PANAMA CORPORATE LAW

Corporation & Foundation

Panama Corporation & Foundation

A Corporation is defined as a stock company with its capital divided into shares, whether in the form of par value or bearer shares, following the principle of the limited liability of the partners towards the company, which carries out a commercial activity.

This type of company is known in Spanish as “Sociedad Anónima” - “S.A.”, “Inc.” or “Corp.” Which means “joint-stock companies” “Private Limited Companies” or “corporations”. In Panama, Corporations are the most common type of companies used to carry out different types of commercial activities offshore and onshore, to keep or manage assets, and for asset purchase.

The law regulating Corporations in Panama is Law 32 of 1927, which presents unique and favorable characteristics. Panamanian law allows foreigners and investors to carry their business with stability, something that few other jurisdictions in the world can offer. Depending on the economic activity to be developed, a Corporation in Panama can be formed with persons of any nationality or place of residence.

Panamanian Corporations are subject to a fiscal territorial regime, which only requires paying taxes for the execution of operations made within the territory of the Republic of Panama. This means that regarding any another operation carried out, executed or having effects abroad, it constitutes an “Offshore” operation, being entirely tax exempt in the Republic of Panama, even if the operation is directed from an office located within the Panamanian territory.

Regarding incorporation of a Private Interest Foundation, the government of Panama was inspired by the laws of Liechtenstein and adapted the European model in order to create a modern and flexible legal model. This brought significant benefits for estate planning both in Panama and abroad.

Law No. 25 of June 12, 1995, which regulates Private Interest Foundations in Panama, despite being influenced by Latin Laws, includes diverse aspects widely used in the Anglo-Saxon Legislation, such as the implementation of a “protector” or “custodian”.

The First Book of Panama’s Civil Code recognizes the existence of “public” non-profit foundations with charitable, scientific, humanitarian or religious purposes or which develop such type of activities. Due to special regulations for corporate bodies, this type of foundations must be recognized by the Ministry of Government and Justice before its registration in the Public Registry of Panama and are subject to strict standards since they are only established to carry out operations within the Panamanian territory and not abroad.

In comparison to the “private” Foundations mentioned above, these do not need a specific proceeding or special authorization from another government entity, except the Public Registry.

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