Colon Free Zone

Only two-hour drive away from the capital Panama City there is the city of Colon. Here in 1948 was created the largest in terms of trade turnover (about 9-10 billion dollars counting import and re-export) in the Western Hemisphere and so far the second largest in the world after Hong Kong international free trade zone.

This is an area in the south part of the city is an independent administrative unit and  a part of Republic of Panama, but the interesting part is that the free zone’s area goes beyond customs territory. Showrooms, warehouses and retail infrastructure occupy about 400 hectares. Here are located more than 2,000 companies. Many of them are world-known brand names that have opened their offices here.

Colon Free Zone is a legal entity which has its own independent status. Import, storage, assembling, repackaging and re-export of goods inside the zone is free of duties, taxes or any other payments to the treasury of the Republic. Companies based in the zone are exempt from taxes on exported capital and paid dividends. The only thing that does exist in matter of payment is in fact the inspection fee.

Companies of Colon Free Zone are able to:

  • Re-export to other countries;
  • Sell goods on the domestic market (upon payment of import duties);
  • Sell products to other companies in the free trade zone;
  • Sell goods to foreign buyers with delivery to their country, without actual delivery to the zone.

Companies in Colon Free Zone can sell or offer the following types of products and services:

Offering rented land for constructions for creating warehouses for their project (20 years with the right of extension);

Buying existing facilities;

Businesses and individuals are not required to obtain the license for operation inside the zone. Also, there is no requirement of a minimum amount of capital invested.

Necessary documents for beginning of operations:

  • Application form;
  • Company registration documents (or a passport of an individual);
  • Bank references;
  • Initial investments – depending on the project can be $ 100,000 – 150,000. Rent cost can be $2- 6, showrooms  $10 -20 per square meter.

Companies which work in Colon Free Zone enjoy special tax benefits. For example, income received as a result of foreign trade is taxed maximum 8,5% (net income). But if the company hires more than 30 residents of Panama there are further reductions in taxes. Company established in Free Trade Zone after 1st  of January of 1976 doing re-export can expect discounts in taxes up to 95% during their first 5 years of operations. Local authorities are prohibited to levy any taxes or duties on products being imported into the zone of Colon or exported from it.

Mostly products are being imported from South East Asia: China, Taiwan, Japan, Malaysia, Indonesia – these counties export fast consuming products. The latter countries plus the US and Italy make 68% of the trade turnover. The biggest re-export market is Colombia, which consumes 20% products that leave Free Colon Zone. Following Colombia is Ecuador, Venezuela, US, Chile and Guatemala. These six counties take up nearly half of the re-export volume.

Consumer products are mostly being sold in Free Zone. It includes home appliances, computers, clothes, shoes, watch, photo cameras, jewelry made of gold, silver and precious stones, cigarettes, alcohol, toys etc. Out of other types of products there are manufactured goods, but they take up only 5% of the turnover.