Private Client in Panama: Using Corporations and Private Interest Foundations (PPIF) For Wealth, Privacy, and Succession

What is "private client" work in Panama and who is it for?

Private client work in Panama focuses on structuring, protecting, and transferring personal and family wealth, mainly through corporations and private interest foundations. It is aimed at high-net-worth individuals, family offices, and entrepreneurs who want tax-efficient structures, asset protection, and smooth succession planning with a high level of confidentiality.

In practice, Panama private client services typically include:

• Incorporation and maintenance of Panama corporations (Sociedades Anónimas) under Law 32 of 1927
• Creation and administration of Panama Private Interest Foundations under Law 25 of 1995
• Bank account opening support (locally and abroad, using Panamanian entities)
• Succession and inheritance planning, including probate-avoidance strategies
• Asset protection from business and personal creditors, divorces, and political risk
• Compliance with international standards (KYC, AML, CRS, FATCA) while preserving lawful privacy

The key attraction of Panama is its legal infrastructure: a mature civil law system, a long-standing corporate and foundation regime, no inheritance tax, and a practical, business-friendly Public Registry. At the same time, international compliance rules are strict, so serious documentation and a clear wealth story are always required.

How do Panama private interest foundations work for wealth and estate planning?

A Panama Private Interest Foundation (PPIF) is a legal entity without owners, created to hold and manage assets for one or more beneficiaries according to a charter and private regulations. It is used to separate personal ownership from legal ownership, enabling privacy, controlled succession, and asset protection.

Core legal features under Law 25 of 1995

• Separate legal personality: The foundation is its own legal person, capable of owning assets and entering into contracts.
• No shareholders: There is no share capital; no one "owns" the foundation in the corporate sense.
• Foundation charter (public): Filed at the Public Registry of Panama. It contains basic information like the name, purpose, initial capital, and council members.
• Foundation regulations (private): Not registered, usually confidential. They set out beneficiaries, distribution rules, and the role and powers of the Protector.
• Minimum initial capital: Commonly stated as at least USD 10,000 (PAB 10,000) in the charter, though it does not need to be fully paid-in at formation.
• Purpose: Can be private benefit (family, succession) and/or charitable, but cannot regularly carry on commercial business as its main activity.

Why foundations are popular for private clients

• Succession planning: Assets owned by the foundation do not form part of the founder's estate, which allows them to be distributed under foundation regulations without probate.
• Control with flexibility: The Protector can be given wide powers to amend beneficiaries, veto council decisions, or replace council members.
• Multi-jurisdictional planning: Foundations can hold real estate, portfolios, company shares, yachts, or bank accounts in different countries under one umbrella structure.
• Privacy: Beneficiaries and the Protector do not appear in the Public Registry; only the charter is public.
• Continuity: The foundation is not affected by the death or incapacity of the founder, council members, or beneficiaries.

How is a Panama private interest foundation different from a corporation (Sociedad Anónima)?

A Panama corporation is a commercial entity with shareholders and share capital, designed for trading and business, while a foundation is a patrimonial entity without owners, designed to hold and manage assets for beneficiaries. Private clients often use corporations for business or holding operating assets, and foundations as the "family umbrella" that owns those corporations.

Key legal and practical differences

Feature	Panama Corporation (Sociedad Anónima)	Panama Private Interest Foundation
Governing law	Law 32 of 1927 on Corporations	Law 25 of 1995 on Private Interest Foundations
Purpose	Commercial and business activities; holding investments	Holding and managing assets for beneficiaries; succession and asset protection
Ownership	Shareholders own shares	No shareholders; no "owners" in corporate sense
Capital	Share capital (e.g. USD 10,000 issued)	Initial foundation capital stated (e.g. USD 10,000), no shares
Governing body	Board of Directors (minimum 3 individuals or 1 legal entity)	Foundation Council (minimum 3 individuals or 1 legal entity)
Beneficiaries	Not applicable; only shareholders and creditors	One or more beneficiaries designated in private regulations
Primary use in private client context	Operating businesses, holding companies, portfolio companies	Wealth holding, estate planning, family governance
Dividends / distributions	Declared by directors to shareholders	Made by council according to foundation regulations
Public information	Directors and registered agent visible in Public Registry	Council, founder, and basic charter visible; beneficiaries and Protector remain private
Probate impact	Shares of a deceased shareholder usually enter probate	Foundation owns assets; founder's death does not cause probate on foundation assets
Main regulatory risk	Seen as business structure; substance and tax residence issues abroad	Seen as wealth-holding structure; may be treated like a trust in many countries

Typical combined use

• The foundation becomes the shareholder of one or several Panama or foreign corporations.
• The corporations hold operating assets (businesses, real estate, investments).
• Upon the founder's death, the foundation continues unchanged, and the council/Protector follows the distribution plan in the regulations.

