FREE ZONES IN THE REPUBLIC OF PANAMA
Free Zones, which are governed by Law No. 32 of 5th April 2011 and regulated by Executive Decree No. 62 of 2017, are specifically defined free enterprise zones in which all support infrastructures, installations, buildings, systems and services are developed, as well as the operational organization and the administrative management required for the establishment within such Free Zones of companies from all over the world whose activities include the production of goods, services, high technology, scientific research, higher education, logistic services, environmental services, health services and general services.
There are three kinds of free zones:
a) Free zones whose investors are individuals or legal entities, whether domestic or foreign. Their establishment, operation and administration lie within the power and responsibility of their owners in accordance with the standards and principles of the free enterprise and private ownership system and other provisions of the laws of the Republic of Panama.
b) Free Zones whose sole investor is the State. Their establishment, development, operation and administration lie within the responsibility of a State entity or of a private operating company to whom a management contract has been granted in accordance with established legal procedures.
c) Free Zones whose ownership is shared by the State and domestic or foreign investors. Their development, operation and administration shall lie within the responsibility of a State entity or of a private company.
Any individual or legal entity wishing to act as a promotor and/or operator of a Free Zone shall need to obtain a Free Zone License from the National Free Zone Commission, an entity of the Ministry of Commerce and Industry.
Companies that may be established within the Free Zones include companies engaged in manufacturing, assembly, processing of finished or semi-finished products, logistic services, higher education, scientific research, high technology, environmental services, provision of health services and general services, as well as investors engaged in the leasing of real estate to companies that carry out the activities allowed by Law 32 of 2011. Individuals or legal entities that wish to engage in one or more of the activities allowed by Law 32 of 2011 shall need a Companies Established in Free Zones License.
a) Tax and import tariff exemption for raw materials, semi-finished products, purchase and importation of construction equipment and material, machinery, spare parts, tools, accessories, supplies, packaging material and any good or service required for their operations.
b) Promoters of Free Zones are exempt from taxes on leasing and sub-leasing income.
c) Service companies, logistic services companies, high technology companies, scientific research centers, higher education centers, general services companies, centers specialized in health services and environmental services companies shall be exempt from income taxes for external operations and for operations among themselves.
d) They shall not be exempt from real estate taxes.
Labor relations within a Free Zone are more flexible than those in force in the rest of the national territory, as worker turnover is allowed and annual leave can be agreed between the parties.
a) Permanent Resident Permit as an investor for foreigners that prove that they invested an amount not less than US$250,000.00 originating abroad in a company established in the Free Zone or in a Free Zone promoter.
b) Temporary Resident Permit for management staff, executives, experts and/or technicians, foreigners hired by a company established in the Free Zone, which permit is valid for the term of the contract.
c) Temporary permits granted by special policies for a teacher, student or researcher of a Higher Learning Center in a Free Zone, or for a researcher in a Free Zone.
d) Short Stay Visa for a businessman and investor, under special laws, valid for nine months, for carrying out transactions or business in Free Zones.
e) Dependents of persons applying for or holding the above-mentioned permits may apply for permanent resident or temporary resident permits, it being understood that a dependent is the spouse and minor children, children of legal age that are dependents of the main applicant, handicapped relatives and dependent parents.
Requirements for Granting of a Free Zone License:
To obtain a Free Zone License, the operator and/or promoter shall submit the following documents:
a) Formal application addressed to the National Free Zone Commission.
b) Power of attorney granted to a bar certified attorney (in the case of legal entities)
c) Certified copy of the applicant’s personal identity card or passport. In the case of a legal entity, a copy of the Articles of Incorporation and a Public Registry certificate.
d) Bank and business references from local and foreign companies of recognized creditworthiness.
e) Certification by the shareholders or partners of the company, signed by the company’s secretary or treasurer.
f) National no balance due certificate issued in favor of the applicant.
g) Digital card photograph of the applicant or legal representative.
h) A study comprising a description of the aims, activities, structures, organization and services that the Free Zone will provide; size and location of the Free Zone; ownership title or lease agreement for the land; initial investment and future investment project; preliminary financial projections; proposed schedule for execution of the project; authorization from the Ministry of Housing and Land Use Planning regarding the respective land use and zoning.
Requirements for Granting of a Company Established in a Free Zone License
a) Power of attorney granted to a bar certified attorney.
b) Formal application addressed to the National Free Zone Commission.
c) A study comprising a description of the activity to be developed, origin and details of the raw materials, materials, supplies, equipment, machinery, accessories and other articles to be used, number of jobs it is envisaged will be created, initial investment and future investment project, schedule for execution of the project.
d) Certified copy of the applicant’s personal identity card or passport. In the case of a legal entity, a copy of the Articles of Incorporation and a Public Registry certificate.
e) Digital card photograph of the applicant or legal representative.
f) Contributor Sole Registration (RUC) issued by the Ministry of Economy and Finance.
g) Certification of capital invested, issued by a certified public accountant.
h) Certification by the shareholders or partners of the company, signed by the company’s secretary or treasurer.
i) Certification issued by the promoter of the Free Zone evidencing authorization for the applicant to be installed in such Zone.
j) Any other requirement set down by regulations.
At our ILH-INTERNATIONAL LEGAL HUB, we provide advice and support to our clients during the process of applying for a Free Zone License or a Company Established in a Free Zone License from the National Free Zone Commission.