P Anama Private Foundation
MMG Panazur Ltd. SA Löwenstrasse 40 8021 Zurich Switzerland Phone +41 44 225 14 14 Fax +41 44 225 14 00 info@mmg-panazur.com www.mmg-panazur.com www.panapromo.com Copyright MMG Panazur Ltd. SA Zurich, October 2011, 2 nd Edition All rights reserved Copy Editing: Bernadette Scherer Layout/Graphics: Sabine Heymach Photos: istockphoto.com Print: FO-Fotorotar, Egg Notice of MMG Panazur: Every effort was made to keep the information contained in this brochure accurate and up to date. However, MMG Panazur does not accept any liability whatsoever for the content provided. The information provided is addressed exclusively to institutional clients such as banks, lawyers, trust companies and asset managers.
Panama Office Morgan & Morgan MMG Tower, 16 th floor 53 rd E Street, Marbella P.O. Box 0832-00232 WTC PA Panama City Republic of Panama
Panama - GEneral Information Country The Republic of Panama has about 3.5 million inhabitants and covers a surface of 75,517 km 2. It is located on the isthmus of the American continent and forms the land link between North and South America. The country has coasts both on the Atlantic and the Pacific Ocean measuring totally 2,490 km. In the east, Panama borders Colombia and in the west Costa Rica; these borders measure 225 km and 330 km, respectively. Panama City is the capital of the country. The town was founded in 1519 and has approximately 900,000 inhabitants. Panama s official language is Spanish; English is spoken as second language by a large part of the population. The indigenous people have their own languages. Panama became independent as a result of the collapse of the Spanish Empire in 1821. In the same year, it voluntarily joined Colombia on a special status. After several attempts to gain back its autonomy, Panama became an independent republic in 1903. The unique geographical location made the country attractive for the construction of the Panama Canal which was carried out by the USA between 1904 and 1914. Since the end of the 20 th century, the canal is fully owned by the Republic of Panama. Government Panama s system of government is a presidential democracy with a single-chamber Parliament and an independent judiciary on the basis of a constitution. The president and the Parliament are elected for a five-year term. The Supreme Court of Justice ( Corte Suprema de Justicia ) is the court of last instance for judicial review of legislative acts. The country s constitution provides for independent executive, legislative and judicial powers and guarantees freedom of worship. The right to vote is conferred on every citizen of 18 years. Economy The currency of Panama is the Balboa. Since 1904, it has been linked at par with the US Dollar (USD) which is the legal tender in Panama. The Balboa is just issued in the form of coins. For investors, it is a great convenience that the USD is recognised as exchange unit in Panama. Panama has an important trade and service sector. In Colón on Panama s Caribbean coast, the country has a free trade zone which is the largest one of the Americas and the second largest worldwide (after Hong Kong).
