Panama Private Foundation 2026: Complete Succession Guide

The Panama private foundation (private interest foundation) is a legal entity without shareholders, created by Law 25 of 1995 to manage assets according to the foundation charter. It serves succession planning because the assets become the foundation's and follow rules written by the founder. For a tax resident of Brazil, the structure must be reported and taxed.

What is a private foundation in Panama and how does it work?

It is an estate with its own legal personality, devoted to purposes defined in the foundation charter. Law 25 of June 12, 1995 (Gaceta Oficial 22,804, of June 14, 1995) allows one or more individuals or legal entities to create it (art. 1). It may not have profit purposes, but it may engage in non-habitual commercial activity, provided the result is used for the foundation's purposes (art. 3).

The structure has four parts:

• •Foundation charter (acta fundacional): the incorporation document, registered in the Public Registry. It defines the name, initial assets, council, resident agent, purposes, how beneficiaries are designated and duration (art. 5).
• •Regulations: internal rules provided for by the law (art. 2), where the founder details distributions and governance.
• •Foundation Council: the body that manages the assets and carries out the foundation's purposes (arts. 17 and 18).
• •Protector (optional): an oversight body that may authorize council acts and, if the charter so provides, appoint new members (arts. 19 and 24).

Registration in the Public Registry gives the foundation legal personality (art. 9). Its assets form an estate separate from the founder's personal assets (art. 11).

What are the legal requirements to create the foundation?

The law sets few objective requirements. The main one is initial assets of at least ten thousand balboas (B/. 10,000), plus a resident agent who is a lawyer or law firm.

The amount of the annual fee is not in Law 25. The law refers to Panama's Fiscal Code, and a note in the consolidated copy indicates that Law 52 of 2016 deals with the amount. Ask the resident agent for the current amount.

How does the founder keep control without owning the assets?

The charter may allow the founder to sit on the council (art. 5, no. 3) and be named as a beneficiary (art. 5, no. 7). It may also reserve the right to remove council members and appoint new ones (art. 21), and provide for a protector with the power to authorize acts (art. 19).

This design gives flexibility, but it has a tax effect in Brazil. Law No. 14,754/2023 (Lei 14.754/2023) considers controlled entities, including foundations, those in which the individual has the power to elect or remove the majority of the managers or more than 50% of the rights to profits or assets (art. 5, § 1º). The more power the founder reserves, the greater the chance the foundation falls under this rule.

Foundation or trust: what is the difference?

The foundation is a registered legal entity. The trust is not a legal entity: the assets stay with the trustee, according to the rules of the document that established it. For a Brazilian resident, Law 14,754/2023 treats the trust's assets as the settlor's until distribution to the beneficiary or the settlor's death, whichever occurs first (art. 10).

To compare with the option most used in asset protection, see the guide to the offshore trust for Brazilians and the page on the jurisdiction of Nevis.

Does the foundation protect assets from creditors?

Only in part. Law 25 says the foundation's assets do not answer for the personal obligations of the founder or the beneficiaries (art. 11). That article excepts the foundation's own obligations, damages caused in carrying out its purposes and the beneficiaries' legitimate rights.

Art. 15 allows the founder's creditors to challenge contributions made in fraud of creditors. Their right expires in 3 years, counted from the contribution or the transfer of the assets to the foundation. This is not a guarantee: a contribution made while a debt or lawsuit is pending is the case in which a challenge tends to appear. Structure before there is a conflict, with assets compatible with the obligations the founder already has.

Panamanian law applies in Panama. A Brazilian judge may analyze the case under Brazilian law, so get an opinion from a lawyer in Brazil before transferring assets.

Does the foundation avoid probate and set aside forced heirship?

The foundation may be created to produce effects after the founder's death, without the formalities of a will (art. 4 of Law 25). When the founder creates it to take effect during life, the assets are already in its name and follow the charter, which reduces what goes into probate.

