Foreign investment laws and special economic zones

With the purpose of strengthening its international services platform and its logistics assets, Panama has promoted the development of Special Economic Zones which, in addition to guaranteeing legal stability, provide a series of tax, labor and migration incentives. Among these areas that promote different specific economic activities, we find:

The Colon Free Zone
The Panama Pacific Special Economic Area
The City of Knowledge
Free Zones in general (19 in total)

Likewise, with the adoption of the Regional or Multinational Companies Headquarters Act (Law 41 of August 24, 2007), there is the additional aim is to promote Panama as a top destination country for this type of companies.

Comparison of the Laws

Authorized Activities
	Colon Free Zone	Panama Pacific Special Economic Area	City of Knowledge	Law of Multinational Companies Headquarters	Free Zones
Law	18 of June 17, 1948	41 of June 20, 2004	6 of February 10, 1998	41 of August 24, 2007	32 of April 5, 2011
Law	18 of June 17, 1948	41 of June 20, 2004	6 of February 10, 1998	41 of August 24, 2007	32 of April 5, 2011	–
Imports	•	•			•
Exports	•	•			•
Re-exports	•	•
Manufacture	•	•			•
Wholesale goods	•				•
Wholesale goods marketing	•	•			•
Wholesale goods distribution	•	•			•
Processing of goods	•	•			•
Refining of goods	•	•			•
Corporate headquarters		•			•
Administrative functions (back office)		•			•
Call-centers		•			•
Logistics and Multimodal Services		•			•
Manufacture of high-tech		•			•
Services to the aviation industry		•			•
Off-shore services		•			•
Film industry		•			•
Data transmission, and radio, television, audio and video broadcasting		•			•
Free transfer of goods between registered companies		•			•
Free transfer of goods and services to ships and airplanes		•			•
Science			•		•
Technology			•		•
Human Development			•		•
Culture			•		•
Superior Education Centers					•
Scientific Research Centers					•
Medical Services					•
Assembly process					•
Services abroad or to other zones					•
Environmental services					•
Services in general with the zone					•

Comparison of Benefits

Comparison of Benefits
	Colon Free Zone	Panama Pacific Special Economic Area		City of Knowledge		Law of Multinational Companies Headquarters	Free Zones
		All activities	Specific activities	Registered users	Affiliated to the International Technological Park
1 – Applicable Taxes
Exempt from income tax	•	•	•	•	•	•	•
Exempt from tax on dividends and supplementary tax			•			•
Taxes on dividends (reduced to 5%)	•						•
Supplementary tax (reduced to 2%)	•						•
Yearly tax (1% on capital stock accumulated by the company)	•	•	•				•
Exempt from taxes on remittances or transfers abroad (withholding)			•	•	•
Exempt from taxes, fees, tariffs or charges on imports	•	•	•	•	•		•
Exempt from exports tax	•	•	•		•		•
Exempt from re-exports tax	•	•	•
Exempt from taxes on sales, invoicing and production	•	•	•				•
Exempt from transfer tax		•	•	•	•	•	•
Exempt from taxes, rates, tariffs, fees or charges		•	•
Exempt from Commercial or Industrial Licenses		•	•		•
Exempt from registry tax (Notice of Operations)		•	•		•		•
Exempt from stamp tax		•	•		•		•
Exempt from property tax		•	•		•		•
Exempt from property transfer tax		•	•		•		•
Exempt from re-export income tax	•	•	•
Exempt from taxes on income obtained abroad	•	•	•
Exempt of dividend taxes for share-holders living abroad	•	•	•			•
Exempt of taxes on investments	•	•	•		•
Exempt of taxes for licences and patents					•		•
Exempt from taxes, tariffs, fees or charges applied to payments from foreign debtors for financial activities
Exempt from taxes, tariffs, fees or charges applied to payments received from the financial lease of equipment		•	•
Exempt from excise taxes		•	•				•
Discounts on taxable income based on the number of Panamanians employed	•
Tax on sales to the Panamanian territory	•
Fee for transfer (documentation)	•
Entry of sea or land cargo	•
Rate for the concept of User Operation Code	•
Rate for the concept of Represented Operation Code	•
Fee for Permit or Operation License	•						•
Security rate	•
Cleaning fee (garbage collection)	•
Fee for company registration		•	•
Rate for annual company registration		•	•				•
Fee for maintenance of common areas		•	•
Special regime of municipal taxes		•	•

2 – Migration regime
Availability of special visas for investors and workers		•	•	•	•	•	•
Availability of special visas for immediate family		•	•	•	•	•	•
Tax free import of personal and domestic goods (up until $100,000.00 USD).		•	•
National Directorate of Migration presence through a special office		•	•
Advantages to foreign investors and executives	•	•	•			•	•

3 – Labor regime
Benefits according to the Social Security Fund legislation (worker-employer relationship)	•	•	•	•	•		•
Fixed rate for overtime (25%)		•	•				•
Fixed rate for employee free days (50%)		•	•				•
Flexibility to assign free days to employees		•	•				•
Freedom to conduct businesses on Sundays and holidays		•	•				•
Flexibility to exceed the percentage of foreign workers in the absence of local labor or according to the company’s need	•	•	•	•	•		•
Justify any dismissal due to losses and/or market fluctuations		•	•				•
Availability of a Higher Education Training Center		•	•
the Ministry of Labor presence through a special office		•	•

4 –Business Stability Regime
Coverage by the Investment Stability Law (Law 54) to companies established in the area		•	•	•	•	•	•
Corporate stability to changes in government		•	•			•
Protection of intellectual property rights	•	•	•			•

Besides being the second largest free zone in the world, the Colon Free Zone is also the main distribution center for Latin America and the Caribbean. It is mainly dedicated to the regional distribution of wholesale goods, together with some logistic and financial services that support such operations.
Panama Pacific Special Economic Area focuses on international shipping, carriage and logistics services, as well as activities specialized in manufacture and hi-tech research and development.
The City of Knowledge concentrates in academic, scientific, cultural and human resources development, and related activities.