Petroleum Free Zones

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Panama has the potential to become a major oil and downstream products redistribution centre for two main reasons: one is the existence of the Panama Canal creating a natural bunkering market as well as a transshipment point, and the other is the fact of being the narrowest isthmus between the Atlantic and Pacific oceans to pipeline oil from South America to the Far East. Companies already doing business in 7 petroleum free zones include Exxon/Mobil, Shell, Alireza/Mobil, Chevron/Texaco, Gencor and others.

The free zone concept is inherent to Panama's historical condition as an international commercial, maritime and trade centre due to its strategic geographical position. The free zone is mainly a tax product within which all transactions are tax free and all business operations from the zone are protected by a special low-tax regime. As a consequence, Panama developed the Colon Free Trade Zone, the second biggest in the world after Hong Kong, and now is pursuing the Petroleum Free Zones.

There presently exists in the country 7 Petroleum Free Zones.

Within any Petroleum Free Zone, individuals or corporations, national or foreign, may perform multiple operations under a special tax free regime, as follows:

a) Introduce, storage, manufacture, bottle, refine, purify, mix, market, transport, transfer, pump, process, transform, sell or in any other way dispose in the domestic market, export, reexport, provide and, in general, operate and manage crude oil, semi processed or any of its by-products;

b) Build, install and operate petroleum refineries and other transformation or processing means of crude oil or semi-processed, storage tanks, oil pipelines, gas pipelines and poly-pipelines, pumping installations and pipes, buildings for offices, warehouses, or workshops and any other installations; introduce machinery, equipment, spare parts, containers, bottles, vehicles, furniture, equipment for fire or spill prevention, construct buildings for offices, warehouses, workshops for the use of the beneficiaries of the contracts to operate in the Petroleum Free Zones in any of the activities mentioned insubsection (a) hereinbefore;

c) Lease, acquire or in any other manner use lands, easements, right of way and other real or personal rights in regard to bona mobilia located in the areas designated as Petroleum Free Zones;

d) Establish water services, electrical power, gas, energy, heat, refrigeration or any other kind of services, upon previous coordination and approval with the respective public entities;

e) Build ports, piers, dry docks, shipping and unloading places for ship and airplanes, railroad stations for loading and unloading on land or granting contracts for the construction and exploitation of such works; and

f) In general, all kinds of operations or activities proper or incidental to the establishment and operation of the Petroleum Free Zones for the introduction, storage, pumping, transference, distribution, marketing and crude refining and petroleum by products.

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