Contrary to most countries with legal systems of Latin and civil law origins, which adopt a more Latin oriented figure of what is known in Spanish as “Fideicomiso”, the Republic of Panama followed since 1941 the more innovative concepts of what is known in English as Trust.
The most common form of trust established in offshore jurisdictions is the Discretionary Trust. This is a flexible trust, it gives a high level of confidentiality as usually there is no requirement to file the trust instrument with any government agencies. The settlor, the trust’s activities and the identity of the beneficiaries are fully protected. Panamanian Trusts are commonly employed in our Project Finance and Securities practice as feasible guarantors of obligations and public stock offerings.
Depending upon the residence for tax purposes of the settlor and the beneficiaries, it is often possible to make distributions of capital or income from the trust completely free of tax.