# Panama Private Foundation (Law 25): Structure, Taxes, Succession

> Panama Fundación de Interés Privado under Law 25 of 1995: founder, council, protector, beneficiaries in private regulations, $10,000 contribution, territorial tax, FATF and EU status.

Author: Maria Plotnikova — Lawyer, Family Office (https://wiki.private.law/en/authors/plotnikova)
Last modified: 2026-09-14T20:40:00.000Z
Canonical: https://wiki.private.law/en/panama-foundation
Publisher: wiki.private.law (https://wiki.private.law)
Version: 2af2457c91d9ba697288423742fe2ea77185a37571ddf06705726d7c790a665a
Cite as: Panama Private Foundation (Law 25): Structure, Taxes, Succession. wiki.private.law. https://wiki.private.law/en/panama-foundation. Version 2af2457c91d9ba697288423742fe2ea77185a37571ddf06705726d7c790a665a.
Topics: structures
Jurisdictions: panama
Product tags: trust, estate-planning, wealth-planning, tax-regime
Semantic tags: trust, estate-planning, wealth-planning, tax-regime

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## Origin: Law 25 and the Liechtenstein Model

The private foundation appeared in Panama late—Law 25 was adopted on June 12, 1995. It was modeled after the Liechtenstein Stiftung, invented back in the 1920s as a way to hold family capital separately from the owner's personal identity. Panama reproduced this structure and removed what hindered foreigners: for example, the requirement to have a resident or citizen of the country on the council. The result was a civil law instrument accessible to non-residents and equally understandable to Latin American and European lawyers.

By the mid-1990s, three generations of registration agents had already been working around the 1927 corporate law. Companies are convenient for business, but poorly suited for transferring capital by inheritance: shares have an owner, which means heirs and creditors. The foundation closed this gap—it itself becomes the owner of property that has no shareholders. Since then, hundreds of thousands of such structures have been registered in Panama.

## Concept

The Panama private foundation (Fundación de Interés Privado) is a Latin American analogue of the Liechtenstein Stiftung. It is a hybrid of a trust and a company: a legal entity without owners, created under Law No. 25 of June 12, 1995, for managing and transferring family property.

## Structure

The foundation has four roles. The founder (fundador) transfers property. The foundation council (consejo de fundación) manages assets and plays the role of a board of directors; it can be a company or three natural persons. A protector, at the founder's discretion, supervises the council and can appoint beneficiaries. Beneficiaries are listed in the regulations (reglamento)—a private document that, unlike the charter, is not filed in the public registry.

The diagram below puts the four roles together with the usual tier below the foundation: the foundation owns a company, the company owns the assets, and payouts to beneficiaries follow the regulations.

```mermaid
flowchart TD
    F["Founder (fundador)"] -->|transfers property| FD["Private foundation"]
    C["Foundation council"] -->|manages| FD
    P["Protector"] -.->|supervises| C
    FD --> S["Panamanian S.A."]
    S --> A["Assets and accounts"]
    FD -->|payouts under the regulations| B["Beneficiaries"]
```

## Property and Restrictions

The minimum contribution to the foundation is $10,000. The foundation may not systematically engage in commerce for profit, but can own any assets: shares, bank accounts, real estate, business interests. Therefore, the typical structure is as follows: the foundation owns a Panamanian corporation (S.A.), which in turn conducts operational activities.

> ⚙️ The separation of roles is convenient for succession: the founder sets the rules in the regulations, the council executes them, the protector supervises. Property remains with the foundation and is not fragmented when generations change.

## Taxes: Territoriality

Panama applies the territorial principle: income from sources outside the country is not taxed. For a foundation whose assets and income are located outside Panama, this means an effective 0% with annual payment of a fixed state fee. Income from Panamanian sources is taxed on general grounds.

## Succession and Privacy

The founder can also be a beneficiary during their lifetime. After their death, property passes to designated beneficiaries according to the rules of the regulations, bypassing the probate procedure.

