Page 1 Langer on Practical International Tax Planning 110:4

12 of 100 DOCUMENTS LANGER ON PRACTICAL INTERNATIONAL TAX PLANNING -- FOURTH EDITION *** Current through Release No. 13 ( May 2007 ) *** Copyright 2007 by Practising Law Institute. All Rights Reserved. VOLUME 2. FOCUS ON FINANCIAL CENTERS AND TAX HAVENS PART IX: AMERICAN HAVENS CHAPTER 110. PANAMA Langer on Practical International Tax Planning 110:4 110:4 Trusts and Foundations 110:4.1 Recognition of Trusts Since Panama is a civil law jurisdiction, common law precedents concerning trusts do not apply. Someone creating a foreign trust will generally be better advised to select a common law jurisdiction, although other considerations, such as the avoidance of English injunctions, may indicate that utilizing a Panamanian trust will be more effective in achieving overall protection objectives. Panamas strict confidentiality laws apply to the establishment of a trust. The 1984 trust law permits revocable trusts and provides for trust secrecy with substantial penalties for breach thereof. A Panamanian trust may be made subject to foreign law and may be transferred to another jurisdiction if the trust deed so authorizes. A trust must have a resident agent and pays a $ 100 annual tax. A trust document may be authenticated by any notary regardless of nationality. 110:4.2 Treatment of Forced Heirship Rules Panama does not have any forced heirship laws. 110:4.3 Asset Protection Trusts Panama does not have any asset protection laws, but it does have laws that protects trust assets from attachment unless the creditor can prove that the assets were fraudulently transferred. 110:4.4 Foundations Panamanian legislation in 1995 enabled the establishment of an entity called a foundation. Similar to the Liechtenstein Stiftung, it creates a vehicle for protecting assets from creditors, avoiding foreign succession laws, and for carrying on business activities. Assets placed in a foundation are then fully owned by the foundation and are not part of the donors estate. Unless the transfers were made with an intent to defraud, the assets are not available to creditors. Transfers subject to legal attack are exposed only for three years from the date of transfer. Private foundations are subject to the anti-money laundering laws. The minimum capital

Page 2 Langer on Practical International Tax Planning 110:4 requirement is US$ 10,000. No accounts are necessary and an audit is not required. As with all Panamanian entities, tax is only levied on income generated within Panama. Foundations are subject to the same capital taxes (minimum $ 60) and annual registration fees ($ 150) as are corporations.

Page 3 Langer on Practical International Tax Planning 110:4