Offshore Trusts Report: Panama
Legal Framework and Formation Rules and Fees
The first trust law in Panama was adopted in the 1940s,
based on the common law trust. However, in 1984 new provisions on
trusts were enacted by means of Law No. 1 of January 5th.
Panamanian trusts (Fideicomiso) must be expressed
in writing, so cannot be constructive. Trusts can be stated to be
revocable but otherwise are irrevocable. The settlor, trustees and
beneficiaries need not be Panamanian nationals or resident in Panama.
Both the settlor and the trustee and/or beneficiary may be a corporation.
A Panamanian lawyer must act as an agent for the trust.
Trusts may be settled in respect of existing or future property;
additional property may be included after the settlement either
by the settlor or a third party.
There are no registration or minimum capital requirements,
or fees, and trust documents can be in English or Spanish. Trusts
are not protected by specific provisions against foreign inheritance
laws, judgements or creditors. However, purpose trusts are allowed
Law No.1 expressly states that the acts of executing,
modifying and terminating a trust as well as the transfer, conveyance
or encumbrance of trust funds and the income or interest produced
by the assets and properties given in trust are exempt from all
taxes, contributions, assessments or encumbrances, provided the
trust involves the following assets:
Properties or assets located abroad;
Funds that are not from Panamanian source or subject to taxes
Shares of stocks or securities of any kind, issued by corporations
whose income is not produced in Panama, even though those shares
or securities may be deposited in Panama;
Time deposits or savings accounts kept in banks located in
If a trust earns a taxable income in Panama, then tax is levied
directly on the trust and not on the trustee.
Article 37 of Law No.1 expressly guaranteed confidentiality for
the execution of a trust, providing imprisonment of up to six months
and a fine of up to USD50,000 for those that break confidentiality.
The assets of a trust constitute an estate separate from the assets
of the trustee. Therefore, they can not be attached, seized or subject
to any lien as a result of obligations of the trustee. The assets
of the trust only answer for liabilities of the trust itself.
Trusts created pursuant to foreign law may be governed by Panamanian
law provided they are subject to the formalities of the law on trusts.
The National Banking Commission of Panama regulates
the transactions of entities acting as trustees. The Banking Commission
does not have the authority to investigate the terms of particular
trusts or the relevant parties, except where complaints are raised
In common with many other offshore jurisdictions,
Panama responded to pressure from the FATF by tightening up its
regulatory regime. At the end of 2000 Panama enacted two laws addressing
money laundering and issued Executive Decrees to effect accompanying
administrative changes. As a result of these new laws, all financial
institutions in Panama now come under the watchful eye of the bank
superintendency, including trusts, whereas previously only banks
were legally bound to report financial transactions over USD10,000
and other suspicious activities.
However, Panama still has some way to go to convinve
the OECD that it is serious about implementing the 'agreed international
tax standard' with regards transparency, which, in effect, means
the signing of a dozen Tax Information Exchange Agreements. While
Panama has committed to implement this standard, it has signed only
one TIEA, with the United States in late 2010, suggesting that the
country risks staying on the OECD/G20's radar. "Secrecy laws"
are also said to be holding up the ratification of a free trade
agreement between Panama and the US.