The Panama Canal is another crucial part of Panama s public services; at the same time, it stands for the country s attitude for a free world economy. Together with the high-sea ports, this trade infrastructure makes Panama the main logistic hub of the region. Panama is also one of the major banking and financial centres on the American continent. The financial activity of the country is concentrated in Panama City; over 80 banks from all over the world, law offices, insurances, trust companies and auditing firms contribute to the dynamic image of the town. Within Latin America, Panama is the chief offshore financial and service centre. Infrastructure Panama features one of the most highly developed infrastructures in Central America and the Caribbean. Its transportation system consists of highways, ports, airports and the Panama Canal. Furthermore, the country has a railway between the two oceans, a transoceanic crude oil pipeline system and a modern telecommunications network. Fiber optic cables and a variety of satellite systems allow a good international connectivity. TAx Treaties In 2010, Panama began to subscribe Double Tax Treaties (DTTs) with foreign countries. Until the end of June 2011, Panama signed DTTs with Mexico, Singapore, the Netherlands, Luxembourg, Spain, Portugal, Italy, France, Barbados, Qatar and South Korea; with the USA, Panama signed a Tax Information Exchange Agreement (TIEA). As a consequence of the 12 tax treaties signed, Panama was deleted from the grey list of tax havens of the OECD in July 2011. Protection of confidentiality The laws of Panama provide for protection of confidential information in important fields such as banking, telecommunications and attorneys. Confidentiality is an important characteristic of the Panamanian financial centre. The Panamanian laws and the signed treaties with foreign countries do not allow so-called fishing expeditions on confidential information. LAW OF Inheritance There is no inheritance tax in Panama and forced heirship is unknown in the Panamanian law of inheritance. Foreign judgements rendered in connection with forced heirship rules are unenforceable in the Republic of Panama. Due Diligence & Compliance In 1986, the first anti-money laundering Article was introduced in the Penal Code. Since 1990, banks must document the identity of beneficiaries; in 1994, Panama introduced the know-your-client-rule. In 1998, Panama s banking law was fully amended to comply with the internationally changed requirements of due diligence & compliance. In 2000, the anti-money laundering became an all-crime-norm excluding tax issues explicitly. In order to fulfil Panama s obligations set forth in the DTTs, law N o 2 of 2011 included further responsibilities regarding due diligence which must be complied with by attorneys acting as resident agents.
the Panama Private Foundation Private Foundation On 12 th June 1995, Panama s Parliament passed Act N o 25 on Private Foundations ( the Act ) permitting private foundations to be formed as legal entities. This way, the fiduciary facilities were supplemented by a foundation for asset management. Definition The Law on Private Foundations does not offer a specific definition for this legal entity. Based on this same law however, it can be defined as capital endowment made for a specified purpose by one or several individuals or entities called founder on an inter vivos or mortis causa basis; thereby, the endowed capital becomes autonomous and legally distinct from the founder s other assets. According to Article 11 of the Act, the foundation s assets cannot be held liable for any personal debts of the founder or beneficiaries. The responsibility for the administration of the foundation s assets is assigned to a governing body called foundation council for the purpose of implementing the founder s intentions and for the benefit of one or several individuals or entities called beneficiaries. It acquires corporate status upon registration of its foundation charter at Panama s Public Registry. Unlike a company, a foundation has no owners but beneficiaries. Alternative to trust In the last decade of the 20 th century, the demand for succession settlements of private assets has grown rapidly worldwide; this need is also the reason for the high popularity of the common law trust even in Continental Europe. As Panama had already adopted a modern trust law in 1984, it decided to alternatively provide also a civil-law instrument for the same purpose: the Law on Private Foundations was born. LAW ON PRIVATE FOUNDATIONS When the Act on Private Foundations was drafted between 1993 and 1995, Dr. Eduardo Ferrer Morgan of the Morgan & Morgan law office took a leading part. The persons responsible were largely guided by the Liechtenstein model; the resultant statutory provisions permit foundations to adopt charters very similar to those common in Liechtenstein. Basic Documents The basic documents of a Panama Foundation are the foundation charter ( Acta fundacional ) and the by-laws ( Reglamento ). To acquire corporate status, the foundation charter must be registered. The by-laws are an entirely internal and fully confidential document which does not need to be registered. It is usually the duty of the foundation council to issue the by-laws but it may also delegate it to a third party.
