In today’s ultra-competitive global economy, businesses are searching for new and innovative ways of gaining a strong competitive edge to ensure higher levels of success. One way of doing so is by starting operations in a special economic or trade free zone that offers several benefits including tax exemptions and lower setup costs. Enter the Panama Pacifico and the Colon Free Trade Zone.
Located in Panama, these important projects represent a crucial international trade hub that attracts logistic services, multinational companies, and commerce and industry.
According to PR Newswire, Panama Pacifico was recognized as the Best Free Trade Zone in the Americas by the Financial Times.
The continuous development of talent, sizable residential dwellings, and strong infrastructure sets Panama Pacifico apart from other trade zones around the world. In this article, we’ll give a brief introduction to the Panama Pacifico and Colon Free Trade Zone.
A special economic area in the Americas, Panama Pacifico is the leading business and trade hub for multinational businesses seeking to strategically position themselves in the region. The brainchild of a Britain-based company London & Regional Properties, Panama Pacifico is one of the biggest mixed-use developments with 3,450 acres worth of land assets.
Located at a 15-minute drive from Panama City, it is a high-value manufacturing center that offers world-class services. Businesses that set up operations in this area gain access to numerous advantages along with unique incentives.
To date, more than 200 companies including Fortune Global 2000 and Fortune 500 have found considerable success. The big names include 3M, Atlas Copco, Cable & Wireless, Norton Lilly, Agrekko, Cummins, Caterpillar, Dell, and VF Corp.
The World Bank’s “Doing Business” Report listed Panama as the best country in its “Trading Across the Border” category. This success stems from an ever-expanding residential community, access to quality human resources, and its proximity to the country’s financial center.
Among the benefits that are only available in the Panama Pacifico area are tax exemptions from all indirect and direct taxes. Minimal setup and operational costs via an umbrella agency bring together all the relevant government agencies aimed at supporting companies operating within its borders.
Additionally, the Panamanian government has enforced strict privacy laws that make it an ideal base of operations for wealth management companies. As such, investors looking to store their gold, silver, or other valuables can get in touch with one of the many reliable wealth management firms with storage facilities within the country.
Panama Pacifico also offers special legal, fiscal, and labor regimes that open the door to several key opportunities. This creates the ideal business conditions conducive to the smooth flow of global operations within a secure environment.
Following is a list of business activities that are granted exemptions from both indirect and direct taxes:
- Multimodal and logistic services
- High-value manufacturing
- The film industry
- Offshore services
- Maintenance, overhaul, and repair of airplanes
- R&D for ICT networks
- Transmission of TV, video, data signals, and the internet
- Selling and exporting goods not manufactured within the Special Economic Zone
- Call centers
- Corporate headquarters
KPMG has more information on the latest tax amendments for the Panama Pacifico Special Economic Zone.
Panama’s unique geographical positioning enables it to provide trade and investment opportunities that cannot be replicated anywhere else in the world. The Special Economic Zone is close to the Panama Canal through which transits around 6% of all global trade.
The Panama Ports Company, the Balboa port, and the Interoceanic railway are 7 km away whereas the PSA International Terminal is just at a distance of 5 km. Also, the second largest free trade zone in the world, the Colon Free Trade Zone, is just an hour’s drive away.
According to the Borgen Project, Panama is home to one of the most highly developed infrastructures in all of Latin America. It also has a stable democratic government, low inflation, and one of the lowest crime rates in the region.
These factors along with the fact that Panama is only 4.5 hours away from Houston and 2.5 hours from Miami has attracted investors from around the globe.
Each year, thousands of clients contact private storage companies to safely secure their physical assets. Wealth management firms in the country such as Fort Kobbe have made a name for themselves by offering excellent private storage services.
The Colon Free Trade Zones
Considered as the country’s “duty-free haven”, the Colon Free Trade Zone is the second largest trade zone in the world and houses more than 3000 companies. The entire area spans across 1065 acres of land and has imports and exports that include everything from electronics, clothing, jewelry, and appliances.
According to the National Institute of Statistics and Census of Panama, the commercial movement reached $20.5 billion for the year 2018. Similar to Panama Pacifico, companies operating within the CFZ enjoy tax incentives and exemptions and do not have to pay any form of corporate income tax.
Merchandise that is stored, leaving, or arriving at the Colon Free Trade Zone is exempt from any type of charges and tariffs. Companies also don’t have to pay any municipal and federal tax. Consumer retail companies using the Colon Free Trade Zone as an export hub to Latin America gain access to the following benefits:
The medium of exchange is in dollars, there are no duty costs on entry, and buyers only have to deal with a single company. Relationships are easier to manage and since Panama is home to some of the biggest transshipment ports, exporting to any one of the Latin American countries is incredibly simple and straightforward.
Due to Panama’s status as a regional air hub, there’s no need to travel to different countries to speak with agents, merchants, distributors, or representatives as everyone is found in a single location.
Reduced Financial Risk:
Once the goods enter the country, the responsibility is transferred to the final buyer. Also, you’ll be dealing with established merchants that can effectively manage financial terms on the basis of creditworthiness. This mitigates the risk of losing out on sales.
Due to its status as the second-largest free-trade zone in the world, retailers from all around Latin America flock to the Colon Free Trade Zone and usually place orders in wholesale quantities. This results in increased sales and business growth.
Both the Panama Pacifico and Colon Free Trade Zone offer unparalleled advantages for businesses seeking to gain a strong competitive edge while strategically positioning themselves within the region.
For more information on obtaining a visa to move to Panama, contact us HERE and we will do our best to assist you.
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About The Author
Mikkel Thorup is the host of The Expat Money Show podcast and Director of Content at Escape Artist. He is also the author of #1 Best-Selling book Expat Secrets on Amazon. He has spent nearly 20 years in continual travel around the world, visiting more than 100 countries including Colombia, North Korea, Zimbabwe, and Iran. His goal is to help people just like you to generate additional streams of income, eliminate your tax bill, and take advantage of offshore structures so you can travel the world freely and never have to worry about money again. For more information on his legal (but creative) tax strategies for Expats watch this free video.
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