With a favorable legal framework for foreigners who wish to invest in Panama, the creation of trust funds has become a benefit to those who desire to protect their assets and confidentiality without putting an end to the tax exemption or minimum tax payment.
The legal entity known as Trust is regulated by Law No. 1 established in 1984. Under this legislation, a trust is a legal act whereby a settlor transfers property to a trustee for its administration according to the received instructions. It is necessary to draft a Trust Agreement, ie, the legal document that establishes the instructions and forms of administration of the goods. These goods, while being under the name of the trustee, are not part of their personal wealth and may not be seized or garnished to meet the demands made to the beneficiary in the country of origin since, in the jurisdiction where this trust was established, the owner is the trustee.
Under this legal act assets of any kind can be transferred, being them the most common: investment instruments, property, warranties, certificates, cash, boats, cars, etc.. Moreover, these trusts offer high confidentiality as they are created in a private document without requiring registration in a Public Registry, secrecy is required in this operation. In this sense, the only requirement is the presence of a Panamanian notary to authenticate the signature of the founder and administrator, pledging to ensure the confidentiality of the transaction.
However, confidentiality and asset protection are not the only reasons why trusts are chosen by foreigners as a beneficial legal concept. Following the principle of territoriality governing Panamanian tax law, trusts also offer vast tax advantages that make them an attractive option for those who desire to relieve fiscal pressures exerted by their country of origin on their patrimony. Following, the tax exemptions trusts offer:
- There are no taxes on the transfer of those assets in the trust.
- Exempt from inheritance taxes.
- Exempt from tax on shares or securities whose income is not of Panamanian origin, even when money is deposited in this country.
- Exempt from tax on interest earned on bank deposits.
Delvalle & Delvalle offers comprehensive advice on the establishment and maintenance of an offshore trust for you to enjoy the extensive tax and privacy benefits offered by this legal entity.
To discuss your case in detail, make an appointment with our lawyers.