Forced heirship, however, is not switched off everywhere. Article 14 of Law No. 25 of 12 June 1995 (Gaceta Oficial No. 22804 of 14 June 1995) provides that inheritance provisions of the domicile of the founder or of the beneficiaries are not enforceable against the foundation and do not affect its validity — but this is a Panamanian firewall, and it operates in a Panamanian court.

Outside Panama the reserved share is computed under the law applicable to the succession: in the EU that is Regulation (EU) No 650/2012, whose Article 23(2)(h) and (i) assign to that law both the reserved shares and the obligation to restore or account for lifetime gifts. A French or Italian court will therefore bring the contribution to the foundation back into the reserve calculation and award the heirs réduction (Articles 921 and 924 of the French Code civil — a monetary indemnity payable by the donee) or riduzione (Article 555 of the Italian Codice civile). The foundation's own regulations (reglamento) remain confidential.

## Application: Typical Scenarios

Most often, a Panama foundation is placed at the top of a family structure. It owns shares in operating and holding companies, and the foundation council manages them according to rules that the founder set in advance. This is a familiar role for succession and for consolidating assets scattered across different jurisdictions—alongside such solutions as a [family holding](https://wiki.private.law/en/family-holding-succession) or [private trust company (PTC)](https://wiki.private.law/en/ptc).

Under the foundation there is usually a company—Panamanian, [BVI](https://wiki.private.law/en/bvi-company), or another [offshore](https://wiki.private.law/en/offshore-companies)—that holds an account, real estate, or portfolio. Beneficiaries do not own assets directly: they receive benefits at the council's discretion or according to pre-established rules. This separation of control and ownership makes the foundation convenient for capital protection and peaceful transfer to the next generation.

> 💡 The foundation holds assets but is not owned by anyone. In succession, the property owner remains the same—only the beneficiaries and distribution rules change, so there is no need to re-register assets or go through probate.

## Regulation, Substance, and Transparency

The territorial principle remains: the foundation does not tax income from foreign sources in Panama. But the "paper" side has tightened noticeably in recent years. Law 52 of 2016 obliged legal entities, including foundations, to keep accounting records and store supporting documents—including those operating only outside the country. For a passive holding foundation, economic substance requirements are softer than for active operations, but the obligation to maintain a resident agent and accessible accounting data applies to all.

### Beneficiary Register and Information Exchange

In 2020, Law 129 created a unified register of beneficial owners (RUBF). The register is closed: information is submitted by resident agents, and only competent authorities have access to it for AML purposes. In parallel, Panama participates in [automatic exchange](https://www.oecd.org/tax/automatic-exchange/) of information: under the [CRS](https://wiki.private.law/en/crs-overview) standard and FATCA, data on the foundation's financial accounts are transmitted to the countries of tax residence of beneficiaries, if the structure has such accounts.

> ⚙️ Since 2016, the offshore "invisibility" of the Panama foundation has disappeared. Accounting documents, resident agent, and CRS exchange have become mandatory parts of the structure. Planning through a foundation should be done with full transparency to the tax authorities of the country of residence in mind.

### Redomiciliation

Law 25 allows the transfer of a foundation from another jurisdiction to Panama and back while preserving the legal entity. In practice, this is used when a family migrates a structure from expensive Liechtenstein or from closing Caribbean regimes: the foundation continues to exist, history and obligations are not interrupted, and contracts do not need to be renegotiated.

## Foundation, Trust, and Stiftung: What's the Difference

The main difference from an Anglo-Saxon trust is that the foundation itself acts as a legal entity and owns property directly, without the figure of a trustee and the split ownership characteristic of common law. For civil law jurisdictions, this is more convenient: where trusts are recognized reluctantly, a [foundation](https://wiki.private.law/en/private-foundations) looks like a familiar corporate form. Compared to the [Liechtenstein Stiftung](https://wiki.private.law/en/liechtenstein-foundation), the Panama version is cheaper and faster to maintain and benefits from territorial taxation; Liechtenstein in return provides access to the EEA, a stronger reputation, and a 12.5% rate. For special tasks without beneficiaries—for example, holding PTC shares—a [purpose trust](https://wiki.private.law/en/purpose-trust) is closer.

