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Setting up a Panama Foundation for DAOs: Legal Strategy for Decentralised Projects

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02.06.2025
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DAOs (Decentralised Autonomous Organizations) looking for support in setting up their legal structure have a variety of interesting options to choose from. We’ll be looking at how using a legal wrapper or operating entity through Panama’s Private Interest Foundations provides a compliant and tax-efficient way to do this. Find out the main benefits and the areas where you need to get expert legal advice to make the right decisions. 

Why DAOs Need Legal Wrappers

A DAO needs a legal wrapper to provide a structured legal entity that allows it to carry out essential activities like setting up contracts, owning assets, and operating a bank account. It’s a sort of legal framework that gives a legal status and protects the assets and members of the DAO from potential liabilities. We could also look at it as providing a way for the DAOs to interact with the rest of the world safely and legally.

This is method of ensuring that the DAO Panama framework meets all of the relevant legal and regulatory requirements, which includes anti-money laundering rules and the current tax obligations. In terms of taxes, a legal wrapper can also optimise the tax burden, helping lower the tax risks for members.

If it doesn’t have a wrapper like this, the DAO will struggle to interact with the external world to carry out basic operations. It would also be at risk of being treated as an unincorporated organisation, which would increase the possibility of its members being held personally responsible for any liability arising from the debts or other obligations belonging to the DAO.

What Is a Panama Private Interest Foundation (PIF)?

A Panama Private Interest Foundation (PIF) is a non-profit entity that has been set up to look after the assets specified. A founding document needs to be set up to explain the goals of the PIF. It’s generally used as an effective way of managing and protecting assets and can also provide a structured form of estate and succession planning.

While it has some elements in common with a Panamanian Trust, its most important features include the fact that it’s governed by a foundation charter and has clear regulations. All of the board members and supervisory bodies that interact with a Panama PIF have to ensure strict confidentiality over the subject. A Panama Private Interest Foundation can include the appointment of a protector to oversee all its activities and ensure that it meets the original intentions. 

The beneficiary who sets up the PIF doesn’t have to live in Panama or even have business interests in this Central American country. However, it needs to be set up taking into account the latest regulations in Panama, with a full understanding of how it needs to operate.

Benefits of Using a PIF for a DAO

A wide range of benefits can be gained from setting up a PIF. Protecting assets is one of the key advantages of this type of legal structure, which is something that it achieved with a high level of confidentiality too. The assets and beneficiaries are strictly confidential, with the information that’s available to the public covering the foundation charter, together with the names of its council members.

This makes it a private and anonymous way to look after the specified assets conveniently. The PIF helps to shield the assets in it from external threats, including lawsuits and creditors, which can be extremely useful in numerous situations. 

Decentralised governance and off-chain compliance are among the other key benefits that make this an attractive approach for DAOs. The Panama PIF can be administered from anywhere, while there’s no need for even the foundation council and protector to be located in this country, adding a lot of flexibility in the way it’s run to benefit Web3 companies opening their business abroad with a global, decentralised approach. It’s a legal approach that also provides ease of banking without costing a lot of money to set up. 

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Panama Foundation Law and DAO Applications

PIFs are governed legally according to the regulations relating to Law No. 25 of June 12, 1995, together with the details in the foundation charter, meaning that they’re aligned with the principles of the DAO. They also need to be registered officially in the Panamanian Public Registry, which makes them subject to the latest Panamanian legislation. PIFs are regulated by Panamanian authorities according to the current Panama private interest foundation law. It’s important to bear in mind that a Panama Private Interest Foundation is set up based on civil law and backed by a public legal document, which makes it different from trusts that are bound by a private contract and common law.

IRS and International Tax Considerations

A Panama PIF provides a clever way of reducing tax obligations, but how does it work? When looking at a Panama Private Interest Foundation, IRS or other tax authorities may struggle to obtain clarity on what is actually covered and who benefits from the assets. The person who is the legal owner of the assets needs to obtain legal advice to understand whether they need to report this on their tax return. It’s worth noting that Panama doesn’t tax income that has been generated outside the country, which provides a substantial benefit in this case.

How InteliumLaw Helps Web3 Teams Structure Foundations

Forming a Panama PIF for a Web3 team is a process that needs to be carried out carefully while considering the current legal requirements. This is why it pays to take expert advice from InteliumLaw on how to go about this. We advise on the best ways to form Panama PIFs, adapting bylaws to fit DAO governance while ensuring that the members are fully protected. You can be certain that we’ll ensure that KYC compliance is met and that all international reporting requirements are fulfilled on time. Take a moment to find out how Panama’s Private Interest Foundations can help you to set up the legal framework you need to protect your assets while meeting all the appropriate legal requirements.
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