Free Trade Zones in Panama

Overview

Free trade zones in Panama are part of an integrated system that promotes the establishment and operation of businesses that contribute to the country’s development, job creation, and inclusion in the global economy. These zones are located in delimited geographical areas within Panamanian territory and provide participants with access to various investment opportunities, as well as economic, scientific, technological, cultural, educational, and social growth.

In the current context, Tax-Free Zones in Panama are gaining increasing attention as a means to boost economic recovery following the COVID-19 pandemic. In this regard, the Panamanian government is working on new initiatives to attract more foreign investors and local companies to these zones, including the opening of new tax-free zones in the country. Additionally, new regulations are being implemented to strengthen transparency and integrity in the operation of these zones, ensuring their long-term sustainability. If you are interested in investing in Panama, Tax-Free Zones are definitely an option to consider.

Permitted activities

The permitted activities in a free trade zone may vary depending on the specific zone but the most relevant activities include:

Manufacturing-icon
Manufacturing

Assembly-icon
Assembly

Logistic-icon
Logistic services

High-tech-icon
High-tech services

Scientific-icon
Scientific
research centers

education-icon
Higher education
intitutions

Environmental-icon
Environmental
services

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Processing
of goods

Popular free trade zones in Panama

Panama is home to a number of popular free trade zones, each with its own unique set of benefits and features. Here are three of the most popular free trade zones in Panama:

Ciudad del Saber is a former military base that has been transformed into a vibrant scientific, technological, and entrepreneurial park. The park is home to a wide variety of businesses, including research and development companies, educational institutions, and technology startups. City of Knowledge offers a number of benefits to businesses, including tax exemptions, access to skilled labor, and a strategic location near the Panama Canal.

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Panama Pacifico is a special economic zone located on the Pacific coast of Panama. The zone is home to a variety of businesses, including manufacturing, logistics, and call centers. Panama Pacifico offers a number of benefits to businesses, including tax exemptions, access to the Panama Canal, and a strategic location near major markets in Latin America and the Caribbean.

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Colon Free Zone is the largest free trade zone in the Western Hemisphere. The zone is located on the Caribbean coast of Panama, and it is home to a variety of businesses, including manufacturing, distribution, and retail. Colon Free Zone offers a number of benefits to businesses, including tax exemptions, access to the Caribbean Sea, and a strategic location near major markets in the United States and Europe.

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Requirements to operate in a free trade zone

A company can establish their operations in a Free Trade Zone through an Operations License granted by the Ministry of Commerce and Industries.

The following are requirements to obtain such license:

  1. Formal request addressed to the National Commission of Free Zones.
  2. Bank references, from local or foreign business companies of recognized solvency.
  3. Attach a study that contains:
    1. Activities to be carried out (production of goods or services).
    2. Origin and detail of the material, machinery, etc., to be used.
    3. Number of jobs that are projected to be generated.
    4. Initial investment and future investment project.
    5. Timeline and project execution.
    6. Identification of the natural or legal person.
    7. Certificate of peace and national security.
    8. Certification on simple paper of invested capital issued by a public accountant.
    9. Certification of shareholders or partners of the company signed by the secretary or treasurer.
    10. Certification issued by the promoter of the free zone.

Benefits of setting up a Business in a free trade zone in Panama

Tax exemptions

Businesses that operate in a free trade zone in Panama are exempt from a number of taxes, including income tax, property tax, and import duty.

Access to skilled labor

Panama has a highly skilled workforce, and many free trade zones offer programs to help businesses recruit and train employees.

Strategic location

Panama is located at the crossroads of the Americas, and it has a number of free trade agreements with other countries. This makes it an ideal location for businesses that want to export their products or services to other countries.

Simplified customs procedures

Businesses that operate in a free trade zone in Panama can benefit from simplified customs procedures. This can make it easier and faster to import and export goods.

Increased security

Free trade zones in Panama are typically well-protected, which can help to reduce the risk of theft and vandalism.

Favorable business environment

Panama has a favorable business environment, which includes a stable political system and a strong rule of law. This can make it easier for businesses to operate in Panama.

Regulation and oversight

The regulation and supervision of the operation of Tax-Free Zones in Panama are carried out by two main government entities: the Colon Free Zone Authority (AZLC) and the General Directorate of Free Trade Zones of the Ministry of Commerce and Industries (MICI).

The AZLC is the entity responsible for administering and supervising the operation of the Colon Free Zone, the largest and oldest tax-free zone in Panama. Its main objective is to promote trade and investment in the zone, and for this purpose, it ensures compliance with customs, migration, and health regulations, as well as promoting transparency and integrity in the zone’s operation.

On the other hand, the General Directorate of Free Trade Zones of the MICI is the entity responsible for regulating and supervising all other tax-free zones in Panama, including industrial and commercial free trade zones. This entity issues the necessary authorizations for the establishment and operation of companies in these zones and oversees compliance with fiscal and customs obligations by the companies established there.

Both entities work together to ensure the proper functioning of Tax-Free Zones in Panama and have implemented a series of measures to strengthen transparency, integrity, and long-term sustainability in these zones. This includes the implementation of monitoring and control systems, promotion of cooperation and dialogue with the companies established there, and strengthening of supervision and auditing mechanisms.

Contact us

Our team at Kraemer & Kraemer can assist you with the process of applying to operate a Free Trade Zone in Panama as well to give you the proper legal advice to establish your company. Send us a note to info@kraemerlaw.com to learn more

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