## Evolution: Foundation in the Era of Data Exchange

Over thirty years, the Panama foundation has gone from a banking secrecy instrument to a transparent succession planning structure. The pressure of automatic exchange, UBO registers, and substance requirements took away its former secrecy but left the main thing for which the foundation was created: the ability to hold capital as a single whole and transfer it without probate. The forced-heirship carve-out in Article 14 of Law 25 operates in Panama; a foreign court applying its own succession law can still pull the contribution to the foundation back into the reserved-share calculation. Today, such structures are used openly—alongside [succession planning](https://wiki.private.law/en/succession-planning) and [asset protection](https://wiki.private.law/en/asset-protection-trusts) instruments. The further sustainability of the instrument depends on how carefully the owner complies with substance, reporting, and economic presence rules.

## Reputation

For a long time, Panama carried the reputational burden of an offshore jurisdiction. The situation has changed: in October 2023, the country was removed from the FATF "grey" list, and in June 2025, the European Commission removed Panama from the list of high-risk third countries. This simplified banking services for Panamanian structures, although enhanced compliance when opening accounts remains.

> 🍓 The Panama foundation provides beneficiary privacy, territorial 0% on foreign income, and a convenient succession mechanism without probate. After removal from the FATF and EU lists, its reputation has noticeably recovered.

## Q/A

### Who owns assets transferred to a Panama private foundation?

Once the foundation is registered and the transfer is completed, the foundation is the legal person that owns the assets. It has no shareholders, and the founder or beneficiaries do not own fractional interests merely because of their role. Their powers and rights arise from Law 25, the charter, regulations and transfer documents.

### May a Panama private foundation run an operating business itself?

Not as its habitual profit-making purpose. Article 3 of Law 25 allows non-habitual commercial activities and the exercise of rights attached to shares held by the foundation, provided the economic result is devoted exclusively to its purposes. An operating company is therefore often placed below the foundation instead.

### Does Article 14 eliminate forced-heirship claims everywhere?

No. Article 14 says succession rules of the founder’s or beneficiaries’ domicile are not opposable to the foundation and do not affect its validity under the Panamanian regime. That does not bind every foreign court or control assets located abroad; the applicable succession law and enforcement forum must be analysed separately.

### Are the beneficiaries of a Panama foundation completely anonymous?

No. The charter is registered and must state how beneficiaries are designated, while detailed regulations can remain private. Confidentiality under Law 25 is expressly subject to disclosures required by authorities. Resident-agent, beneficial-owner, AML and applicable CRS or FATCA reporting duties mean privacy is not invisibility.

### Does a Panama foundation guarantee a zero tax rate on every receipt?

No. Law 25 gives Panamanian exemptions for specified foreign assets and foreign-source income, while Panamanian-source income remains within the territorial tax system. Source classification depends on the asset and activity, and the founder’s, beneficiaries’ or controlled companies’ home jurisdictions may tax income, distributions or attribution.

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## Factual claims

- The private foundation appeared in Panama late—Law 25 was adopted on June 12, 1995. It was modeled after the Liechtenstein Stiftung, invented back in the 1920s as a way to hold family capital separately from the owner's personal identity.
- By the mid-1990s, three generations of registration agents had already been working around the 1927 corporate law.
- The diagram below puts the four roles together with the usual tier below the foundation: the foundation owns a company, the company owns the assets, and payouts to beneficiaries follow the regulations.
- The minimum contribution to the foundation is $10,000. The foundation may not systematically engage in commerce for profit, but can own any assets: shares, bank accounts, real estate, business interests.
- In 2020, Law 129 created a unified register of beneficial owners (RUBF).
- Law 25 allows the transfer of a foundation from another jurisdiction to Panama and back while preserving the legal entity.
- The main difference from an Anglo-Saxon trust is that the foundation itself acts as a legal entity and owns property directly, without the figure of a trustee and the split ownership characteristic of common law.

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