Foundation talk

[John89]

I am surprised there is not more talk about foundations on this website. After some research, it seems to me that foundations are the simplest way to hide money from the taxman, and the only way to do so legally (apart from trust, but trust is more complicated and has some disadvantages). The advantage of the foundation is that you give your money to the foundation, and now it is an independent unit, and the money no longer belongs to you. You can then either 1) open the foundation in a low-tax country and pay little tax, or (what I plan to do) 2) use the foundation to buy stuff (which reduces its profits of the foundation) and use that staff, and pay yoursel some money as a beneficiary. So of course you still pay taxes, but less than previously.

So I am surprised there isn't more talk about foundations here. Which would be the best countries to set up a foundation? The European countries with foundations seem to be

1) Liechtenstein: anonymity but costs at least Euro 6,000 to set up, and run yearly
2) Switzerland: the beneficiary of family foundations must be incapacitated (so I guess paralysed, or a drug addict, or something like this).
3) Luxembourg: potentially great, but the set up has not yet been confirmed by the government
4) Jersey
5) Ireland

I wonder if anybody has insights to share into foundations, specially in Europe?

 

[Sols]

There are many reasons why foundations aren't more popular.

All in all, foundations end up costing way more than the sticker price. The bare costs for forming the foundation may be manageable but then you need to consider the costs for someone to sit on the council to provide management. Banking also tends to be challenging and costly, as you will not have direct access to the bank account yourself.

Because they are legal entities, foundations can be subject to the same tax residence rules as companies so you're not automatically solving anything by just forming one. It needs to be set up correctly, in line with applicable laws and your future plans (e.g., how do you plan to receive funds from the foundation). There is more customisation, which drives up costs and complexity.

Not all jurisdictions understand/recognize foundations and entities like them, and view them as companies.

Another issue that foundations vary more greatly between jurisdictions than companies do. For a company, the main differences between jurisdictions tend to be min/max number of directors, shareholders, and share capital requirements. Otherwise, companies follow a pretty well-establish global standard. For foundations, there are greater differences, which make choice of jurisdiction complicated.

 

[bizniz]

Foundations are a great alternative to a trust. In some countries trusts are not recognized, and opening bank accounts for trusts can be complicated. This is where Foundations become really useful.

IMO the best Foundation legislation is Panama. It is just the same as Liechtenstein but cheaper, so why pay extra for Liechtenstein?

Serbia has something similar, an Endowment. This is very interesting too. It works much like a Foundation and can be set up by non-residents, but on the beneficial ownership register the legal guidance says that the person who controls the Endowment (the trustee equivalent) should be listed as the beneficial owner. This allows a lot of room to keep ownership of assets quiet and you can get access to major global banks in Serbia relatively easily. We also recently opened a Private Banking account in USA for a Serbian endowment - that is a good structure but not cheap of course.

 

[andres33]

what about open account on a street bank in correct jurisdiccion (Switzerland, UK, Liechtenstein, Luxembourg, etc) for a family foundation?.
Somebody has some experience about it?

 

[bizniz]

what about open account on a street bank in correct jurisdiccion (Switzerland, UK, Liechtenstein, Luxembourg, etc) for a family foundation?.
Somebody has some experience about it?

Yes, you can do so... of course it depends how much money to have to deposit. But if you are setting up a family foundation it is reasonable to assume you have fairly substantial assets so most banks will be interested.

 

[andres33]

Yes, you can do so... of course it depends how much money to have to deposit. But if you are setting up a family foundation it is reasonable to assume you have fairly substantial assets so most banks will be interested.

Do you mean that for exemple some swiss, Uk, etc.. banks will accept open account for a foundation made in Liechtenstein, or Panama, or Luxembourg, or Jersey, or Cook ...?
And , i.e for asset 6 or 7 figures?
Can you inform wich banks are open for that?
Do you think that these account can be have a normal run? or perhaps these kind of account can have problems when it will operate with transfer to other jurisdictions?
Have you experience on this matter?

 

[bizniz]

Andres, my experience is with banks in Switzerland, Liechtenstein and Luxembourg that they will totally all be open to accounts for Panama foundations with 6 or 7 figures.
I think it is not appropriate to name banks here as I could then be accused of promoting them, and it is against the rules of the forum to name providers. I think basically any bank will accept it, but stay away from the big ones.
Transfers to other jurisdictions - well that really depends. It could be difficult. But you know, paying your daughter's rent in London is very different to wiring a million dollars to North Korea so again I will have to pass on this question unless you want to be more specific.

