Free Zones open doors to multinationals

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Over the years, Panama has sanctioned incentive laws to attract foreign investment to the country. One of these, Law No 32 of April 5, 2011, creates new free zones where companies can operate without paying income tax, customs duties and have special labor and immigration dispensations. These free zones work differently to what are considered the traditional free zones (Colón Free Zone, City of Knowledge (Ciudad del Saber) and Panama-Pacifico) which have different legal frameworks.

A total of 19 licenses to operate free zones have been awarded, eleven of which are active, with a concentration in the cities of Panama and Colón. Around 122 companies operate within them, mainly in Corozal-Marpesca, S.A. (30), Panexport (21) and Albrook Free Zone (19). The majority of those companies are dedicated to foreign trade service activities.

Free Zones - open doors to multinationals

There are three types of zones: private, state-owned and mixed. The types of companies that can be set up in these special areas include: manufacturing, assembly, processing of finished or semi-finished products, environmental services, general services, logistics, higher education institutions, scientific research centers, specialized centers, providing health services and high technology companies.

Companies from Venezuela, the United States, Israel, India, China, Belgium, Argentina and Panama have invested more than $300 million since 2011 in the construction of assembly factories and other services.

The Cabinet Council and the Export Processing Zones National Commission authorize the creation of free zones in specific areas, clearly defined and in compliance with the requirements, conditions, advantages, and conditions as established by Law No 25 of November 30, 1992.

Production Free Zones tax and immigration advantages

The companies that establish in these free zones are exempt from taxes on profits and customs duty on construction material, imported equipment, raw material, property, goods and also the tax on commercial licenses.

Promoters of these zones and companies established within the free trade zone who have invested $250,000 are entitled to apply for a Permanent Resident Permit as Free Trade Zone Investors.

Foreign and Panamanian companies have invested $300 million since 2011

Potential Investors are able to apply for a Short Term Visa valid for up to nine months, in order to come to Panama and investigate the possibilities of establishing a free zone or carrying on business in free trade zones

Free zones have a special labor dispensation that allows them to negotiate special vacation and off days with employees based on seasonal industry demands.

Colón Free Zone

The Colón Free Zone (CFZ) is a free zone located in the city of Colón. It is an autonomous entity occupying 240 hectares and is the biggest free zone on the Ameri-can continent, second largest in the world and also Latin America’s first container hub.   It contributes 8% of the GDP.

It provides services and is an import, storage, assembling, packing and repacking center. It also re-exports products from all over the world such as electric goods, pharmaceutical products, liqueurs, tobacco, home and office furniture, textiles, shoes, jewelry and toys. The main imports come from Hong Kong, Japan and the United States destined for South and Central America and the Caribbean. The main markets are Colombia, Venezuela, Brazil and Puerto Rico.

The ZLC was created in June 1948. The zone is open to foreign tourists but closed to locals to avoid contraband. It is possible to buy articles in bulk and retail. More than 1,400 companies operate there.

The zone is divided into two areas: the Colón Free Zone where the majority of the shops and shop windows are located and France Field, which is used as a merchandise storage hub and is very close to the ports of Manza-nillo International Terminal and Colón Container Terminal. The merchandise movement in the ZLC is through a multimodal system called Centro Logístico Multimodal de las Américas and is formed by the ports of Manzanillo International Terminal, Colon Container Terminal, Cris-tobal; Panama Canal Railway and the Enrique Adolfo Jiménez Airport.

The ZLC allows the process and the manufacturing of almost any industry, but 80% of the products must be exported, unlike the free zones where there are no restrictions on re-exporting finished goods.

Over the last five years the ZLC has gone through a rough period due to to problems with Venezuelan traders, restrictions imposed by Colombia on textiles and shoes and a downturn in the Brazilian market. In 2014 it registered a fall of 12.3% in profits and the worth of registered trade was $24 million while in 2013 it was $27.4 million and in 2012 it was $30.8 million

In 2014 imports totaled $11 million, 13.3 % less than in previous years, while the re-exports were $13 million, 11.5 % less than 2013.

The Government is contemplating changes in legislation to convert the whole city into a free port as a way to revive the ailing free zone.

Colon 2000 Port in Colon City.

Colon 2000 Port in Colon City.

Colón Free Port

President Juan Carlos Varela’s flagship project is the renovation of Colón City and one of the aims is to convert the area into a free port to encourage private and public investment. The free trade zone will be located in the old city, very close to the Colón Free Zone.

Recently, the Cabinet approved Resolution No. 64 which modifies and adds articles to Law 29 of December 30, 1992, for implementation and operation of a Freeport or corporate events. This includes an ample auditorium, theater, multiple classrooms, venues for meetings, and videoconference halls, all of which are furnished and equipped with audio-visual technology.

Special System for the province of Colon

The Government is investing more than $500 million in the Colón Urban Renovation Project that is seeking to extend the free commerce area to the 16 streets of the Old Town, giving the revenue injection that the province needs to continue its development.

