There are 3 Tax Free Trade Zones in Panama. Each of them offer different kinds of tax breaks based on their intended purposes. Below is a review of Panama’s tax incentivized businesses zones.
1. Colon Free Trade Zone
The Colon Free Trade Zone was created in 1948 and is the 2nd largest in the world behind Hong Kong’s. More than 1,800 companies operate within zone. Most of these businesses are involved with the exporting and importing industry having warehouses, factories, and re-package various products. A semi-independent governmental agency administers the Colon Free Trade Zone granting operational permits and leasing space.
To be located in the Colon Free Trade Zone requires companies having a minimum 60% of the imported products to be exported annually and hiring five Panamanians.
The Colon Free Zone consists of a port and transit systems designed for exports, re-exports, imports, manufacturing, warehouses, refining and processing goods, and other activities related to free zones.
Colon Free Zone Benefits
- No import duties
- Only a 5% dividend tax
- Zero tax on income derived from export activities, and
- Zero tariffs and quotas on imports and exports to foreign countries
2. The Panama Pacifico Special Economic Zone
The Panama Pacifico Special Economic Zone is being constructed on a 1,390 hectare site with an 8,400 foot runway jet airfield. When completed it will be a small city including bank offices, corporate offices, call centers, high tech products and manufacturing, logistics services, offshore services, aircraft maintenance and repair services, film industry, transferring goods and services to ships and airplanes, and exporting goods.
Qualifications for location within the Panama Pacifico require being engaged in one of these industries:
- Call centers,
- Offshore services,
- Back office services,
- Multimodal & logistics services,
- Data & digital transmission,
- Maritime services,
- Aviation services,
- High tech manufacturing & assembly.
Companies wishing to operate inside this economic area must apply with London & Regional Panama and with the government agency Panama Pacifico Agency.
Panama Pacifico Developers
London & Regional Panama (LRP) merges two companies: Latin America’s Southstone Investment Company with London & Regional Properties (L&R) and. L&R brings vast real estate knowledge on a distinguished level, as developer, manager, and owner of nearly $21 Billion USD in worldwide real properties on 5 continents. Southstone combines Latin American cultural insight, experience, and economic support.
The former U.S. Howard Air Force Base is being developed into a Special Economic Zone for multi-national corporations and high technology companies. There are over 125 multi-national companies now established there, with 50 more coming in 2012.
LRP has a Master Plan including the latest trends in green buildings, fiber-optic networks, and walk able neighborhood designs. The developer’s vision includes:
“Enter a new world that forms a bridge between tradition and innovation, country breathing space and big-city accessibility, private funding and government support. A true master-planned community that brings together people of all ages to live, work and play. A haven of residences with a vivacious mix of strolling neighborhoods and chic homes. A global enterprise offering unprecedented business advantages. All set within a sustainable landscape linked by parks and trails.”
Panama Pacifico offers a new way of life that’s all about connectivity. Unlike any other destination in Latin America.
Once a U.S. Air Force Base, the majority of Panama Pacifico’s infrastructure was already established. Panama Pacifico benefits by being connected to Panama’s leading public works suppliers operating out of the Panama Canal. From potable water works, premier electrical connections to state-of-the-art high tech capabilities from 5 key submarine telecommunications spheres and excellent roads, Panama Pacifico’s excellent infrastructure accommodates present and future generations.
Panama Pacifico already has an onsite shuttle bus system. The new Transportation Demand Management system began in 2012, with commuter buses for onsite employees
The entire infrastructure system will be underground preserving the community’s natural views and character.
Panama Pacifico Tax Benefits
- Import duties,
- Income taxes,
- Stamp tax,
- International phone call tax,
- Remittance tax,
- Dividend taxes,
- Sales Tax (ITBMS),
- Real Estate Transfer Tax,
- Real Estate Property Tax,
- Licensing Tax, an
- Export/Re-Export Tax.
- There are also tax exemptions for transferring services and goods between the ports, to petroleum free zones, to ships and passengers, to other companies, to the London & Regional Panama Company, and government agencies located in Panama Pacifico
- Tax benefits will have a 10 year consistency.
- Labor laws regarding working hours, Sunday & holiday pay, and the right to negotiate different days of rest and vacations with employees are relaxed.
- Companies will also have more immigration visas and work permits for foreign workers.
The Panama Pacifico Special Economic Zone also provides Panama Immigration benefits including easy application and issuance of the following visas:
- One stop shop immigration office to handle all visas and work permits;
- Family Visas, which extends to financially dependent parents and spouse;
- 3 to 5 year special visas for investors and laborers;
- Tax free importation of personal effects up to $100,000
In addition, the Panama Pacifico Special Economic Zone offers Labor Incentives such as:
- Fixed rates for holidays (50%) and overtime (25%).
- Flexibility by allowing companies to be open on Sundays and holidays, with assigning employees holidays, and greater percentage of foreign workers.
- More flexibility to fire employees for just cause or market fluctuations.
3. City of Knowledge
The former U.S. Army Base of Fort Clayton has been converted into the Ciudad del Saber (City of Knowledge) containing high tech companies providing services to international governments, international research, educational, science research centers, universities, and business and non-government organizations. The not for profit City of Knowledge Foundation administers this complex.
The City of Knowledge (Ciudad del Saber) Special Economic Zone is a scientific, technological and entrepreneurial park. The types of businesses allowed include scientific, technological, human development, and cultural.
City of Knowledge Tax Benefits
- Import duties exemptions for all vehicles, equipment, machinery, furniture, and any company operations materials;
- Income tax exemptions;
- Exemption from sales taxes on all equipment and goods necessary for company operations;
- Property transfer tax exemption; and
- Quota exceptions for immigration visas and work permits for high skilled foreign workers including their immediate family members’ immigration visas who relocate to Panama.
Tax Free Zone Investor Visas
The Panama Tax Free Processing Zone Investor Program allows foreign investors and their families to relocate to Panama and obtain Panama residency by renting a plot of land, office, or an entire building with at least a 10 years lease within one of Panama’s Tax Free Zones. The purpose for the business varies for each free zone.
Panama immigration laws favor foreign investors who can generate business from Panama to the rest of the world. There are distinct tax advantages for foreigners who can operate manufacturing plants, assembly plants, call centers, software creation facilities, and other businesses which can export their products or services. These businesses also get a substantial tax break when selling a certain percentage of their products or services locally.