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Panama Free Trade Zone Overview

Updated time: Jul 28, 2018 , 12:43 (UTC+08:00)

There are 3 tax-free trade zones in Panama. Each of them offers different kinds of tax breaks based on their intended purposes. Below is a review of Panama’s tax incentivised businesses zones.

1. Colón Free Trade Zone

The Colón Free Trade Zone was created in 1948 and is the 2nd largest free-trade zone in the world, behind Hong Kong’s. More than 1,800 companies operate within the zone. Most of these businesses are involved with the exporting and importing industry, having warehouses, factories and repackaging facilities for various products. A semi-independent governmental agency administers the Colón Free Trade Zone, granting operational permits and leasing space.

To be located in the Colón Free Trade Zone companies must have a minimum 60% of the imported products exported annually, and hire five Panamanians.

The Colón Free Zone consists of a port and transit systems designed for exports, re-exports, imports, manufacturing, warehouses, refining and processing goods, and other activities related to free-trade zones.

Colón Free Trade Zone benefits

No import duties

Only a 5% dividend tax

Zero tax on income derived from export activities

Zero tariffs and quotas on imports and exports to foreign countries

2. The Panama Pacifico Special Economic Zone

The Panama Pacifico Special Economic Zone is being constructed on a 1,390-hectare site with an 8,400-foot runway for planes. When completed, it will be a small city including bank offices, corporate offices, call centres, high-tech products and manufacturing, logistics services, offshore services, aircraft maintenance and repair services, film industry, transferring goods and services to ships and airplanes, and exporting goods.

Qualification for location within the Panama Pacifico is being engaged in one of the following industries.

  • Call centres,
  • Offshore services
  • Back-office services
  • Multimodal and logistics services
  • Data and digital transmission
  • Maritime services
  • Aviation services
  • High-tech manufacturing and assembly

Companies wishing to operate inside this economic area must apply to London & Regional Panama and the government agency Panama Pacifico Agency.

Panama Pacifico developers

London & Regional Panama (LRP) merges two companies: Latin America’s Southstone Investment Company and London & Regional Properties (L&R). L&R brings vast real-estate knowledge on a distinguished level, as developer, manager and owner of nearly US$21 billion in worldwide properties on 5 continents. Southstone combines Latin American cultural insight, experience and economic support.

The development

The former US Howard Air Force Base is being developed into a Special Economic Zone for multinational corporations and high-technology companies. There are over 125 multinational companies now established there, with 50 more coming in 2012.


LRP has a master plan including the latest trends in green buildings, fibre-optic networks, and walkable neighbourhood designs. The developer’s vision includes: “Enter a new world that forms a bridge between tradition and innovation, country breathing space and big-city accessibility, private funding and government support. A true master-planned community that brings together people of all ages to live, work and play. A haven of residences with a vivacious mix of strolling neighbourhoods and chic homes. A global enterprise offering unprecedented business advantages. All set within a sustainable landscape linked by parks and trails.”

Panama Pacifico offers a new way of life that’s all about connectivity, unlike any other destination in Latin America.


Once a US Air Force base, the majority of Panama Pacifico’s infrastructure was already established. Panama Pacifico benefits from being connected to Panama’s leading public-works suppliers operating out of the Panama Canal. From potable water works, premier electrical connections to state-of-the-art high-tech capabilities from 5 key submarine-telecommunications spheres and excellent roads, Panama Pacifico’s excellent infrastructure accommodates present and future generations.

Panama Pacifico already has an on-site shuttle-bus system. The new Transportation Demand Management system began in 2012, with commuter buses for on-site employees.

The entire infrastructure system will be underground, preserving the community’s natural views and character.

Panama Pacifico tax benefits

  • Import duties
  • Income taxes
  • Stamp tax
  • International phone-call tax
  • Remittance tax
  • Dividend taxes
  • Sales Tax (ITBMS)
  • Real Estate Transfer Tax
  • Real Estate Property Tax
  • Licensing Tax
  • Export/Re-Export Tax

Other benefits

  • There are also tax exemptions for transferring services and goods between the ports, to petroleum-free zones, to ships and passengers, to other companies, to the London & Regional Panama Company, and to government agencies located in Panama Pacifico.
  • Tax benefits will have a 10-year consistency.
  • Labour laws regarding working hours, Sunday and holiday pay, and the right to negotiate different days of rest and vacations with employees, are relaxed.
  • Companies will also have more immigration visas and work permits for foreign workers.

Immigration benefits

The Panama Pacifico Special Economic Zone also provides Panama immigration benefits, including easy application for and issuance of the following visas.

  • Family visas, which extend to financially dependent parents and spouses
  • 3- to 5-year special visas for investors and labourers.

There is a one-stop-shop immigration office to handle all applications for visas and work permits.

Another benefit is the tax-free importation of personal effects with a total value of up to US$100,000.

Labour incentives

In addition, the Panama Pacifico Special Economic Zone offers labour incentives such as:

  • fixed rates for holidays (50%) and overtime (25%);
  • flexibility, by allowing companies to be open on Sundays and holidays, with assigning employees’ holidays, and having a greater percentage of foreign workers; and
  • more flexibility to fire employees with just cause or for market fluctuations.

3. City of Knowledge

The former US Army base of Fort Clayton has been converted into the Ciudad del Saber (City of Knowledge), containing high-tech companies providing services to international governments, international research, education, science-research centres, universities, businesses and non-government organisations. The not-for-profit City of Knowledge Foundation administers this complex.

The City of Knowledge (Ciudad del Saber) Special Economic Zone is a scientific, technological and entrepreneurial park. The types of businesses allowed include scientific, technological, human-development and cultural organisations.

City of Knowledge tax benefits

  • Import-duty exemptions for all vehicles, equipment, machinery, furniture and company-operations materials
  • Income-tax exemptions
  • Exemption from sales taxes on all equipment and goods necessary for company operations
  • Property-transfer tax exemption
  • Quota exceptions for immigration visas and work permits for high-skilled foreign workers, including immigration visas for immediate family members who relocate to Panama.

Tax Free Processing Zone visas

The Panama Tax Free Processing Zone Investor Program allows foreign investors and their families to relocate to Panama and obtain Panama residency by renting a plot of land, office or entire building with at least a 10-year lease within one of Panama’s Tax Free Zones. The qualifying purpose of the business varies for each free zone.

Panama immigration laws favour foreign investors who can generate business from Panama to the rest of the world. There are distinct tax advantages for foreigners who can operate manufacturing plants, assembly plants, call centres, software-creation facilities and other businesses which can export their products or services. These businesses also get a substantial tax break when selling a certain percentage of their products or services locally.