Tourists and visitors will be exempt from paying the 7% purchase tax (ITBMS) imposed on the rest of the country. Panamanians will be able to buy a maximum of $2,000 a year in merchandise from the new free port

The City of Knowledge

One hundred twenty hectares and more than two hundred buildings at the former Clayton U.S. military base now harbor a thriving international community where entrepreneurial, academic, scientific, and cultural collaboration seeks to forge a more humane and sustainable development based on knowledge.

A complete offer of services

City of KnowledgeCity of Knowledge offers its guests and visitors a unique experience at the region’s most prestigious educational complex –the site of a renowned program of academic, scientific, entrepreneurial, and cultural activities.
In addition, City of Knowledge offers both a tranquil and stimulating environment, envisioned to foster innovation, creativity, and learning in tune with a natural and landscaped setting, where sustainable urbanism and avant-garde architecture coexist with the preservation of the area’s historic heritage.
Its green areas are yet another attraction for visitors, much alike its recreational complex, which features sport courts, swimming pool, gym, and other facilities.

Convention Center and Classrooms

City of Knowledge features a complete offer of facilities and services for the organization of institutional or corporate events. This includes an ample auditorium, theater, multiple classrooms, venues for meetings, and videoconference halls, all of which are furnished and equipped with audio-visual technology.

Ateneo

The “Ateneo” at City of Knowledge offers a yearlong, varied program of artistic, scientific, and academic activities. It is located at Clayton’s old movie theater (built in 1935), a fine example of Panama’s “Bella Vista” architecture, and features impeccable acoustics and state-of-the-art technology. The facility is ideal for events such as concerts, graduations, conferences, congresses, and film presentations, among others.

The Plaza

City of Knowledge's food areaThe Plaza is the main meeting point of the City of Knowledge’s community. In addition to its open architecture, the facility includes a varied offer of services, such as restaurants, cafeterias, bakeries, delicatessens, bank, library, art gallery, travel agency, beauty salon, bike rental, dry cleaner, clinic, and drug store. All of this, in addition to its program of cultural activities, has turned the Plaza into a unique, cozy and entertaining venue.

Lodging Complex

The complex is ideal for those who organize and attend congresses and other events on our campus, as well as for the temporary stays of students, faculty members, and professionals engaged in consultancy or research activities.

It features single, double, and triple bedrooms equipped with air conditioning, hot water, cable TV, telephone, Wi-Fi, balconies offering views of interior gardens, housekeeping services, and safes, etc. Other amenities include shared kitchenettes on each floor, lobbies, laundry, and all the campus’ facilities.

Location and accessibility

City of Knowledge is strategically located facing the Panama Canal, a few minutes away from downtown Panama City and its Old Quarter. City of Knowledge’s bus transfer terminal connects the campus with the Metro Bus network, which provides a direct route to and from Al-brook’s Gran Terminal de Transporte, which also adjoins Line 1 of the Metro system.

Panama Canal Visitor’s Center (Miraflores) ——————————- 2 Km
Marcos A. Gelabert Airport   (domestic flights) ————————— 6.2 Km
Albrook Mall & Albrook Bus   Terminal ————————————- 6.6 Km
Old Quarter ———————————————————————- 10 Km
Banking District —————————————————————– 11.5 Km
Biomuseo (at Amador) ——————————————————– 13 Km

For reservations: Tel.306-3766; ventasesc@cdspanama.org; www.ciudaddelsaber.org

Panama Pacifico Special Economic Area (SEA)

This special area was created by the Government in 2004 to drive direct foreign investment, provide Panama-nians with better-paying jobs and to attract new growth industries to the country. The model followed is similar to similar zones around the globe.

Panama Pacifico is strategically located at the south entrance of the Panama Canal, in the former Howard air base, just across the Bridge of the Americas. The SEA is a public and private enterprise which is managed by London & Regional Panama and Agencia Panamá Pacífico. This team is in charge of the development, administration and promotion of the zone as well as regulating the activities that take place.

The project contemplates the development of an international business center to attract the big multinational logistics services and industries in general.

Advantages include the on-site, one-stop shop with access to 11 government branches; special labor incentives; simplified on-site immigration benefits; legal incentives; tax incentives, including exemptions for 12 Specific Business Activities; and access to the on-site workforce training center.

Since 2008, more than $300 million have been invested in Panama Pacifico, from infrastructure to new constructions. There are more than 160 companies and over 7,000 employees.

City of Knowledge

City of Knowledge is a management platform that focuses on boosting the innovative and competitive capacities of the users who share the Campus. Integration, dynamic networking, and joint efforts facilitate the transference of knowledge.

This allows for an unusual concentration of innovative organizations focused on development, as well as academic and research institutions, resulting in a lively and successfully collaborative community. In order to strengthen these dynamics the City of Knowledge provides access to a series of benefits and services aimed at the needs of its users.

Just a few minutes from downtown Panama City, the City of Knowledge is strategically located across from the Panama Canal. Some 120 hectares and more than 200 buildings of what was once the Clayton military base are now home to a booming international community established for the purpose of business, academic, scientific, and humanistic collaboration. The objective is human and sustainable development based on knowledge.

