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COLON FREE ZONE (CFZ)
Commercial Showcase of the Continent
ABOUT CFZ
The Colon Free Zone was created by Decree Law No. 19 dated June 17th, 1948, as an autonomous institution of Panamanian Government. Its purpose is to take advantage of all competitive advantages that Panama offers as a crossroad of world trade since the colonial times.
Location is one of the key elements of the enormous success of the Colon Free Zone. Its relative proximity to the Tigers of the Pacific, to North America and to Europe make it an ideal hub in this age of globalization of the world's economy. The Colon Free Zone is the world’s biggest free zone after Hong Kong and aims to be the main commercial distribution center for the hemisphere. To this end the Zone is constantly reconstructing and modernizing its warehouse, shipping and transit systems for all types of merchandise, keeping one step ahead of modern technology and always ready to offer the best multimodal services.
The Free Zone Legislation is conceived for the purpose of promoting national and foreign investment, especially in connection with the commercial and industrial field.
Established in the Atlantic entrance of the Panama Canal and served by modern ports facilities, the Colon Free Zone serves as a strategic location to export into Central America, South America and other countries.
BASIC FACTS ABOUT CFZ
Number of Companies |
More than 2,000 |
Area |
400 Ha |
Main Cargo Facilities |
5 major seaports in the surroundings
Tocumen International Airport serving as airlines hub in the region. |
Legal Tender |
US $ |
Annual Trade (includes import and re-export) |
US$ 12.281 billions |
Number of Employees |
More than 19,000 people |
Number of Visitors |
250,000 people per year |
Origin of Major Imports |
Hong Kong, Japan, U.S.A. |
Major Markets |
Colombia, Brazil, Venezuela, Ecuador and other Latin American countries |
Bank deposits by CFZ in the Panamanian International Banking Center |
US$ 578 million |
Credit by CFZ from Panamanian International Banking Center |
US$ 742 million |
Moreover, strict measures to thwart money laundering and brand name piracy are in place. A special copyright office was created in August 1997.
With a growth rate of 13.1% in 2005, comparing to 2004, and an activity value of US$ 12.281 billion and a total freight weight of 1,980,500 metric tons, the Colon Free Zone currently houses a total of more than 2,000 enterprises, including a large amount of foreign companies duly represented by local enterprises.
Commercial Activity at Colon Free Zone
2004 - 2005
Remarks |
2004 |
2005 |
Variation % |
Value (US$ millions) |
10,720.3 |
12,281.1 |
14.6 |
Imports |
5,250.6 |
5,807.9 |
10.6 |
Re-exports |
5,469.8 |
6,473.3 |
18.3 |
Weight (metric tons) |
1,737.8 |
1,980.5 |
14.0 |
Imports |
944.6 |
1,049.2 |
11.1 |
Re-exports |
793.2 |
931.3 |
17.4 |
Value per Unit (US$ / Kg.) |
|
|
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Imports |
5.6 |
5.5 |
-0.4 |
Re-exports |
6.9 |
7.0 |
0.8 |
Source: Annual Economic Report 2005, Ministry of Economy and Finance of Panama.
ADVANTAGES & INCENTIVES
The Colon Free Zone has a number of elements which support commercial activity on such differing levels as transport and financial operations. For instance, privileged geographical location, as well as the Panama Canal and other transportation facilities are strong elements that make Panama a trade hub for the region. American dollar as legal currency and the International Banking Center, which is located in Panama City, creates an ideal climate for international commerce. Moreover, a modern communications system and an efficient tourism service add to the facilities enjoyed by the Colon Free Zone users.
Advantages for Importers
- Purchase at only one place; in which a large variety of products and services are offered.
- Easiness to obtain credits.
- Less than 24-hour-dispatch service.
Advantages for Exporters
- Hub for market access to American continent, Europe, Asia, Africa and Australia. Freight moves by air, land, rail, and sea.
- World’s main shipping and cargo agencies services are available.
Special Tax Treatment
- No sales tax, no production tax.
- Tax exemption on income derived from abroad.
- No tax or duty on imports to or to reexports from the Free Zone to foreign countries.
- Income tax for the companies established in the Colon Free Zone is the same one that applies at the national level.
Among the tax benefits of the Colon Free Zone, the following are worth mentioning:
- Preferred tax schedule over profits.
- The import and re-export of merchandises is tax free as well as free of any other duty.
- Capital repatriation or dividends paid outside are not considered profit for tax purposes.
- Except for the payment of US$250.00 annual tax for the Panamanian Corporations and property taxes, companies are exempt from national and municipal taxes.
- Companies established in the Colon Free Zone which manufacture for export are fully tax exempt as long as they generate a certain number of stable and direct jobs.
- Tax laws for companies established in the Free Zone require separate accounting for local and foreign transactions. General administrative expenses are prorated according to the ratio of local and foreign revenues.
- Labor laws of the Republic of Panama are applicable.
HOW TO START A BUSINESS AT CFZ
A.Business Operational Schemes in Colon Free Zone
Any company or person that wishes to establish a business in the Colon Free Zone can do so under one or more of the following operational schemes:
- Subscribing with the Administration a Lot Rental Contract
- Subscribing with the Administration a Building or Commercial Premise Contract.
- Subscribing with the Administration a Premise Rental Contract for warehouses.
- Subscribing with a company that is already established, a Representation Contract.
- Using the services of the Public Warehouse established in the Colon Free Zone.
B.Requirements
Pursuant to Law Decree 18 of 1948, the corporations that operate in the Colon Free Zone will not be required to have neither a Commercial License nor a minimum investment capital, but they have to meet the following requirements:
C.Cost
1) In order to operate in the Colon Free Zone the company interested needs to have a license or code, the cost of which will depend on the type of operational scheme the said company will use, such as:
A. Operation Code: $3,000.00 annual. This should be obtained by any company operating in the Colon Free Zone.
B. Operating License: $2,400.00 annual. This should be obtained by a company that is operating under a lease agreement with another company that is leasing their warehouse to said new company.
C. Represented Code: $2,500.00 annual. This should be obtained by a company that has a representation agreement with a company already established and operating within the Colon Free Zone.
D. Monthly Rent. The rate will depend on the area the company is basing its operations.
2) The costs of the infrastructures are as follows:
a. Undeveloped areas:
Regarding the cases stated above, the client will have to assume the costs of building the infrastructure, i.e. office and warehouse space. However, it is our understanding that there is no undeveloped area at this time.
b. Buildings property of the Colon Free Zone
- In Colon City US$4.00 per m²
- In France Field US$ 2.75 per m²
- In Coco Solo US$ 2.25 per m²
c. Private Property
The parties must agree on the rent to be paid for the office and/or warehouse space. However, the rent agreed between the parties must be authorized by the General Manager of the Colon Free Zone based upon Resolution No. 02-92 of March 25, 1992 on Permits for Operation.
d. Representation Contract
The percentage must be agreed between the contracting parties.
e. Trash Collection
$30.00 - $120.00 monthly
f. Initial Expenses
Deposit in the equivalent of three months rent, plus the filling expenses (B/.30.00)
To see detailed maps of Colon Free Zone and France Field, please click here.
Sources:
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