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 approximately 3,000 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.
Colon Free Zone has maintained a constant growth throughout the last decade. For the year 2011, the commercial movement of the free trade zone has reached $29,154 million, representing an increase of 34.8% compared to 2010. The imports totaled $14,041 million and reexports totaled $15,113 million at the end of 2011.
The main products imported by Colon Free Zone are pharmaceuticals and chemical products, textiles, machinary and electricals, shoewares and headwares. These products have mainly been imported from China, Singapore, United States, Taiwan and Mexico. These same products are reexported to the Latin American markets, mainly to Venezuela, Colombia, Puerto Rico, Panama and Domincan Republic.
Major countries of imports are China, Singapore and the USA. The major directions for export are Puerto Rico, Venezuela and Columbia.
About $ 400 million of Panamanian exports are shipped to the United States. Venezuela and Colombia are the main export countries in the region, representing about 10 million dollars in transactions.
Business at the CFZ has increased as a result of increased volume of re-ported goods, generating more income in both the wholesaler and the retailer internal trade.
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 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.
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.
ColÃ³n 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 is China followed by Singapore, United States, Hong Kong, Mexico, France (Monaco), Taiwan, Japan, United Kingdom. These countries supplied nearly 90 percent of all CFZ imports. Puerto Rico is the largest buyer of merchandise, buying nearly 20 percent of all CFZ exports. Other principal buyers are Venezuela, Columbia, Panama (domestic market), Guatemala, Costa Rica, Ecuador, Dominican Republic, the United States, Chile, uba, Honduras, Peru, Brazil, Nicaragua and El Salvador.These countries buy approximately 80% of all exports from the CFZ. (2011 data)
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.
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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:
1. Re-export of goods from CFZ warehouses;
2. Sales to clients located within Panama’s customs territory;
3. Direct sales to foreign clients in which goods are shipped from a third country; manufacturer without physically arriving in the CFZ; or
4. 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:
1. 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;
2. Purchasing an existing facility from the CFZ Administration;
3. 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
4. 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.
Regulations / Resolution
By means of Resolution of May 10, 2008 the CFZ General Management modified the implementation of the revised figure of Investment Appreciation or Lease Back, created in 1993 and regulated by Resolution No. 02-97 of March 12, 1997. This change increases the amount, forms to acknowledge construction of infrastructure investment over one million dollars, transferability of the investment credit and inclusion of the expiration figure.
The General Management recommends allowing application of credit to the legal person who executes the investment in a different site other than that were infrastructure was built, provided that it is the same person, and shall keep the same monthly installments amount that corresponds according to construction area.
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 BusinessPanama Group and its alliance partner in the Colon Free Zone can provide you full services to your proposed operation in the CFZ.
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