Advantages of free trade in Panama: discovering the Colon free trade zone

It's not necessary to explain the advantages of free trade. The possibility to choose with whom one wants to do business and under what conditions is practically sacred. When discussing this topic, we can't stop mentioning Panama free trade zones and their significant impact on the economy of the region.

Exports, imports, activities, and industries are some of the concepts involved in the subject. After having described the wide variety of options in the country of the canal today we feel that focusing on Panama trade and free trade zones is only fair. After all, these free trade zones are arguably the reason why the country attracts so many international businesses thus starting a healthy cycle of investment, wealth, and development. Let's find out what it means to register in the Panama free trade areas.

Exploring Panama free trade: import & export

Firstly, it's worth mentioning the difference between the free trade zones and the free zones for companies (economic zones). While the former facilitate the trading of goods the latter encourages investment. As the reader can figure out by now these are both two important pillars for the country's economy when it comes to export services and Panama trade in general. 

What is a Panama free trade zone

These zones are defined by the application of regulations and policies that intend to incentivize international trading activities, hence, their names “free trade zones”. Within these sectors, businesses conduct exports, imports, and related activities. In other words, this is the ideal place for an import-export company. A clear example is the Colon free zone (CFZ) or Zona Libre de Colon in Spanish.

Economic free zones for corporate development 

On the other hand, economic free zones are focused on enabling a favorable environment for investment and company development. In line with this, the zones target specific enterprises and industries offering tax incentives, top-notch financial services, and advantages when it comes to infrastructure. If you want to get to know these free zones the Panama Pacifico (PPA) is a great way to start.

The essence of Panama free trade zones beyond import & export: what can you do here and what advantages you'll enjoy

The CFZ was created in 1948 specifically for those conducting wholesale businesses. Among other advantages, the zone doesn't require any minimum investment. This along with other perks has probably helped constitute the Colon Free Zone as the largest in its continent and the second largest worldwide. It's also the number one center of container distribution in Latin America.

Those who want to establish and operate within the CFZ must acquire a permit from the corresponding administration which is an autonomous institution belonging to the government. In simple words, this means that an import-export business or a company established here is not obliged to get a business license (aviso de operaciones) like any other regular Panama company must do. 

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As the reader probably already knows, free trade zones offer a variety of incentives under certain conditions. Simply speaking one gets the perks as long as they compromise in other aspects because there are only a handful of activities permitted. The Panama free trade zone of Colon allows for the following:

• Managing an import-export company
• Distribution and commercialization
• Manufacturing
• Sales
• Processes and refining of goods

Furthermore, only some of these are exempt from corporate income tax:

• Transferring merchandise that will be destined for exports. Transferring applies to goods from one free zone to another.
• Repackaging and invoicing abroad.
• Logistical services related to exports. This includes the internal moving of cargo or merchandise and storage.
• Sales of foreign or domestic merchandise for import & export.

Incentives for companies registered in the Colon free trade zone

Here's where it gets interesting as we can see what the actual benefits of this Panama free trade zone. Firstly, no income tax on profits derived from external operations will be applied to the companies of the zone. Moreover, the entities enjoy a reduced tax rate of 5% on dividends, a rate which is not to be dismissed.

If an import-export company transfers goods within the Colon free zone these operations are not subject to ITBMS. The same applies to logistical and ancillary services related to the corresponding cargo.

Exemptions also apply to the re-exporting of the capital, a feature that surely attracts foreign companies encouraging them to settle their headquarters in the territory. Moreover, if a company pays royalties to an entity incorporated abroad, beneficiaries are not taxed.

Consular fees are not charged, and neither are the shipments whose destination is the free zone.

A significant plus is the fact that goods can be freely moved within the zone and are exempted from import duties. Also, there are no taxes or charges for goods entering or leaving the free zone.

What taxes are applied for operations and import-export business entities within the Panama free zone

All entities established here are subject to capital gains on the transfer of securities and properties.

Disclaimer: this article is merely informative and it doesn't replace formal, legal, or financial advice. For accurate information about Panama free trade zones please consult with a certified and qualified professional. 

Embrace the advantages of free trade in Panama with Mundo

We're proud to say we have close connections with the country of the canal. Panama free trade zone regime is no secret to our experts, and neither are banking, regular incorporations, foundations, real estate, and immigration programs.

Together with our team of lawyers, agents, and developers we can offer separate services or a comprehensive package that covers different aspects of your financial plan. Although Panama is one of our favorite countries it's not the only one we recommend. One may easily be surprised by the enormous opportunities still available in a post-offshore era. Mundo is aware of the challenges of our times and by understanding this we can provide effective solutions for the perpetual traveler and nomad capitalist.

If countries like Nevis, Turkey, Grenada, the Cayman Islands, Singapore, or Seychelles find a place within your plan don't hesitate and contact us. If they don’t, we can still find a solution and guide you thanks to our wide network of professionals and our teams located in strategic places.

Whatever you require to cover your financial needs, we're here for you standing proudly on our expertise and experience.

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