This layered structure can minimize probate exposure and centralize control over a global portfolio.

How does a Panama foundation avoid probate on the founder's death?

A Panama foundation avoids probate because the assets are legally owned by the foundation, not by the individual founder, at the time of death. On the founder's death, the foundation continues to exist and the council distributes assets according to the foundation regulations, without needing a court-administered succession.

How Panama probate normally works

• Probate (sucesión) is handled by the Civil Circuit Courts (Juzgados de Circuito de lo Civil) of Panama.
• Assets held in the personal name of the deceased (real estate, bank accounts, shares) generally cannot be transferred until the court completes the succession process.
• Even though Panama has no inheritance tax, probate is slow, public, and can take 1 to 2 years or more, especially if there are disputes.

What changes when a foundation holds the assets

• The foundation is listed as owner of assets in the Public Registry, land registers, and bank records.
• The founder's personal estate is smaller, since valuable assets were transferred into the foundation during life.
• On death, only any assets still in the founder's personal name go through probate, while foundation assets are unaffected.
• The council and Protector follow the private regulations to distribute income or capital to the beneficiaries on defined events (e.g. founder's death, beneficiary reaching a certain age).

Interaction with foreign estates and forced heirship

• For Panama-situs assets: if the foundation is registered owner, Panama courts usually treat the foundation as a separate legal person; the assets are not part of the deceased's estate.
• For foreign-situs assets: local law of the asset's location may impose forced heirship or probate rules, so local legal advice is needed.
• Many clients use a Panama foundation to hold shares of foreign holding companies, so the immediate asset in the foreign jurisdiction is a company share, not the underlying properties. The foundation then directs what happens to those shares.

Careful structuring and early transfers are essential. Last-minute transfers close to death can trigger disputes by forced heirs, which is where the 3-year limitation period on creditor actions becomes relevant.

Who are the Founder, Council, Protector, and Beneficiaries in a Panama foundation?

The founder formally creates the foundation, the council manages it, the Protector exercises control and oversight, and the beneficiaries ultimately receive the economic benefit. In serious private client planning, the public roles are often nominee, while real control is anchored in the Protector and confidential regulations.

The Founder

• Executes the foundation charter and files it with the Public Registry through a Panamanian lawyer or registered agent.
• Can be an individual or a legal entity; often a Panamanian law firm or corporate services provider acts as initial founder for confidentiality.
• After formation, the founder usually has no ongoing control unless expressly granted powers in the regulations.
• Role can be purely technical: many clients do not want to appear as founder in public records.

The Foundation Council

• Equivalent to a board of directors.
• Minimum composition: 3 individuals (of any nationality) or 1 legal entity, as required by Law 25 of 1995.
• Names and addresses appear in the Public Registry via the foundation charter.
• Manages the assets, executes documents, and represents the foundation before banks, registries, and third parties.
• Often composed of professional council members (e.g. staff of the registered agent) to preserve privacy.

The Protector

• Not legally mandatory, but almost always appointed in serious planning structures.
• Usually appointed in the private foundation regulations, so the Protector's name is not public.
• Can be an individual, a trusted advisor, or a professional corporate Protector.
• Typical powers: approve or veto distributions, appoint or remove council members, amend regulations, add or remove beneficiaries.
• In many structures, the Protector is the real "controller" from a practical and compliance standpoint.

The Beneficiaries

• Individuals or entities designated to receive income and/or capital from the foundation.
• Named in the foundation regulations or via separate confidential letters of wishes.
• Can include the founder, family members, charities, or future generations.
• Rights can be discretionary (council decides who receives what) or fixed (clearly defined shares or conditions).

Careful drafting of regulations and Protector powers is critical. Poorly drafted documents can create tax or reporting issues in the beneficiaries' residence countries, or trigger disputes between family members later.

How does a Panama foundation provide asset protection from foreign creditors?

A Panama foundation provides asset protection by separating legal ownership from the individual and by limiting the ability of foreign creditors to attack transfers into the foundation. Law 25 of 1995 includes strong provisions that restrict actions by creditors and impose a 3-year statute of limitations to challenge transfers as fraudulent.

Key asset protection mechanisms in Law 25 of 1995

• Autonomous patrimony: Once assets are validly transferred, they belong to the foundation, not to the founder or beneficiaries.
• Restrictions on foreign judgments: Panamanian courts are generally reluctant to enforce foreign judgments that conflict with Panama's public policy or the foundation law, especially in purely private patrimonial matters.
• 3-year limitation period: Actions to challenge the transfer of assets to a foundation as fraudulent conveyances must be brought within a limited period (commonly 3 years) from the date of transfer.
• Burden of proof: Creditors usually must prove intent to defraud and that the transfer rendered the debtor insolvent.

