Panama Private Foundations Tax: Annual Fees & Exemptions

Panamanian Private Interest Foundations are required to pay an “Annual Franchise Fee”. This tax must be paid for the first time at the time of the constitution of the foundation which is US$250.00.This amount is included in our incorporation fees.

On subsequent years the amount for this tax will be US$300.00.

All income generated from our Panamanian Foundations that are made outside Panama will be tax-exempt.

Panama Private Foundations offers flexible and tax-efficient asset protection and estate planning structures. One key obligation is the payment of an Annual Franchise Fee, which ensures the foundation remains in good standing. While this fee is mandatory, Panama’s tax system provides significant advantages, such as exemptions on income generated outside the country.

At Delvalle & Delvalle, we assist clients in understanding and managing their tax responsibilities for Panamanian Private Interest Foundations, ensuring compliance with local regulations.

What is the Annual Franchise Fee?

The Annual Franchise Fee is a mandatory tax that Panamanian Private Interest Foundations must pay to maintain their legal status. This fee is required by law and must be paid upon the foundation’s incorporation and annually thereafter.

The first payment of the Annual Franchise Fee is made when the foundation is created, ensuring its registration with Panamanian authorities. Failure to pay this fee on time can result in penalties or legal consequences, so foundation owners must stay current with their obligations.

How Much is the Annual Franchise Fee?

The Annual Franchise Fee for a Panamanian Private Interest Foundation is structured as follows:

• At the time of incorporation: A one-time payment of US$250.00 is required. This fee is included in the foundation’s incorporation costs.
• For subsequent years: The annual renewal fee is US$300.00, which must be paid to keep the foundation in good standing.

Timely payment of this fee is crucial to avoid penalties or legal issues. Ensuring compliance with this requirement helps maintain the foundation’s operational status and legal protections.

Tax Exemptions for Panama Private Foundations

One of the main advantages of a Panama Private Foundation is its tax-exempt status for income generated outside of Panama. This means that any revenue earned from activities conducted outside Panamanian territory is not subject to local taxation.

This exemption applies regardless of the type of income as long as it originates from foreign sources. Private foundations are attractive for individuals looking to structure their assets efficiently while gaining tax advantages.

Benefits of Tax Exemptions for Private Foundations

The tax-exempt status of Panama Private Foundations provides several key advantages, including:

• Asset Protection—The foundation’s assets are legally separate from its founder’s, protecting them from personal liabilities.
• Tax Efficiency – Since income generated outside of Panama is exempt from local taxes, foundation owners can optimize their financial planning.
• International Flexibility – The foundation can engage in global investments and financial activities without incurring Panamanian taxes.
• Long-Term Stability—The foundation remains in good legal standing without additional tax burdens as long as the annual franchise fee is paid.

These benefits make Panama Private Foundations an effective wealth management and succession planning tool.

How to Stay Compliant with Panama’s Tax Regulations

To ensure that a Panama Private Foundation remains in good standing, complying with the country’s tax regulations is critical. The key requirement is the timely payment of the Annual Franchise Fee.

Here are some essential steps to maintain compliance:

• Pay the Annual Franchise Fee on Time – The fee must be paid upon incorporation and then annually to avoid penalties.
• Monitor Payment Deadlines – Keeping track of due dates helps prevent late fees or possible legal issues.
• Seek Professional Assistance – Engaging a trusted firm like Delvalle & Delvalle ensures proper management of payments and compliance with all legal requirements.

By following these steps, foundation owners can avoid unnecessary complications and maintain the legal benefits of their Panamanian foundation.

Panama Private Foundations offers tax-efficient and legally secure asset protection and financial planning structures. While they must pay an Annual Franchise Fee, they benefit from a significant advantage: all income generated outside Panama is tax-exempt. This makes them attractive for individuals seeking international flexibility and long-term financial stability.

At Delvalle & Delvalle, we assist clients in ensuring compliance with Panama’s tax regulations, including the timely payment of the Annual Franchise Fee. Our expertise helps foundation owners maintain their legal standing while maximizing the benefits of their Panamanian Private Foundation.