Purpose The law defines the purpose of a foundation as non-commercial or nonprofit although a foundation, for instance, may own shares in commercial companies or invest its assets for profit in the finance industry. Founder The founder may be Panamanian or foreigner or a company acting either in its own name or in fiduciary capacity. This permits foundations to be formed for persons not resident in Panama. The charter may provide that the (fiduciary) founder relinquishes all rights upon registration of the foundation charter. Endowment Capital The initial endowment capital must be not less than USD 10,000. Nevertheless, the evidence of payment does not need to be submitted to the Public Registry. In principle, the founder has the obligation to pay-in the endowment capital but this obligation may also be transferred to a third party. The foundation may include any type of assets. Foundation Council The duty of the foundation council (also called board of councillors or foundation board ) is to implement the founder s intentions by administrating the foundation according to its charter and by-laws. Panamanian and/or foreign citizens or companies may be appointed councillors. If the councillors are all individuals, they must be at least three; if a company is appointed councillor, it may also be the sole councillor. A mixed number of individuals and companies is also admissible. MMG Panazur offers a fiduciary foundation council service to its institutional clients. By-Laws The by-laws, i.e. the document specifying beneficial rights and beneficiaries, may be drawn privately and remain confidential. Legalisation is not required but possible if it is necessary. Position of beneficiaries The beneficiaries are neither owners nor creditors of the foundation. Against the foundation, they can only make claims based on the rights specified in the charter, the by-laws and/or board resolutions. Protector There is the option to appoint a protector for a private foundation. The protector s powers and functions may be defined in the foundation charter or in the by-laws; this office may be vested in one or several individuals or companies.
Recorded data Article 5 of the Act specifies the minimum of information required for the foundation s charter to be recorded at the Public Registry. The following details are necessary: name of the foundation, initial capital, councillors, domicile of the foundation, local representative (resident agent), purpose, mode of appointing beneficiaries, rights reserved to the founder (if any) and duration of the foundation. Particulars on beneficiaries or beneficial rights do not have to be recorded. Amendments To Charter At any time, the foundation council or any other person designated in the charter may make amendments to the charter and register them. The deed of amendment must be filed by the local registered agent (lawyer) at the Public Registry. Amendments to By-Laws The by-laws may be amended in the same way they first were drawn or as otherwise provided for in the charter and regulations. Amendments to the by-laws are not required to be publicly recorded. Taxation The Republic of Panama applies the territorial tax principle which means that only income arising from a source within Panama is subject to taxation. Therefore, a Panama Foundation whose assets are located abroad and whose income is derived from a source outside the Republic of Panama is exempt from Panamanian taxation even if the assets are administered in Panama. A foundation is merely required to pay the annual government licence fee of USD 350. Accounting and Audit Unless otherwise provided by the charter or the by-laws, the foundation council is liable to account to the beneficiaries for the administration of the foundation. This implies the duty of bookkeeping. Auditing for foundations is not required. Confidentiality Article 35 of the Act requires all persons connected in any way with a particular foundation to observe strict confidentiality in respect of all confidential facts related to the foundation. Transfer of domicile Panama has defined the transfer of domicile and jurisdiction in respect of Panamanian or foreign foundations by following the Caribbean notion of continuation. Thus, a Panama Foundation may emigrate abroad or a foreign foundation may settle in Panama without losing its corporate status. From this date on, it is subject to the law of the host country. Extracts of the public registry Extracts issued by the Panamanian Public Registry are obtainable at any time. This is important for legal certainty when a third party wishes to know for sure whether the persons signing are legally authorised to do so.
Authentications Panama is a signatory of the Hague Convention of 5 th October 1961 on Apostille which is a system of internationally authenticated documents. The effect of having a document authenticated by Apostille is that it allows such documents to be recognised in all signatory countries of the convention. As a rule, the foundation charter of MMG Panazur is provided with Apostille. Shelf foundation MMG Panazur has a number of ready-made foundations with individuals as members of the foundation council available. Dissolution Dissolution of the foundation must comply with Article 25 of the Act and with the terms of charter and by-laws. Thus, the duration of the foundation may be fixed in the charter. The foundation may also be dissolved if its declared purpose is unattainable. It may also be formed subject to revocation. Unless otherwise provided by the charter, the decision to dissolve the foundation rests with the foundation council. A deed of dissolution must be registered at the Public Registry.
