SIMILARITIES AND DIFFERENCES BETWEEN TRUSTS AND PRIVATE INTEREST FOUNDATIONS IN PANAMA

1. Both the trust and the private interest foundation allow one natural or juridical person for the constitution of its patrimony or assets, for the achievement of any its purposes, which can not contravene moral, the laws or public order.

2. Both the trust and the private interest foundation do not have members or shareholders. They have trust beneficiaries or beneficiaries, who are the persons that receive the benefit of the trust or the foundation.

3. The patrimony or assets over which the trust is constituted, same as the patrimony or assets of the private interest foundation, may be constituted by assets or properties given by its founders and/or by third parties. This does not necessarily mean that these persons have a right over such contributions. Nonetheless, the Trust Law and the Private Interest Foundations Law both allow for the founder of the trust or foundation to be the beneficiary of same.

4. The trust instrument only needs to be filed and registered in the Public Registry of Panama when it is constituted over real estate properties located in Panama. Nonetheless, the Foundation Charter always has to be filed and registered in the Public Registry.

5. The trust does not have its own juridical personality, nonetheless the private interest foundation does. It is obtained through the filing and registration of the Foundation Charter in the Public Registry.

6. The management of the assets or properties of the trust correspond to the trustee. The trustee is the natural or juridical person who is dedicated professionally and regularly to the trust business, and has prior authorization from the Panamanian Banks’ Superintendency.

With regards to the private interest foundation, the management of the patrimony or assets of the foundation is carried-out by the Foundation Council, which may be integrated by natural or juridical persons of any nationality or domicile.

7. In a trust the settler transfers his assets to a third party (trustee), who manages such assets in accordance with the instructions given by the settler. In a private interest foundation the assets are transferred in favor of the foundation, becoming a separate patrimony from the personal patrimony or assets of the founder. Nonetheless, the founder may participate in the management of the patrimony or assets due to the fact that he may be part of the Foundation Council.

8. The assets of the trust, same as the assets that conform the patrimony of the foundation, can not be seized or sequestrated, except for the following reasons: obligations incurred; damages caused on the occasion of the execution of the trust or the purposes or objects of the foundation; by third parties when the assets have been transferred or retained fraudulently and in prejudice of their rights, and due to the legitimate rights of the beneficiaries of the private interest foundation.

9. The laws that govern the trust and the private interest foundation in Panama establish that they will both be exempt from every tax, levy, duty or lien with regards to the acts of constitution, modification and extinction of a trust or a private interest foundation.

This is also enforced with regards to the acts of transference or transmission of the assets given in trust or that constitute the patrimony or assets of the foundation, and the revenue originating from such assets or any other act thereon, when the trust or the patrimony of the foundation is conformed by:

a. Properties or assets located abroad;

b. Money deposited by natural or juridical persons whose revenue does not originate from a Panamanian source or a source taxable in Panama; or

c. Shares or securities of any kind, issued by corporations whose revenue does not originate from a Panamanian source, or when its revenue is not a taxable source, even though when such money, shares or securities are deposited in the Republic of Panama.

10. Both the trust and the private interest foundation must have a Registered Agent in the Republic of Panama, who must be an attorney at law or law firm, in charge of countersigning the trust instrument or Foundation Charter.

 

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