In Eastern European countries, a foundation is associated only with a charity, along with its status of a charitable organization, the funds of which are raised through grants and donations from persons who will not receive any profit, as the funds will not be put toward their private goals. At the moment, in Poland it’s slowly changing and it’s possible to plan the succession in partnerships and companies without the need for inheritance proceedings. However, these regulations are still far from those applied outside of Poland.
The concept of a private foundation was born in Liechtenstein over a hundred years ago, as a tool to secure one’s estate and plan financial succession. Setting up a private foundation is an element of planning for the future of the estate as such, but also after the death of the founder.
A private foundation is a legal entity and can own assets. It works in a similar way to a company, although it should be noted, that a private foundation has neither members nor shareholders. In many European countries, the activities of foundations are regulated through legal acts. Examples of countries with complex legislation pertaining to foundations include the Netherlands, Liechtenstein, Austria, and more recently, Panama. However, despite some statutory limitations, there is a lot of freedom when it comes to the composition of the foundation, as well as appointing and removing an administrator. The founder can voluntarily decide on statutory purposes of their foundation.
The Panama Private Interest foundation especially deserves attention, as it is has liberal regulations and does not require keeping accounting records. The maintenance cost for this foundation is around 250USD a year. It also can hold shares in a Panamanian LLC, which can conduct commercial activity in Panama and outside it, and the profits coming from it are not subject to income tax. A solution to combine the two entities can in reality have a structure of a trust which would serve as a tool for a tax-optimised business.
Our company offers a wide range of solutions in setting up foundations and helping to manage them, especially in Panama, where we have one of our representatives. We advise how to utilise the foundation’s assets and how to manage foundations in combination with companies.