 

[andres33]

Andres, my experience is with banks in Switzerland, Liechtenstein and Luxembourg that they will totally all be open to accounts for Panama foundations with 6 or 7 figures.
I think it is not appropriate to name banks here as I could then be accused of promoting them, and it is against the rules of the forum to name providers. I think basically any bank will accept it, but stay away from the big ones.
Transfers to other jurisdictions - well that really depends. It could be difficult. But you know, paying your daughter's rent in London is very different to wiring a million dollars to North Korea so again I will have to pass on this question unless you want to be more specific.

ok thanks @bizniz. The important info is that you had a positiv experience and there are banks accepting this structure independently that a customer has 8 figures or more.

 

[kyler565]

I have a question about foundations so I'll ask it here insted of starting a new thread . I'm in the process of becoming a non tax resident of Canada and becoming a tax resident (in 2022) and eventually a citizen of Colombia. In the process of liquefing hard assets in Canada and will pay tax and exit.. I would like to only bring about half of wealth to Colombia. For privacy reasons and to not have all my eggs in one basket(incase of wealth tax, many countries talking about this) a panama foundation might work for me. Would it be possible to setup a foundation so income (dividends and capital gains) are only taxed when money is taken out of the foundation. 2nd question is if the original founder of a Panamanian foundation dies and the controll is passed on to someone else (a relative) would this create another layer of privacy for the new controller of the foundation ?

 

[tradingworldwide321]

I have a question about foundations so I'll ask it here insted of starting a new thread . I'm in the process of becoming a non tax resident of Canada and becoming a tax resident (in 2022) and eventually a citizen of Colombia. In the process of liquefing hard assets in Canada and will pay tax and exit.. I would like to only bring about half of wealth to Colombia. For privacy reasons and to not have all my eggs in one basket(incase of wealth tax, many countries talking about this) a panama foundation might work for me. Would it be possible to setup a foundation so income (dividends and capital gains) are only taxed when money is taken out of the foundation. 2nd question is if the original founder of a Panamanian foundation dies and the controll is passed on to someone else (a relative) would this create another layer of privacy for the new controller of the foundation ?

I am not a lawyer neither practice it but I have read a little bit about it and will tell you
Colombia is a corrupt country and understanding the Law is not easy. Once I spoke with a Real Estate Lawyer explaining them what I had in mind according to taxes for selling real estate and inheritance etc... What he did? He laughed and told me: you can read whatever you want to read but in real life it's not. I also spoke with another consultant and told me I was right about it but dangerous.
So in few words, you have to be very careful, very careful. Go with the best lawyers with experience on the field you are and you will.

Now you say: I would like to only bring a half of wealth to Colombia.
Then, I ask you: Are you planning to move your wealth to Colombia under your personal name AND keep it all in local currency? Kindly remind you there's only one currency and it's Colombian Peso. There is no local bank that can hold foreign currency inside the country. There are hard law about foreign exchaange transactions. So Would you like to exchange your wealth to COP? If you want to keep USD/EUR it's better to open a foreign account with an foreign branch of a local bank located in Panama, Cayman Islands, Puerto Rico and Bahamas. That's how you keep USD/EUR with those banks. Explain yourself how do you plan to move your wealth.

You ask: Would it be possible to setup a foundation so income are only taxed when money is taken out of the foundation? Answer: Yes, it would be possible but you have to check with tax lawyer in Colombia to double check about this.

You ask: If the original founder of a Panamanian foundation dies and the controll is passed on to someone else (a relative) Would this create another layer of privacy for the new controller of the foundation ?
Answer: What do you mean another layer of privacy ?
You mean, the new controller, the "cousin" is not going to appear in the Founder's register? If so, then he's not because HE IS the Controller/Manager/Protector. BUT be careful, the founder needs to make a letter of wishes so when he/she passes away, then his/her wishes must happen.

You need to check who has control to add/remove beneficiares, council managment etc...
The banks will need to know who is the ultimate beneficary owner. So I don't see this as another layer of privacy.

I hope this helps.

 

[kyler565]

I am not a lawyer neither practice it but I have read a little bit about it and will tell you
Colombia is a corrupt country and understanding the Law is not easy. Once I spoke with a Real Estate Lawyer explaining them what I had in mind according to taxes for selling real estate and inheritance etc... What he did? He laughed and told me: you can read whatever you want to read but in real life it's not. I also spoke with another consultant and told me I was right about it but dangerous.
So in few words, you have to be very careful, very careful. Go with the best lawyers with experience on the field you are and you will.

Now you say: I would like to only bring a half of wealth to Colombia.
Then, I ask you: Are you planning to move your wealth to Colombia under your personal name AND keep it all in local currency? Kindly remind you there's only one currency and it's Colombian Peso. There is no local bank that can hold foreign currency inside the country. There are hard law about foreign exchaange transactions. So Would you like to exchange your wealth to COP? If you want to keep USD/EUR it's better to open a foreign account with an foreign branch of a local bank located in Panama, Cayman Islands, Puerto Rico and Bahamas. That's how you keep USD/EUR with those banks. Explain yourself how do you plan to move your wealth.

