Colon Free Zone in Panama

Overview

The Colon Free Zone (CFZ) has been a segregated free trade region for wholesale enterprises since it was established in 1948. Currently, more than 3,000 businesses are active in this sector, with product re-exports being the most significant activity.

The Colon Free Zone is situated near the Caribbean end of the Panama Canal, about an hour’s drive from Panama City and the airport, respectively.

Panama is considered as an attractive place for investments thanks to its special regimes. Such zones have established laws and regulations allowing local and foreign investors to establish companies enjoying unique fiscal, migratory and labor incentives.

The Colon Free Zone is the main distribution center of the Western hemisphere. For this reason, warehouses, port and traffic systems for all types of merchandise are constantly being built and modernized, keeping abreast of modern technology and always ready to offer a wide range of excellent services and a great variety of products.

The zone is highly connected to multimodal platforms. There are four container seaports in Colon, and one in Panama City on the Pacific Ocean which are interconnected by a modern railroad network providing maritime connectivity to the global market. This multimodal platform is interconnected with a road network of highways and corridors between both metropolitan cities.

In addition to being the first container distribution center in Latin America, it is the largest free zone in the Americas and the second largest in the world. By providing the world with a distinctive location for international trade, it has grown to be the leading free zone in the hemisphere and one of the biggest and most significant global logistics hubs. The CFTZ is a facility that has earned ISO 9001-2008 accreditation.

Any goods entering the CFZ are exempt from import duties and may be imported, stored, modified, repackaged, and re-exported without being subject to any customs rules (with the exception of firearms or petroleum products). Customs officials collect a fee for the monitoring service in exchange for keeping track of exported goods. The cost is determined by the exporting items.

Permitted activities

Import.
Export.
Re-export.
Manufacturing.
Sale, commercialization and distribution.
Refining and processing of goods.
Operations, transactions, negotiations or incidental activities appropriate to the establishment and operation of international free trade zones.
The provision of services relating to aviation and airport operations, including the transportation, handling and warehousing of cargo in general.
Construction of ports, docks, boatyards, ports or places of loading and unloading.

Fiscal benefits of the Colon Free Zone

Exempt from income tax in relation to the export activities carried out.
Exempt from taxes on earnings from re exports
25% income tax on the importation of products into national tax territory.
5% tax on dividends (reduced rate).
Exempt from ITBMS in relation to the export activities carried out and logistics services.
Exempt from municipal taxes.
0.5% Operation Notice tax (reduced rate).
Tax exemption on capital investment
Tax exemption on profit from operations abroad

Registration type

Companies must get permission from the CFZ Administration in order to operate out of the Colon Free Zone (an autonomous government institution). This indicates that there is no need for a business license or notice of operation. However, a corporation in the Colon Free Zone must have a “operational key,” which is a number that identifies it and permits it to conduct business as usual. Companies do not need to comply with any minimum investment requirements.

The operating Key will be granted depending on your registration type, such as:

Operation code
Register as an individual entity and lease a warehouse from a third party, such as MIT Logistics. Allows your to import, export and re-export. This registration has the highest operational costs: Yearly renewal fee 4,900.00USD (registration yearly fee and operational code yearly fee) and registration fee (one time fee) is 5,560.00USD in concept of warranty deposit.
Represented Entity Code:
Entity established in the Republic of Panama authorized by the CFTZ, that does not have physical presence in the CFTZ, who register for the sole purpose of importing, exporting, and re-exporting through the CFTZ. Through this registration, you would operate under an operational entity in the CFTZ, who will handle your operations as your representative. Registration cost is 2,500.00USD, and 2,500.00USD yearly renewals after the first year.
Special Represented Entity Code:
Foreign Entity not established in Panama authorized by the CFTZ, that does not have physical presence in the CFTZ, who register for the sole purpose of re-exporting through the CFTZ. Through this registration, you would operate under an operational entity in the CFTZ, who will handle your operations as your representative. Registration cost is 2,500.00USD, and 2,500.00USD yearly renewals after the first year.

Requirements to operate in the Colon Free Zone

There are three options to acquire a permit to operate in the free zone, which on average takes no more than 60 days to obtain.

Operation License: In case of acquiring a galley or premises within the free zone, a permit may be requested to start the company’s operations. To do so, you must fill out and comply with the requirements established in this form. This option has an annual cost of US$ 2,400.
Leasing premises: A 20-year lease can be purchased with the Free Zone Administration, either for a lot to build your own facilities (according to the rules established by the Free Zone Administration), or by renting an existing facility. You must fill out and comply with this form.This option has an annual cost of US$ 2,500.
Represented company: An established business (generally logistics companies), is used as a representative, making arrangements for transportation, packaging, re-export, billing, storage of goods, distribution, or logistics in general. In order to establish itself under this option, the approval of the Free Zone Administration is needed, which will require the export of 60% of the goods. You must not have a lease contract to be able to opt for this option, and it is not necessary to have a physical presence in the free zone. You must fill out and comply with this form. This option has an annual cost of US$ 2,500.

Contact us

If you want to learn more about the benefits and requirements to establish your company Zona Libre de Colon, contact us today or send us a note to info@kraemerlaw.com and our team will be glad to assist you and guide you through the process.