On forced heirship, art. 14 says the inheritance laws of the founder's or the beneficiaries' domicile cannot be invoked against the foundation. That rule belongs to Panamanian law. In Brazil, the Civil Code reserves half of the estate to forced heirs (art. 1,846), limits a will to half when such heirs exist (art. 1,789) and declares void a gift to the extent it exceeds what the donor could dispose of by will (art. 549). The LINDB (art. 10) subjects succession to the law of the country of the deceased's domicile.

For that reason, do not treat the foundation as a guaranteed way to set aside forced heirship for someone who lives in Brazil. It serves to organize succession with clear rules. If the idea is to give more to one heir than to another, assess the limit in art. 549 with a Brazilian lawyer. See the page on succession planning.

How is the foundation taxed for someone who lives in Brazil?

A Brazilian resident reports on the DAA (annual income tax return) the profits of controlled entities abroad, taxed on December 31 of each year at a rate of 15% (Law 14,754/2023, arts. 2 and 5). The rule applies to controlled entities in a favorable-tax country, under a privileged tax regime, or with own active income below 60% of total income (art. 5, § 5º).

A foundation that only holds investments tends to have little own active income, but the classification depends on the facts. Take the case to an accountant before deciding.

The exemption in art. 27 of Law 25 applies to Panamanian taxes on assets abroad, deposits and securities of non-Panamanian source. It does not affect Brazilian taxation.

Also ask your lawyer how the contribution of assets to the foundation will be treated in Brazil, for purposes of gift tax and capital gains. See also the pages on tax planning and compliance.

When must the foundation be reported to the Central Bank (CBE)?

The Brazilian Capital Abroad report is mandatory for residents who have assets abroad totaling US$ 1,000,000.00 or more on December 31 (annual CBE). The deadline runs from February 15 to April 5 of the following year. Penalties range from BRL 2,500.00 to BRL 250,000.00, and may rise by 50% in some cases, according to the Central Bank.

Add up the assets you hold abroad, in your own name or through structures. Confirm in the Central Bank's manual how to report your interest in a foundation.

How much does it cost and how long does it take to open?

There is no official price table. Law 25 only sets the minimum initial assets of ten thousand balboas (B/. 10,000) and the Public Registry's annual fee (art. 8). The fees of the resident agent and council members are set by each provider, so compare proposals in writing and ask for a breakdown of what is included in the annual renewal.

The timeline depends on the resident agent's diligence, since the agent must endorse the charter before registration (art. 5, no. 5), and on the documentation you provide. Do not rely on fixed timelines promised without that analysis.

What are the steps to create the foundation?

1. •Define objectives and beneficiaries with lawyers in Brazil and in Panama.
2. •Hire the resident agent, who must be a lawyer or law firm (art. 5, no. 5).
3. •Form the council with at least 3 members, or a legal entity (art. 17), and decide whether there will be a protector.
4. •Draft the charter and the regulations, with the items in art. 5.
5. •File with a notary and register in the Public Registry (arts. 6 and 9).
6. •Transfer the assets to the foundation (arts. 10 and 16). Real estate follows the rules for transferring real estate.
7. •Comply with obligations in Brazil: DAA and, if you reach the threshold, CBE.
8. •Keep accounting records. A note in the consolidated copy of the law indicates that Law 52 of 2016 imposes this obligation on foundations; confirm the current rule with the resident agent.

If you want support structuring it, the offshore corporate structures and the jurisdiction of Panama are detailed on the site's pages.

What mistakes should you avoid when structuring the foundation?

• •Transferring assets while a debt or lawsuit is pending. Creditors can challenge the contribution for fraud (art. 15 of Law 25).
• •Not reporting in Brazil. The foundation does not exempt you from the DAA or the CBE.
• •A council only on paper. If the founder decides everything, the foundation tends to be treated as controlled (Law 14,754, art. 5, § 1º).
• •Mixing personal assets and the foundation's. The asset separation in art. 11 depends on the foundation being treated as a distinct entity.
• •Promising the heir what Brazilian law does not guarantee. See the limit in art. 549 of the Civil Code.
• •Choosing by price. Compare what is included, who the council members are and how the resident agent performs due diligence.