The myth that opens the webinar
The session flags it early: the foundation is “a subject with many myths, mainly around confidentiality”. When the questions came, Kathia Rivera, the firm’s founder and president, was more direct: the foundation is not “a magic tax-saving tool”. It works very well, she said, for protecting assets and for making succession clear.
The distinction matters more than it looks. Paying less tax and leaving succession in order are two different problems, and the foundation is designed for the second one.
The question that changes a consultation
The moment in the webinar that best shows the difference between selling a structure and giving advice is an example Kathia Rivera told. Many clients come to her saying they are not sure which vehicle suits them and that someone mentioned a trust, because they own a few apartments bought in Panama, shared with their sisters and even their parents. Her answer is not to explain the trust. It is to ask how many apartments they are talking about. In the case she described, there were two.
With two apartments, keeping a structure running (the annual single fee and the resident agent, among other obligations) can cost more than it protects. I think that question sums up the approach: good advice starts with the size of the estate and the goal, and the structure comes after.
Foundation, corporation or trust, according to the webinar
| Private interest foundation | Corporation (sociedad anónima) | Trust (fideicomiso) | |
|---|---|---|---|
| Who owns it? | Nobody: autonomous assets | The shareholders | A trustee manages the assets |
| Who controls it? | The foundation council, under the rules | The shareholders, even if there is a board | The trustee, a regulated third party |
| Typical use | Succession and asset protection; it should not carry out ordinary commercial activity | Commercial activity | Managing assets in a larger estate |
| Particularity | The rules are private and are not registered in the Public Registry | Non-structural changes are made with simple documents | The trustee charges according to what moves through it |
Summary of the comparison Kathia Rivera presented in the Legal Solutions Panamá webinar. Each case depends on the assets, the country of tax residence and the goal.
What gets overlooked before signing
- Who sits on the council. The foundation council manages the assets and has fiduciary duties: it must act, in the lawyer’s words, “in the best interest of the foundation”. The founder can be part of it and can also be a beneficiary. The minimum is three individuals or one legal entity.
- The rules are private. They are not registered in the Public Registry. That is where first- and second-level beneficiaries are set, along with conditions for selling assets and what happens if the founder is no longer around.
- Compliance. Panama requires due diligence and the identification of beneficial owners, regulated by Law 129 of 2020. The word “compliance”, said Alina, “is key” in Panama today.
- Taxes depend on you, not on the foundation. Panama taxes territorially, but the obligations in the founder’s or beneficiaries’ country of tax residence remain. Becoming a tax resident of Panama means showing 183 days in the country, with rental contracts, utility bills or a child’s school enrolment.
My reading: three questions before setting one up
- What problem am I trying to solve? Orderly succession or protection against contingencies fit a foundation. Running a business every day does not.
- How much is at stake? If the estate is small, maintenance costs can outweigh the benefit.
- What does my country’s law say? The lawyer was clear: it is necessary to sit down with lawyers in the country of residence too, because international taxation changes the outcome.
There is a fourth reason to take the time, and it is the least glamorous: a poorly designed foundation is hard to undo. Combining structures exists and works. An operating corporation owned by a foundation that protects the assets is one example Kathia Rivera herself mentioned. But that combination is designed with lawyers, case by case.
Anyone who wants to see how a Panamanian firm approaches these cases can read the Legal Solutions Panamá article on strategies to protect international assets, or the full webinar transcript in Radar Panamá’s piece.
Frequently asked questions
Does a private interest foundation help you pay less tax?
That is not its purpose. Kathia Rivera, of Legal Solutions Panamá, put it this way in the webinar: it is not a magic tax-saving tool. It protects assets and sets up succession; the tax burden depends on where income is generated and on the tax residence of the people involved.
How much capital is needed to set up a foundation in Panama?
Minimum assets are 10,000 dollars, but it is subscribed capital, not paid in, so there is no need to prove the deposit when setting it up.
Who can sit on the foundation council?
Three individuals or one legal entity. The founder can be part of the council and can also be a beneficiary.
Can a foundation run a business?
It should not carry out ordinary commercial activity. To run a business, the firm recommends a corporation, which the foundation can own.
Related articles
- Private interest foundation, corporation or trust: Legal Solutions Panamá explains which one fits
- Corporation, LLC or private foundation in Panama: which one suits
- The best lawyers in Panama for foreign investors
Sources
- Legal Solutions Panamá, webinar “Fundaciones y estructuras internacionales” (YouTube, 1 h 2 min); quotes are verbatim translations with minimal punctuation edits.
- Law 25 of 1995, on private interest foundations (text on Justia Panamá).
- Law 129 of 2020, on beneficial owners of legal entities (Ministry of Economy and Finance).
- Legal Solutions Panamá, legal strategies to protect international assets from Panama.
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