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OFFSHORE CORPORATIONS OR COMPANIES IN PANAMA

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PRIVATE INTEREST FOUNDATIONS IN PANAMA

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PURPOSE

PROTECTION OF ASSETS

CONSTITUTION

CHARACTERISTICS AND REQUIREMENTS

PROTECTION OF ASSETS IN A FOUNDATION

NATIONALITY

FISCAL ADVANTAGES

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PRIVATE INTEREST FOUNDATIONS IN PANAMA

Private Interest Foundations are regulated in Panama by Law 25 of June 12, 1995.

The administration of wealth is an activity that does not yet have a specific regulation in our country. Nonetheless, many companies offer their services in an offshore manner to organize, from Panama, the economic operations of companies, such as Opening of Bank Accounts, Financing of Operations, Fiscal and Administrative Planning.

As it is, the majority of these activities are normally associated with the activities needed to set up Private Interest Foundations, Corporations or Companies required for the creation of Mutual Funds and Reinvoicing Operations, where the Republic of Panama offers significant operative and fiscal advantages as an Offshore Operations Center.

Panamanian Private Interest Foundations are a novel Asset Protection Instrument which complements the Offshore Services structure, the technical origins thereof are to be found in the well known Liechtenstein family Foundation, with the added difference that our foundations contemplate the inclusion of various persons or entities as beneficiaries and not only members of the family nucleus.

Foundations, as they are known in an abbreviated manner, are acts by means of which a person donates an asset to achieve the goal of the previously established objectives of the foundational certificate on the part of the Foundation Council (Board of Directors) for the benefit of individuals designated as Beneficiaries.

In contrast to a Corporation or Company, the Foundation does not have Partners or Shareholders and cannot engage, in a regular and continuous manner, in the exercise of commerce, being able to carry out commercial acts only in an accidental or isolated manner.

PURPOSE OF THE PRIVATE INTEREST FOUNDATIONS IN PANAMA

The objectives of a Foundation can be diverse, except those associated with the exercise of lucrative or commercial activities in a habitual or continuous manner, being able to be utilized in different manners, such as:

1- Foundations can be holders of securities, being able to receive dividends for their participation in

companies.

2- Foundations are not contingent on the life or death of their founder, reason why they have a

permanent character, subject to the conditions established in the Foundational Certificate, reason why a Foundation is close to the Trust (except that the Administration Council -Fiduciary- as such does not acquire in property and a Trust does not have a juridical character as does a foundation), to the Corporations, the Will (where it even fulfills, the function of an executor) in this manner avoiding the corresponding inheritance proceedings.

PROTECTION OF ASSETS

A Private Interest Foundation is designed for the protection of assets. For this reason it is contemplated in the law that the Founder can designate natural or juridical persons as professional advisors, auditors, control, or supervision entities, or any others which can exercise oversight functions related to compliance with the objectives of the foundation and the rights and interests of the beneficiaries, demand rendition of accounts to the Foundation Council, supervise the administration of the Foundation's Assets and ensure the application of the latter to the purposes and goals described in the Foundational Certificate.

CONSTITUTION OF A PRIVATE INTEREST FOUNDATION IN PANAMA

The Constitution of a Private Interest Foundation requires of the presentation of a Protocolized Foundational Certificate for its inscription in the Public Registry of Panama.

In contrast to a Public or Social Interest Foundation, which requires the approval of the Government and Justice Ministry, the Private Interest Foundation does not require any governmental approval, which makes it different from the above mentioned, only requiring the will of its founder.

CHARACTERISTICS AND REQUIREMENTS OF PRIVATE INTEREST FOUNDATIONS IN PANAMA

In general terms, a Private Interest Foundation has the following characteristics and requirements:

1- A Panamanian Private Interest Foundation requires a minimum nominal capital in the amount of

US$10,000.00, which can be paid after the constitution of the foundation

2- The Foundations Founder does not acquire any right over the assets of the Foundation

3- The Name of the Legal Representative of the Foundation

4- The Foundational Certificate constitutes the juridical instrument that governs the foundation,

which must include, among other things, sufficient information as to the name and seat of the foundation, its objectives and purposes, the address of the council's members, and the use of its net worth in the event of the dissolution of the foundation.

5- The name and domicile in the Republic of Panama of the resident agent who has to be a Lawyer

or a Law Firm confirming the Foundational Certificate

6- The founder can establish a "regulation" which will be of a private nature and in which everything

related to the benefits of the foundation is set out, in such a way that said information not be of public knowledge and only known to the interested parties. In this regulation the founder can issue, within the framework of the Foundational Certificate, the instructions related to the ways of administrating the foundational funds and in a manner compatible with its expressed purposes.

7- The Foundational Certificate as well as the Regulation can be modified, if and when it is

established in said documents. The duration of the foundation can be perpetual or not.

PROTECTION OF ASSETS IN A PRIVATE INTEREST FOUNDATION IN PANAMA

For legal effects, the Foundation's net worth constitutes a separate patrimony from the assets of its founder and that of its beneficiaries, their sequestration, embargo or any other action or cautionary measure not being possible, except for incurred obligations or for damages caused in the process of executing an end or purpose of the foundation or to protect the legitimate rights of its beneficiaries.

NATIONALITY OF PRIVATE INTEREST FOUNDATIONS

The Foundation Council or the Protector (in the event he or she exits) may consider convenient to the purposes of the foundation the change or transfer of the Foundation to another country and the Law authorizes said activity.

In the same manner, the law authorizes that Foundations constituted in accordance to foreign laws, can continue their existence as Panamanian Foundations.

FISCAL ADVANTAGES OF PRIVATE INTEREST FOUNDATIONS IN PANAMA

A Private Interest Foundation, national or offshore, is exempted from all taxes, contributions, fees or duties almost in the same manner as a Trust. This is why, constitution, modification, or extinction acts, as well as transfer, transmission, or encumbrances acts of the assets of a Foundation and the income generated by said assets or any act in respect of said assets, are exempted if and when:

1- The goods are located abroad

2- The monies deposited by natural or juridical persons or their revenues are not from a Panamanian

source nor taxable for any reason in Panama

3- Shares or securities of any type issued by corporations whose income are not from a

Panamanian source nor taxable for any reason, even when said shares or securities are deposited in Panama

4- All acts related to the transfer of real estate, titles, certificates of deposit, securities, monies,

actions carried out related to the compliance of the purposes or objectives or the extinction of the foundation, in favor of first-degree relatives or the spouse of the founder.

Only economic activities, which take place within the country, are taxed, if the taxable income is not generated from a Panamanian source.

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