Here are some of the direct benefits for affiliates and users recognized by the City of Knowledge:

  • Tax and immigration benefits through affiliation to the City of Knowledge Foundation project.
  • Telecommunications, IT and educational technology services, including an intelligent high-tech center with the required capacity for teleconferences, distance learning, fast internet connections, and other services.
  • Infrastructure and well-maintained buildings, easily adaptable to various uses.
  • Technical, administrative and consulting services. Constant electricity flow (99.9%) with redundant power supply from the Panama Canal thermal plant located 300 m (328 yards) away in the Miraflores locks.
  • Complementary accommodation and catering service. -Sports and recreation facilities.
    Access to the major higher learning and scientific research centers in the country.
  • Access to the Panama Canal Basin, a living laboratory for scientific research and technological innovation on advanced tropical ecosystem management.

Baru Free Zone (BFZ)

Baru Free Zone was created by Law No. 19 dated May 4th, 2001, with the purpose of establishing a special fiscal and Customs regime to promote tourism, a logistics multimodal system, export processing zones and petroleum development area. Located in the Baru district, on the Pacific side of Chiriqui province the zone has the advantage of being close to Puerto Armuelles with paved highways and the second transcontinental oil pipeline built in the Americas in the area.

Free zones can negotiate special vacation and off-days with employees

This free zone is divided into commercial, tourism development, manufacturing and petroleum zones.

Commercial Zone: It is expected to become an important platform for agricultural exports since Chiriqui province is rich in agricultural production. It has easy access to ports on the Pacific side, and therefore, enables it to export goods to the whole American continent, Europe and Asia. There are plans for it to become a regional warehouse and distribution center for all sorts of merchandise.

Tourism Development Zone: Baru has areas of great natural beauty providing the opportunity to launch any kind of ecological adventure, while offering interesting and picturesque sightseeing such as Paso Canoas International village, near the border with Costa Rica. Several tour operators have extreme adventure activities from sports fishing to rock climbing. The free zone allows tax-free import for ships, yachts, airplanes and any other vehicle required to develop such activities. Companies that invest in the tourism zone will be exempt from income tax and can receive other fiscal benefits.

Manufacturing Zone: Baru aims at transforming itself into a manufacturing and re-exporting zone of agricultural products. Its main objective is to guarantee a regular supply of perishable agricultural products to markets in Europe, the United States, Canada and Asia. It also seeks to boost a regional economic cooperation framework in areas such as transport, classification, management, packaging design, freight handling and warehousing techniques among others. Based on the zone regulations, companies are exempt from income tax, import tax on equipment and machinery, and subject to any other benefits for being involved in activities related to manufacture.

Petroleum Zone: is able to store, manufacture, refine, purify, blend, market, transship, transport, pump, process, transform, sell, export, re-export, provide and in a general sense, operate and handle crude, semi-crude and any other oil related products. There is a 204 km-long road system in the region, and a 131 km-long oil pipeline crosses the Isthmus from the Pacific to the Caribbean Ocean, by which oil from Ecuador is transported to the terminals located in Panama, such as Charco Azul, which allows oil tankers of 300,000 dwt to dock.

Petroleum Free Zones

There are ten petroleum free zones. Contractors in these zones are granted the following benefits:

  • Total exemption from income taxes on profits derived from such activities, during the first five years of production or until the initial investment is recovered; whichever comes first. From then on, the contractor pays income tax of 25%.
  • Total exemption from import duties on machinery, equipment, parts, and any other items, necessary for the execution of the activities under the contract.
  • Special carry-over provisions for income tax purposes.
  • Special depreciation schedules for machinery and equipment.
  • There are ten free fuel zones nationwide.

New Fuel Free Zones

Melones Oil Terminal Inc. (MOTI), Isla Melones with investments in the amount of $65 million, storage capacity of 2 million barrels.

Decal Panama, S.A., Isla Taboguilla, investments for the amount of $10 million, increased storage capacity by 1.3 million barrels.

Colon Oil & Services, Inc. (COASSA), Coco Solo-Cristobal with investments in the amount of $6 million, increased storage capacity to 450,000 barrels for handling Bunker C and marine diesel.

Petroport, S.A. Telfers Island, investments for the amount of $16 million, increased storage capacity at 505,000 barrels, for handling Bunker C and marine diesel.

Petroamérica Terminal, S.A. (PATSA), Vasco Nunez de Balboa – Rodman, investments for the amount of $16.5 million, increased capacity storage barrels 352, for handling ethanol marine fuels and other derivatives.

Assign Panama, S.A. – Tocumen International Airport, investments for the amount of $4.6 million, increased storage capacity 15,000 barrels for handling aviation fuel Jet – Av.

Petroterminal de Panama , S.A. , Charco Azul and Chiriqui Grande, investments for the amount of $470 million , increased storage capacity 8.9 million barrels for storage of different hydrocarbons.

It is expected that this sector will grow in the near future once the expanded Canal starts operating at the beginning of next year.