaches the public registry.

The founder may be protector and beneficiary at the same time; Panamanian law does not object. But the more control the founder keeps, the weaker the protection against his own creditors, and the more likely the tax authority where he lives treats the foundation's assets as his.

Confidentiality and the beneficial owner registry

Panama has no public register of beneficial owners. It has had a closed one since 2020: Law 129 of 2020 created a single private system for registering ultimate beneficial owners. The resident agent must file beneficial ownership data within thirty days of the entity's registration with the Public Registry, or of the agent's appointment, and must keep it current. The system is run by the Superintendency of Non-Financial Regulated Entities, and access is limited to competent authorities acting on a justified request.

For a foundation, the beneficial owner is not only the person named as beneficiary in the regulations. The whole control perimeter falls in: the founder, the council members, the protector, anyone able to change the beneficiaries. All of them are disclosed to the resident agent.

The second channel is automatic exchange. Panama has participated in CRS since 2018 under Law 51 of 2016 as amended by Law 254 of 2021, and the list of partner jurisdictions is refreshed periodically by tax authority resolution; in the version effective from August 2026 there are more than a hundred partners. A foundation's bank account goes into that exchange, and it is classified by controlling persons - the founder, the protector and the beneficiaries - not by the abstract legal entity.

The honest conclusion follows. A Panama foundation keeps beneficiary names away from the public: from competitors, former partners, journalists, anyone searching open registers. It does not keep them away from the tax authority where the founder and the beneficiaries live, and it does not keep them away from the bank holding the account. What is on sale is non-publicity, not anonymity, and the gap between the two is worth the whole structure if nobody spells it out in advance.

Panamanian tax and the annual running costs

Panama taxes Panamanian-source income - the territorial principle, set out in more detail on our page about taxes in Panama. Article 27 of Law 25 adds a specific exemption on top: the creation, amendment and termination of the foundation, together with transfers, transmissions and encumbrances of its assets and the income derived from them, are exempt from all taxes and duties, provided the assets are located outside Panama or are otherwise not taxable in Panama.

What that means: the foundation pays no Panamanian tax on foreign income. What it does not mean: that the foundation is tax neutral everywhere. The founder and the beneficiaries are taxed where they live, and a Panamanian exemption does nothing about that.

The foundation carries mandatory annual costs even if it owns nothing. There is the tasa única flat fee, the resident agent's fee, and the council's remuneration if the council is professional. Since 2021 there is bookkeeping too: Law 254 of 2021 and Executive Decree 177 of 2024 require foundations that operate outside Panama or act as asset holders to maintain accounting records with supporting documentation, deliver them to the resident agent annually by 30 April for the year ended 31 December, and notify the physical address where they are kept. Penalties start at 5,000 dollars and come with suspension of corporate rights.

A new constraint arrived in 2026. Law 526 of 28 May 2026 introduced economic substance requirements for Panamanian entities that belong to a multinational group and earn passive foreign-source income - dividends, interest, royalties, capital gains, real estate income. Without a genuine presence in Panama, that income is taxed at 15%. The law applies from fiscal year 2027, with the first return due in 2028. Family foundations and holding structures without cross-border ownership links inside a group are generally treated by Panamanian advisers as outside its scope, but a structure combining a foundation with several operating companies across countries needs a specific review.

The foundation plus company structure

A foundation is rarely used on its own. The standard architecture looks like this: the foundation runs no operations and holds no accounts directly; it owns one hundred per cent of the shares of one or several companies, and those companies carry the business, the property, the portfolio and the banking. The companies can be Panamanian - see company registration in Panama - or from any other jurisdiction.

The reason for the split is legal. Article 3 bars the foundation from habitual commercial activity but expressly permits it to hold company shares and receive income from them. Operational risk and trading activity therefore go downstairs; the succession layer stays upstairs.

The second reason is succession without probate. Shares held personally pass through a succession procedure at the owner's domicile after death, sometimes in several countries at once. Shares already held by the foundation change nothing: the legal owner is the same entity, only the class of beneficiaries under the regulations shifts. The business does not sit idle for eighteen months.

Where it breaks. First, banks look through the entire chain to the ultimate individual, and every extra layer lengthens onboarding; documentation expectations are covered on our page about business accounts in Panama. Second, costs double: the company has its own tasa única, its own bookkeeping and its own resident agent. Third, from 2027 an empty Panamanian company inside an international group risks 15% on passive income under Law 526. Fourth, a foundation does not replace a will where you hold real estate, pension accounts or brokerage assets in your own name - a local instrument is still required.

