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Panama
Explored and settled by the Spanish in the 16th century, Panama broke with Spain
in 1821 and joined a union of Colombia, Venezuela, and Ecuador - named the
Republic of Gran Colombia. When the latter dissolved in 1830, Panama remained
part of Colombia. With US backing, Panama seceded from Colombia in 1903 and
promptly signed a treaty with the US allowing for the construction of a canal
and US sovereignty over a strip of land on either side of the structure (the
Panama Canal Zone). The Panama Canal was built by the US Army Corps of Engineers
between 1904 and 1914. In 1977, an agreement was signed for the complete
transfer of the Canal from the US to Panama by the end of the century. Certain
portions of the Zone and increasing responsibility over the Canal were turned
over in the subsequent decades.
Panama
is home to thousands of financial institutions and international corporations
serving primarily the markets of Central and South America. Corporations are
governed by Panama's Commercial Code which is modeled on Delaware corporate law.
The legal system is a civil code system similar to many European countries such
as Switzerland and Liechtenstein. The national currency is the U.S. dollar.
Spanish is the official language and English is widely spoken, particularly
within the financial industry.
Panama is a desirable jurisdiction for operation of offshore corporations and
foundations due to its established banking infrastructure and strict banking and
financial secrecy laws. Panama is a well respected international trade and
banking center. Privacy and confidentiality are constitutionally protected.
Unlike many banking centers in the European Union, Panama does not have mutual
legal assistance treaties with other countries.
One of Panama's most popular business structures is the foundation. Panama
offers both a Private Interest Foundation and a Charitable Public Foundation
which operates for charitable purposes only. Private foundations may be
established for the benefit of individuals, a family, or a specific social
purpose. The rules governing Panamanian foundations are modeled after
Liechtenstein law.
The Private Interest Foundation is a hybrid between a trust and a corporation.
It is a legal entity without owners, has a specific purpose, and a general group
of beneficiaries. Foundations can be useful when a person wishes to control a
foreign corporation but wishes to avoid ownership in order to simplify reporting
requirements, such as those concerning controlled foreign corporations. Rather
than owning shares individually or in bearer form, ownership may be transferred
to a foundation with a predetermined purpose and anonymous beneficiaries.
Foundations are also useful for establishing bank accounts and transferring and
receiving funds. It is possible to donate funds to a foundation which later
provides educational or other benefits to family members, thereby avoiding
multiple gift taxes and onerous reporting requirements.
Panama is the second most popular jurisdiction for Class A banks (by number
of licenses), with about 80 through 2006. However, it has not issued any new
licenses in several months and many believe they will drastically rework
their offshore banking laws. The strength of
