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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 for.

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 in Panama;

  • 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 Panama.

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 by beneficiaries.

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.

   

The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

New Zealand

New Zealand: Legal Framework and Formation Rules and Fees
New Zealand: Review of the Law of Trusts
New Zealand: Taxation of Trusts

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees

 


Panama News

European Commission Announces New Anti-Avoidance Measures Wednesday 6/7/2016 In response to the publication of the Panama Papers, the European Commission has proposed new measures to improve transparency and better facilitate the exchange of information between tax authorities.

NZ Inquiry Launched On Foreign Trust Disclosure Rules Tuesday 3/5/2016 New Zealand's Minister of Finance, Simon English, and the Minister of Revenue, Michael Woodhouse, has established a government inquiry into Foreign Trust Disclosure Rules.

European Parliament To Investigate Panama Papers Tuesday 19/4/2016 The European Parliament Conference of Presidents has unanimously backed a proposal for the creation of an inquiry committee to investigate the so-called Panama Papers.

New Zealand To Review Foreign Trusts' Transparency Tuesday 12/4/2016 The New Zealand Government has appointed tax expert John Shewan to conduct an independent review of disclosure rules covering foreign trusts registered in the country.

NZ Revenue Minister Says Tax Regime Robust Wednesday 6/4/2016 New Zealand's Revenue Minister, Michael Woodhouse, has defended the country's tax system in response to calls from opposition parties to tighten the tax rules following the so-called "Panama Papers" leak.

Panama Approves Israeli, UAE Double Tax Pacts Monday 11/2/2013 Panama's National Assembly has approved two new double tax conventions signed with Israel, and with the United Arab Emirates.

Panama Faces Up To OECD Test Wednesday 6/10/2010 The Global Forum on Transparency and Exchange of Information for Tax Purposes criticized Panama in its phase one peer review covering the legal and regulatory framework.

Global Tax Forum Issues Peer Reviews Monday 4/10/2010 The Global Forum on Transparency and Exchange of Information for Tax Purposes has issued the first phase of peer reviews covering the legal and regulatory frameworks for transparency and exchange of tax information in Bermuda, Botswana, Cayman Islands, India, Jamaica, Monaco, Panama and Qatar.

Jersey Foundations Attract Growing Interest Thursday 2/9/2010 Just over a year since they were launched, Jersey Foundation structures are continuing to receive a steady flow of interest, according to an offshore legal expert.

Mexico Signs Tax Information Exchange Accords With Bahamas, Panama Wednesday 24/2/2010 Mexico signed agreements to avoid double taxation and prevent fiscal evasion with both Panama and the Bahamas, on the occasion of the Summit of Latin American and Caribbean Unity.