How the 3-year statute of limitations works in practice

• If a person transfers assets into a Panama foundation, creditors generally have up to 3 years to file an action in Panama to attempt to unwind that transfer.
• After this period, it becomes very hard for creditors to successfully attack the transfer, especially if the creditor's claim arose after the transfer.
• The shorter limitation period, compared with many other jurisdictions, makes Panama attractive for pre-emptive asset protection planning.
• Last-minute transfers when a claim is already pending or clearly foreseeable carry higher risk and are more vulnerable to challenge.

Practical asset protection strategies

• Transfer assets into the foundation well before any dispute or liability arises.
• Use the foundation to hold passive assets (bank portfolios, real estate, shares) rather than operating risk-heavy businesses directly.
• Consider segregating assets into multiple foundations or sub-structures to ring-fence different risk categories.
• Avoid personal guarantees where possible; if unavoidable, align them with foundation structures and time transfers accordingly.

Asset protection must be combined with tax and reporting compliance in the client's residence country. Properly structured, a Panama foundation can be a robust tool to resist aggressive foreign creditor action while staying within the law.

What is the process and cost to set up a Panama private interest foundation?

Setting up a Panama foundation normally takes 3 to 10 business days and is done through a local law firm or licensed corporate services provider. All-in first-year costs typically range from USD 1,500 to USD 3,500 (PAB 1,500 to PAB 3,500), depending on the complexity and level of customization.

Step-by-step process to create a foundation

1. Planning and design
   • Clarify the goals: privacy, succession, asset protection, tax efficiency, family governance.
   • Identify founder, proposed council members, Protector, and general categories of beneficiaries.
   • Coordinate with tax advisors in the client's residence country before final decisions.
2. Due diligence and KYC
   • Panama applies strict AML and KYC rules under Law 2 of 2011 and related regulations.
   • Clients must provide certified ID, proof of address, source of funds/wealth information, and background documents.
   • The law firm evaluates risk and may ask for bank or professional references.
3. Drafting the foundation charter
   • Choose name, domicile (Panama), initial capital, purpose, and council composition.
   • Appoint the registered agent (Panamanian lawyer or law firm).
   • Founder signs the charter before a Panamanian notary.
4. Registration at the Public Registry
   • The charter is protocolized before a Panamanian notary and filed at the Public Registry (Registro Público).
   • Once recorded, the foundation acquires legal personality.
   • This stage usually takes 2 to 5 working days after filing, depending on workload.
5. Drafting the foundation regulations
   • Regulations define beneficiaries, distribution rules, Protector appointment, and powers.
   • They are signed by the council and/or Protector but are not filed at the Public Registry.
   • Often, a separate letter of wishes from the founder guides discretionary decisions.
6. Transferring assets to the foundation
   • Update bank accounts, share registers, and property titles to show the foundation as owner.
   • In Panama, real estate transfers to a foundation are recorded at the Public Registry and may trigger transfer taxes if there is consideration.
   • For foreign assets, follow the law and registration requirements of each country.

Typical cost ranges in Panama (approximate)

Item	Typical Range (PAB/USD)	Notes
Foundation formation (standard, first year)	1,500 - 3,000	Includes drafting charter and regulations, Public Registry fees, registered agent, council nominees
Annual maintenance (from year 2)	1,000 - 2,000	Registered agent, resident council, compliance monitoring, government annual fee
Complex planning / tax coordination	200 - 500 per hour	Senior lawyer time for multi-jurisdictional design
Bank account opening assistance	500 - 1,500	Varies by bank, complexity, and required documentation
Real estate transfer to foundation	Variable	Transfer taxes, notary fees, and registry costs depend on property value

Fees depend on reputation of the law firm, risk profile of the client, and the level of substance or administration required.

How are Panamanian foundations and corporations taxed?

Panama applies a territorial tax system: income sourced outside Panama is generally not taxable in Panama for both corporations and foundations. However, clients must always consider tax and reporting obligations in their country of residence, where Panama entities may be treated as controlled foreign corporations, transparent entities, or trusts.

Tax rules in Panama

• Territoriality principle: Only Panama-source income is taxable under the Panamanian Tax Code.
• Foundations: Typically treated as non-commercial entities; if they only hold foreign-sourced investments, they often pay no Panamanian income tax.
• Corporations: If conducting business or generating Panama-source income, they pay corporate income tax at standard rates (around 25 percent), plus other local taxes depending on activity.
• No inheritance or estate tax: Transfers at death are not subject to inheritance tax in Panama, though registration and transfer fees may apply for assets like real estate.
• Annual government fees: Both corporations and foundations pay fixed annual franchise tax to the Panamanian government.

Foreign tax considerations

• Many countries "look through" Panama structures and tax residents on worldwide income, whether received personally or retained in the foundation.
• Some jurisdictions treat Panama foundations as trusts, with specific rules for settlor-interested or discretionary trusts.
• Controlled foreign corporation (CFC) rules may apply to Panama corporations owned by residents of high-tax countries.
• Common Reporting Standard (CRS) and FATCA: Panama financial institutions must report accounts where controlling persons are tax residents abroad.

