A trust is a specific contract on the basis of which the trust settlors transfer a part of their private or company assets (possibly all their assets) to a third person referred to as trustee. The trustee may be a person appointed by the settlor or a professional licensed trustee holding a license for the carrying on of these activities (usually a bank or a special company holding a license for trust administration).

The assets transferred to a trust are handled on the basis of the Last Will or Letter of Wishes in such a manner which corresponds to the wished of the settlor. The settlor can also appoint a Protector, who can supervise over the activities of the trustee, whether the trustee acts in the best will and according to instructions or wishes of the settlor and persons who should have benefits from the trust (beneficiaries). A protector can be any person, such as a family friend, lawyer or any person who has the confidence of the trustee.

According to article 694 of the Fiscal Code, the income earned by any person, either an individual or corporation, from sources outside Panama, is exempt from taxes. Legislation expressly provides that the following transactions are not subject to income tax in Panama:

The advantages of trusts result especially from the fact that settlors transfer a part of their personal or company assets (or all these assets) to a third person (trustee) and thus they avoid any execution, forfeiture, confiscation or nationalisation of the assets of the settlor by heirs at law (spouse, children, relatives) or creditors (banks, financial institutions, state, creditors, etc.), because the ownership of the assets owned in this manner will be separated from the original owner by way of transfer to a third person, in this case to a trust. Features of the Panamanian trust are:

These benefits have made of Panama the tax haven that it is today and the reason why others from the region have tried to imitate us

Trust Companies

As it has already been stated, Licensed Trust Companies are entities which hold a license in the jurisdiction in question, that enables them to administer and establish trusts for their international clients, possibly for fiduciary services as well.

A number of leading bank companies establish trust companies in classical offshore centres as well as out of those centres, in order to be able to provide their clients with complete services from a number of classical bank services to trust and often fully specific and individual services connected with a confidential administration of onshore and offshore assets (such as share subscribers, nominee directors and shareholders, fiduciaries, etc.