Investing In Panama: Colon Free Trade Zone
Colon Free Trade Zone (“CFZ”) is the largest free zone in the Americas and the second largest in the world. Created in 1948, the free zone houses 1,751 merchants, receives yearly more than 250,000 visitors from all parts of the World, mainly from countries such as Haiti, Jamaica, Costa Rica, Venezuela, Colombia, United States, Ecuador, and others. The CFZ generates exportation and re-exportation goods valued at more than US$6.5 billion in 2005.
The CFZ, world trade leader, is located at the Caribbean entrance of the Panama Canal, with access to three ports in the Atlantic and one in the Pacific. The products most often imported in the CFZ are electric appliances, clothing, watches, perfumes and cosmetics, textiles, gold jewelry, liquors, and cigarettes. According to statistics, the country noted as the best client is Venezuela due to its high purchase index. Colombia follows, and the largest importer is Hong Kong.
The CFZ generates many benefits to the national economy. The intense commercial activity that develops in this emporium has an enormous impact in the local economy, which is reflected in the contribution to the national internal product of 7.5%, reason why it is considered one of the largest pillars in the Panamanian economy.
In 2006, the re-exportation commerce in the CFZ increased to 14.7% in value and 23.5% in metric tons, while the value of the importations increased 11.1% and 8.6% in metric tons. Regarding the income of the Panama Canal in concept of tolls, the same increased in 21.9%, cargo in long tons in 9.3% and the net tons en 8.4%, in contrast to the transit of ships through the waterway which increased in 3.6%.
The CFZ success is due to a combination of factors such as the geographical location of Panama at the crossroads of the world, the Panama Canal, the fact that the US dollar is legal tender, a large banking center on its doorstep, a developed insurance and reinsurance industry, several state-of-the-art container ports and not very onerous business requirements.
Colón has regained the glory that once belonged to nearby Portobelo which, until the middle of the 18th century, was a major trading center in the New World.
Most Free Zone merchandise is transshipped from Panama to other parts of the Western Hemisphere and Europe. Imports into the CFZ come mainly from the Far East. The largest individual supplier of the CFZ in 2004 was Hong Kong (China) followed by Taiwan, United States, Japan, Korea, France, Mexico, Italy, Puerto Rico, Switzerland, United Kingdom, Malaysia and Germany. These countries supplied nearly 87 percent of all CFZ imports in 2004. Colombia is the largest buyer of merchandise, buying nearly 16 percent of all CFZ exports. Other principal purchasers are Venezuela, Panama (domestic market), Guatemala, Ecuador, Costa Rica, Dominican Republic, the United States, Chile, Cuba, Honduras, Peru, Brazil, Nicaragua and El Salvador. These countries buy approximately 83% of all exports from the CFZ.
The CFZ is administered as an autonomous institution of the Panamanian government. Today it is completely developed, and covers approximately 400 hectares, including 45 hectares designated as an industrial zone.
The CFZ offers free movement of goods and complete exemption from tax on imports
and re exports. There are no taxes on the export of capital or the payment:
of dividends. In addition, there are reduced income tax rates on earnings from
re-export sales. Furthermore, firms located in the CFZ are exempt from import
duties as well as from guarantees, licensing, and other requirements and limitations
on imports. Due to its geographic location, the CFZ is a major factor in channeling
goods from large industrialized countries to consumer markets in Latin America.
To view our Services in the Colon Free Zone, please Click Here
The CFZ Administration is operated and managed by its Board of Directors, an Executive Committee and the General Manager of the institution. Corporations or individuals of any nationality may establish operations in the CFZ without obtaining a commercial license or investing any minimum amount of capital. Firms interested in operating in the CFZ must file an application and provide a copy of the articles of incorporation and bank references.
Companies operating in the CFZ can be engaged in four types of sales operations:
- Re-export of goods from CFZ warehouses;
- Sales to clients located within Panama’s customs territory;
- Direct sales to foreign clients in which goods are shipped from a third country; manufacturer without physically arriving in the CFZ; or
- Transfers in which sales are made to other CFZ firms.
Companies operating from the CFZ enjoy many trade advantages along with special tax incentives
such as tax credits, depending on the number of Panamanian employees, and special
income tax rates on foreign trade operations. Companies in the free zone do
not pay corporate income tax. Dividends paid on profits from foreign trade operations
and from direct sales are not subject to the dividend tax. Merchandise arriving
at, stored in, or leaving the CFZ destined for a foreign country is exempt from
taxes, charges or any type of tariff. Also, CFZ companies are not subject to
any type of federal or municipal tax.
There are four basic ways of doing business in the CFZ:
- Leasing lots on which the firm builds a warehouse or other facilities as designed by the firm. Land leases are granted for a 20 year period;
- Purchasing an existing facility from the CFZ Administration;
- Reaching an agreement with a company already established in the CFZ as the operator’s representative. The cost of this service is set by mutual agreement between the parties involved. Representation agreements are subject of approval of the CFZ Administration; or
- Leasing a public warehouse operated by the CFZ Administration. The firm receives its goods and stores them like any other company of the zone. There are no fixed costs and payment is based on the weight or volume of the goods stored.
The Business Panama Group has an alliance partner in the Colon Free Zone that is a well-known and fully licensed company with complete warehouses and logistic services in the Colon Free Zone. Our Colon Free Zone Alliance Partner will act as the representative of your corporation. We will receive the merchandise, send it to its distributors, invoice it and send you a detailed report.
Together, the Business Panama Group and its alliance partner in the Colon Free Zone can provide you full services to your proposed operation in the CFZ.
If you want to set up operations in the Colon Free Zone, please Click Here.
For more information, please contact us at
Business Panama Group
Plaza 2000 Tower, 10th Floor
50th Avenue
Panama City
US & Canada Toll Free 1-866-750-3498
Local Tel (+507) 223-6788
Fax (+507) 263-2460
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