When it comes to asset protection, a Panama Foundation is typically used for estate planning and holding assets without commercial activity, while a Panama Company (often an International Business Company or IBC) is used for conducting business and generating income.
This guide compares Panama Foundation vs Panama Company to help expats and high-net-worth individuals choose the best structure for their offshore planning goals.
Key topics covered include:
- What are the advantages and disadvantages of having a company in Panama?
- What are the advantages and disadvantages of Panama foundation?
- Can you use a foundation and a company in tandem in Panama?
- Is Panama blacklisted?
My contact details are hello@adamfayed.com and WhatsApp +44-7393-450-837 if you have any questions.
The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.
What Is a Foundation in Panama?
A Panama Foundation, also known as a Private Interest Foundation (PIF), is a legal entity without owners or shareholders, created to hold and manage assets for the benefit of individuals or causes.
It blends features of a trust and a corporation but stands as a separate legal person.
Key characteristics:
- No shareholders or beneficiaries with ownership rights
- Asset separation from personal estate
- Can be used for estate planning, philanthropy, or asset protection
- Requires a founder, a council, and optionally, a protector
What Is a Panama Company?
A Panama Company, often structured as an International Business Company (IBC), is a traditional corporation formed to conduct business activities.
It has shareholders, directors, and officers, making it more suitable for commercial operations rather than wealth structuring.
Key characteristics:
- Requires at least three directors
- Shareholders own the company
- Profits can be distributed as dividends
- Must maintain corporate books and records
- Used commonly for trading, holding assets, or investment activities
Is a Foundation the Same as a Company in Panama?
No, a foundation is not the same as a company in Panama.
A Panama Foundation is a non-commercial entity focused on asset protection and estate planning. It cannot engage in regular business activities unless such activity is incidental to its purpose.
A Panama Company, on the other hand, is built for commercial and for-profit objectives.
It can enter contracts, hire employees, and engage in global trade; something a foundation cannot legally do as its main purpose.
Panama Foundation vs Panama Company: Pros and Cons
When deciding between a Panama foundation and a Panama company, it’s important to weigh their benefits and limitations side by side.
Pros
- Succession and Continuity: Foundations continue to exist after the founder’s death and allow flexible succession planning, bypassing forced heirship laws. Companies may require additional legal planning to ensure continuity and may not offer the same succession flexibility.
- Privacy: Foundations generally do not disclose beneficiaries publicly, enhancing confidentiality. Companies may need to disclose shareholder identities under international transparency rules, potentially reducing privacy.
- Tax Neutrality: Foundations are not taxed on foreign-source income, whereas companies are subject to bookkeeping and reporting obligations, which may increase scrutiny under global initiatives like BEPS, FATCA, and CRS.
- Legal Stability: Foundations benefit from Panamanian laws that protect them from foreign court judgments and provide a stable offshore legal framework. Companies operate under standard corporate law, which is simpler but may offer fewer protective features against external claims.
- Maintenance: Foundations typically have low maintenance relative to comparable trust structures, though higher than basic companies. Companies require ongoing filings, registered agent fees, and bookkeeping, which are standard corporate obligations.
Cons
- Limited Commercial Activity: Foundations cannot actively conduct business unless incidental to their purpose, while companies are designed for active commercial operations.
- Setup Complexity: Foundations generally require specialized legal structuring and professional advice. Companies are simpler to incorporate and manage.
- Costs: Foundations involve government fees, nominee services, and potential professional fees, making them more expensive to maintain than basic companies. Companies have ongoing maintenance costs too, but these are usually lower.
- Scrutiny and Perception: Foundations may attract regulatory attention in some jurisdictions as potential tax avoidance tools, while companies face scrutiny under international tax reporting initiatives, particularly for transparency and compliance.
Which Is Better for Asset Protection: Panama Foundation or Panama Company?
Panama Foundations are generally more effective for asset protection, especially for high-net-worth individuals, expats, and families looking to:
- Separate personal assets from their estate
- Avoid forced heirship
- Create long-term holding structures
Panama Companies are more suitable if:
- You need a legal vehicle for active business or trading
- You want to hold global investments under a corporate umbrella
Panama Foundation vs Panama Company at a Glance
| Feature | Panama Foundation | Panama Company |
| Primary Purpose | Asset protection, estate planning, holding assets | Commercial trade, for-profit business |
| Legal Personality | Separate legal entity without owners or shareholders | Separate legal entity with shareholders |
| Profit Distribution | Not allowed (non-commercial structure) | Allowed, profits go to shareholders |
| Commercial Activities | Prohibited unless incidental to its purpose | Fully allowed and expected |
| Beneficiaries | Can have beneficiaries (like a trust) | Has shareholders, not beneficiaries |
| Control Structure | Managed by a council, guided by a founder and possible protector | Managed by directors and shareholders |
| Taxation | No tax on foreign-sourced income | No tax on foreign-sourced income |
| Privacy | High – no public registry of beneficiaries | Moderate – shareholders and directors must be registered |
| Ideal For | Estate planning, holding investments, inheritance structuring | Trading companies, consulting, offshore business operations |
Can You Use a Panama Foundation and Company Together?
Yes. A hybrid setup is often used by expats and offshore planners where:
- The Panama Foundation owns 100% of the shares in the Panama Company.
- The Company conducts business or investment activities.
- The Foundation protects the ownership of the Company from disclosure, lawsuits, or succession issues.
Conclusion
Panama Foundations are ideal for long-term asset protection, succession planning, and privacy.
Panama Companies are more suitable for active business and commercial uses.
For many expats and high-net-worth individuals, the right structure or combination of both depends on their specific needs, risk profile, and home country tax laws.
Frequently Asked Questions
Can a foreigner set up a Panama Foundation or Company?
Yes. Both structures are open to non-residents and can be set up remotely through a registered agent in Panama.
Is it expensive to maintain a Panama Foundation?
Yes, maintaining a Panama Foundation can be relatively expensive.
Annual costs typically starts at 3,750 EUR, depending on services like nominee directors, registered agent, and legal updates.
Is Panama a blacklist jurisdiction?
Yes — Panama is currently on the EU’s blacklist of non-cooperative tax jurisdictions as of the most recent update in February 2025.
However, in June 2025, the European Commission formally proposed removing Panama from the list, citing the country’s progress in strengthening anti-money laundering and tax transparency measures.
While the proposal is a positive step, Panama’s removal has not yet been finalized and still requires approval from EU member states.
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Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