Effective private client planning always requires coordination between Panamanian counsel and tax advisors in the client's home jurisdiction.

How do banking, reporting, and confidentiality work for private clients in Panama?

Private clients use Panama entities to open bank and investment accounts either in Panama or abroad, but banks now apply strict KYC and transparency rules. Panama still offers a high level of lawful confidentiality, but it is no longer a secrecy jurisdiction in the traditional sense.

Banking with Panama structures

• Panamanian banks can open accounts for corporations and foundations, but require full disclosure of ultimate beneficial owners and controlling persons.
• International private banks often accept Panama foundations as account holders, treating them as trust-like structures.
• Expect detailed documentation: source of wealth, business background, corporate charts, copies of foundation regulations or at least a summary of beneficiaries and control.

Confidentiality and transparency

• Public Registry shows limited information: charter, council, founder, registered agent.
• Beneficiaries and Protectors are not in public records, but must be disclosed to the registered agent and often to banks.
• Bearer shares for corporations are now immobilized under Law 47 of 2013, held by authorized custodians, with identified owners.
• Panama has implemented CRS and exchanges financial account information with many countries.

Compliance obligations

• Clients must file tax returns and asset reports in their residence countries if required by local law.
• Foundations may need to register as reporting financial institutions or passive entities under CRS, depending on their activity.
• Registered agents in Panama must perform ongoing AML monitoring and may request updated information periodically.

Well-structured Panama entities can still provide robust privacy against public curiosity and many private counterparties, but they are not a tool to hide assets from tax or regulatory authorities.

When should you hire a Panamanian lawyer or expert?

You should hire a Panamanian lawyer or expert whenever you want to use a Panama foundation or corporation as part of your wealth, succession, or asset protection planning. Local expertise is crucial to comply with Panamanian law, interact with the Public Registry and banks, and coordinate with advisors in other jurisdictions.

Situations where local advice is critical

• You plan to set up a Panama Private Interest Foundation with complex beneficiary and Protector provisions.
• You want to transfer Panama real estate, ships, or other registry assets into a foundation or corporation.
• You face potential or existing creditor claims and want to design lawful pre-emptive asset protection.
• You intend to run a business in or from Panama using a local corporation.
• You need to regularize or unwind old Panama structures that are no longer compliant with current transparency rules.

What a good Panamanian private client advisor provides

• Technical mastery of Law 25 of 1995, Law 32 of 1927, tax rules, and registry practice.
• Ability to structure foundation regulations that are both enforceable under Panamanian law and compatible with foreign tax requirements.
• Reliable nominee services for council members and, if needed, founder roles while preserving control through Protector mechanisms.
• Strong relationships with local and international banks for smoother account opening.

Choose firms that focus on private client and wealth structuring, not only mass incorporation services. The added sophistication pays off in reduced risk and smoother implementation.

What are the next steps if you want to use Panama for private wealth planning?

The next steps are to clarify your objectives, consult cross-border tax and legal advisors, and then design and implement a tailored Panama structure, usually based on one or more private interest foundations combined with corporations. Proper documentation, early planning, and reputable advisors make the difference between a robust long-term structure and a fragile one.

Actionable next steps

1. Define your goals in writing
   • List your assets by country, type, and approximate value.
   • Identify your intended heirs and any sensitive family dynamics.
   • Clarify your top priorities: privacy, control, tax efficiency, asset protection, or philanthropy.
2. Speak with your home-country tax advisor
   • Discuss how your country treats Panama foundations and corporations for tax and reporting.
   • Identify any CFC, trust, or deemed disposal rules that may apply.
3. Engage a Panamanian private client lawyer
   • Request a written proposal describing the recommended structure, roles, costs, and timelines.
   • Ask specifically about: probate avoidance, 3-year creditor limitation, and the balance of powers between council and Protector.
4. Design and sign the documents
   • Approve the foundation charter and regulations, and any corporate documents for holding companies.
   • Agree on who will act as Founder, council, Protector, and how replacements will be handled.
5. Transfer and align assets
   • Update bank accounts, portfolios, and property titles so the foundation (or companies it owns) becomes the legal owner.
   • Ensure all transfers comply with tax, FX, and reporting rules in each relevant jurisdiction.
6. Review periodically
   • Revisit the structure every 2 to 3 years or after major life events (marriage, divorce, birth of children, sale of business).
   • Update beneficiaries, distribution rules, and letters of wishes to reflect your current intentions.

With a well-implemented Panama foundation-centered structure, you can centralize global assets, protect them against many risks, and ensure they pass to the next generation according to your plan, with minimal friction and maximum continuity.