AdvAntages Panama As financial centre The jurisdiction of Panama has a few advantages, for example: y Over 80 banks have made Panama an international banking centre; furthermore, many law offices, insurances, trust companies and auditing firms have established their business. y The financial centre of Panama has the necessary regulation to guarantee a solid, efficient and stable banking sector. y Since 1990, different laws have been enacted to combat drug-related crime and money laundering to protect the financial centre. Due to this regulation, banks and financial intermediaries are obliged to know their clients. y Taxation in Panama is based on the tax territorial principle. This means that only income generated in Panama is taxable. y The largest free trade zone of the western hemisphere is in Colón at the Atlantic coast of the Panama Canal. y The Panama Company, introduced in 1927, is the world s most stable offshore company. y Panama has a modern law on foundations which was enacted in 1995. The Panama PRIVATE Foundation A Panama Foundation has the following advantages: y The formalities for establishing a Panama Foundation are very simple and speedy. y After the endowment is made by the founder, the capital is autonomous and legally separate from the founder s other assets. y The foundation councillors may be foreigners. y As private foundation the Panama Foundation is best suitable for estate and succession planning. y Panama has no inheritance tax; therefore, succession to foundations is tax exempt. y The Panamanian law of inheritance does not know forced heirship; therefore, foreign judgements about mandatory inheritance quotas are not reforceable in Panama. y If the assets of a Panama Foundation are located abroad they are exempt from Panamanian taxation.
MMG PAnazur LTD. SA SERVICES Being a subsidiary of the Morgan & Morgan Group with a worldwide network, MMG Panazur is capable of offering services and products from all over the world for the local market. The traditionally strong jurisdictions of the Morgan & Morgan Group are Panama, the British Virgin Islands, Belize and the Bahamas. Additionally, a number of other jurisdictions are offered in order to accommodate the steadily changing market. MMG Panazur follows a business policy of cost transparency. All services are offered with flat fees and advice given over the telephone or in personal consultation is free of charge. Hourly rates are only used in individual cases where extensive work of specialists is required. MMG Panazur offers its services exclusively to institutional clients such as banks, trust companies, lawyers and asset managers regulated under anti-money laundering legislation. The following services can be offered: y Consultancy in all fields of companies, foundations and trusts y Formation, administration, management and liquidation y Assistance in setting up and administrating complex structures y Assistance for holding company structures y Arranging professional legal advice in the different jurisdictions y Back office services in Zurich and in the country of origin y Support for immigration and setting up of your own enterprise in Panama ORIGINS The origin of MMG Panazur Ltd. SA dates back to 1980 when Rogelio Tribaldos Alba, today CEO of the enterprise, was appointed Consul General of Panama in Zurich and moved with his family to Switzerland. In 1981, he established Panazur Corporate & Shipping Services Inc., a Panamanian corporation with a branch office in Zurich. The word Panazur is a combination of Panama and Zurich and stands for the best of two worlds: the stability of the Panamanian jurisdiction and the quality of Swiss services. In the year 2000, the enterprise decided to voluntarily join a Swiss Self Regulatory Organisation (SRO) in order to meet the high Swiss standards. In 2001, the name of the firm was amended to MMG Panazur Ltd. SA to better express its affiliation to the Morgan & Morgan Group. MANAGEMENT Mr. Rogelio Tribaldos-Alba, Panamanian and Swiss citizen, married, four children, former Ambassador of Panama in Germany and Consul General in Zurich, founder and Vice- President of MMG Panazur, Panama, and CEO of MMG Panazur Zurich Branch, speaks four languages and lives in Switzerland since three decades. Domiciled in both countries, Mr. Tribaldos-Alba is resident partner of the Morgan & Morgan Group in Zurich and director of the PANAPROMO Panama Promotion Centre Zurich.
Head office MMG Panazur Ltd. SA MMG Tower 53 rd Street, Marbella P.O.Box 0816-01547 Panama City Republic of Panama
MMG Panazur Ltd. SA Löwenstrasse 40 8021 Zurich Switzerland Phone +41 44 225 14 14 Fax +41 44 225 14 00 info@mmg-panazur.com www.mmg-panazur.com www.panapromo.com