You ask: Would it be possible to setup a foundation so income are only taxed when money is taken out of the foundation? Answer: Yes, it would be possible but you have to check with tax lawyer in Colombia to double check about this.

You ask: If the original founder of a Panamanian foundation dies and the controll is passed on to someone else (a relative) Would this create another layer of privacy for the new controller of the foundation ?
Answer: What do you mean another layer of privacy ?
You mean, the new controller, the "cousin" is not going to appear in the Founder's register? If so, then he's not because HE IS the Controller/Manager/Protector. BUT be careful, the founder needs to make a letter of wishes so when he/she passes away, then his/her wishes must happen.

You need to check who has control to add/remove beneficiares, council managment etc...
The banks will need to know who is the ultimate beneficary owner. So I don't see this as another layer of privacy.

I hope this helps.

So who would be the BO in this Foundation? I'm the protector my kids age 6 and 9 are beneficiary and the founder and council are just nominees

 

[tradingworldwide321]

View attachment 2350
So who would be the BO in this Foundation? I'm the protector my kids age 6 and 9 are beneficiary and the founder and council are just nominees

According to a recent panama law, The UBO is:
“A natural person, who directly or indirectly owns, controls, and/or has a significant influence over the account relationship, contractual relationship and/or the business; or the natural person benefitting from a transaction or who ultimately controls the legal entity’s decisions”.
In a future, when your kids take control of it, then they will become the UBO.

 

[kyler565]

Very interesting and thank you for your replies. I'll continue to read and learn from this webpage (so much good information) I understand it's complicated when the foundation is located in Panama and im a tax resident of another country in my case it will be Canada or Colombia. I'm guessing the issue is depending how the foundation is setup, Canada/Colombia could say the foundation is being controlled and operated operated from Canada/Colombia and it will be taxed as a Canadian/Colombian company

 

[tradingworldwide321]

Very interesting and thank you for your replies. I'll continue to read and learn from this webpage (so much good information) I understand it's complicated when the foundation is located in Panama and im a tax resident of another country in my case it will be Canada or Colombia. I'm guessing the issue is depending how the foundation is setup, Canada/Colombia could say the foundation is being controlled and operated operated from Canada/Colombia and it will be taxed as a Canadian/Colombian company

You're welcome.

Yes, Canada or Colombia could say you are controlling the entity and you should pay taxes.
But again, you have to confirm if you have to pay once you receive dividends from the foundation, because one thing is taking decisions, but other thing is transfering funds to Colombia to your name from the foundation so that's the thing. To confirm if you only pay for what you receive or for all assets foundation has because you are managing. You will have to confirm that because I also have read the law and there's no answer about this

However, what you can do is hire a team so they can be part of the council, also pay for an office in panama and you can travel to panama to take decisions, then come back to the country.

Anyways, you can not pay taxes from the foundation because it's not legally yours. It belongs to the foundation itself, but you will have to learn what to do and what not so government don't tell your foundation is actively operating in the country. I think there are some good ideas over there.

All the best.

 

[John89]

I tried to open an account in Switzerland as a non-resident, and it was impossible in most banks. It's not illegal, but banks don't want to go through the hassle of doing so. The only one willing to do so was UBS at the airport of Zurich.

 

[kyler565]

I tried to open an account in Switzerland as a non-resident, and it was impossible in most banks. It's not illegal, but banks don't want to go through the hassle of doing so. The only one willing to do so was UBS at the airport of Zurich.

Did you end up starting a foundation yet?

 

[JohnLocke]

I think it is not appropriate to name banks here as I could then be accused of promoting them, and it is against the rules of the forum to name providers.

In the connection of this discussion you may mention bank names and even large consultancy firms if that is what you want, it's not against the forum rules. Only if you own a bank or consultancy firm or hold a position in such operations it will be considered self promotion or even spam as is not allowed!

Back to topic

 

[Alex Fr]

Hm and if the foundation owns 100% shares of some entity A, will bank or EMI ask for UBO(s) of the foundation when opening account for entity A ?

 

[bizniz]

In the connection of this discussion you may mention bank names and even large consultancy firms if that is what you want, it's not against the forum rules. Only if you own a bank or consultancy firm or hold a position in such operations it will be considered self promotion or even spam as is not allowed!

Back to topic

Thank you for the clarification.

In that case I would say Credicorp Bank is the best in Panama at the moment. They have a dedicated non-resident department and they open accounts remotely.

 

[kyler565]

does the panama foundation hold the bank accounts and brokrage accounts directly or is it better for a company inside the Foundation to hold the accounts. For example if there is a UAE freezone company inside the panama foundation would that make banking easier?