Panama on the EU and FATF lists in 2026

The reputational picture has shifted noticeably over three years, and the lists need to be taken one at a time because they get conflated.

FATF. Panama was removed from the grey list in October 2023. It is no longer identified as having strategic anti-money-laundering deficiencies by FATF.

EU high-risk AML list. Panama was removed by EU Delegated Regulation 2025/1184; the revised list entered into force on 5 August 2025. In practice this was the important development: European banks stopped applying mandatory enhanced due diligence to Panamanian structures on formal grounds, and servicing became measurably easier.

EU tax list. Here Panama stays. It remains in Annex I, the list of non-cooperative jurisdictions for tax purposes, and the February 2026 revision did not remove it. The Panamanian government has publicly stated the goal of exiting by late 2026 or early 2027, but as of September 2026 that is a roadmap, not a fact, and structures should be planned against the current status.

The practical consequences of the tax listing land on your counterparties and on you rather than on Panama. Several EU member states apply defensive measures: non-deductibility of payments to Panamanian entities, higher withholding tax, automatic application of controlled foreign company rules, mandatory disclosure of the cross-border arrangement under DAC6. Banks and payment providers rate Panamanian structures as higher risk and ask for more documentation.

Reputation deserves a separate line. The Panama name has remained heavy for compliance teams since the 2016 leaks, even though Law 25 predates them by twenty years and has nothing to do with them. That is an operational problem rather than a legal one: accounts take longer to open, review requests come more often, and counterparties are more likely to decline without explanation. If the same goal can be met with a foundation in a jurisdiction carrying a calmer reputation, that option is at least worth pricing.

Who a Panama foundation does not suit and what can go wrong

US citizens and US tax residents. The IRS generally treats a Panama foundation as a foreign trust. A founder who keeps control or is a beneficiary is treated as the owner of a foreign grantor trust: income is taxed to him in the year earned, and Forms 3520 and 3520-A are due, alongside the FBAR and Form 8938. The penalty for failing to file Form 3520 is the greater of 10,000 dollars or 35% of the reportable amount. There is no tax saving here, only reporting and exposure.

Russian tax residents. Russian tax law has a separate category for foreign structures without legal personality and names foundations among them, treating the founder as the controlling person. A Panama foundation is formally a legal entity but has no members, so its exact classification calls for advice from a Russian adviser. Either way, notification duties and controlled foreign company rules arise; exemption does not.

Anyone with a creditor already at the door. Article 15 gives creditors three years to challenge a transfer to the foundation. Moving assets once a claim has been filed, a debt is overdue or a dispute is obviously brewing will be characterised as a fraudulent conveyance both in Panama and in the forum hearing the case. Asset protection is built early and in calm weather; otherwise it is not protection, just another exhibit in the file.

Anyone looking for anonymity. The council appears in the public registry. Beneficiaries are disclosed to the resident agent and filed in the closed registry. Accounts flow into CRS. The foundation delivers non-publicity; it does not deliver anonymity, and anyone promising otherwise is selling the wrong product.

Anyone planning to trade through the foundation itself. Article 3 does not allow habitual commercial activity. Operating business needs a company, with the foundation holding its shares.

Anyone not ready for annual discipline. A missed tasa única, undelivered accounting records, a lost line to the resident agent - and three years later you have a foundation with suspended rights and assets in limbo. Reinstatement costs considerably more than careful maintenance.

Anyone who was promised a tax saving. The article 27 exemption is Panamanian and only Panamanian. Tax is paid where you live, not where the foundation is registered. If the conversation opens with a promise to cut your tax bill, that is a reason to stop rather than to sign. The general logic of tax residence is set out on our page about taxes and tax residence.

Anyone with modest capital. With government fees, bookkeeping, agent fees and a sensible council, a foundation starts to make sense from the point where annual running costs are a fraction of a per cent of the assets. Below that threshold a well-drafted will, an insurance wrapper or straightforward joint ownership is cheaper and more reliable.

Fees

Prices are indicative and cover our work on a typical case. We confirm the exact quote in writing after a short call - you know the final number before we start. Government fees and bank tariffs are billed separately unless explicitly included.

What the work covers: reviewing the goal and testing whether a foundation is the right instrument at all; designing the structure - charter, regulations, council, protector, distribution mechanics; drafting and registering through Panamanian agents; filing beneficial ownership data; ongoing maintenance including government fees, resident agent, accounting records and amendments. We also work through the tax consequences in your country of residence as a separate step, before registration rather than after.

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