Setting up in the Colon Free Zone

With an average of US.$ 12.9 billon worth of transactions annually over the past five years, the Colon Free Zone is bound to catch the eye of the foreign investor.

Any person or company can set up operations in the Colon Free Zone by applying to the Administration and supplying commercial and bank references, a Panamanian Government tax clearance (paz y salvo) and the articles of incorporation in the case of a company. No commercial licence is required and no minimum capital investment is stipulated. The only condition is that a minimum of five Panamanians be employed.

Setting up can be achieved in any one of four ways:

1. Premises can be rented from a private owner.

2. A 20-year lease can be obtained on a lot of land and a company can construct its own facilities subject to Administration approval of plans.

3. An existing company can be used as a representative. A number of companies are organised for this service and the advantages they offer provide a convincing argument for this type of operation. The representative company makes transport arrangements, receives goods, does the documentation, packs and re-packs if necessary, re-exports, bills and even collects. The instructing company retains title to the merchandise. Agreements of this sort need approval of the Administration and the condition will be that at least 60% of the goods be re-exported. The advantages of this system are obvious: no capital investment, no overheads, no headaches, providing the relationship between owner and representative is a good one.

4. Merchandise can be handled by the public warehouse system. The businessman stores his merchandise in a public warehouse but in other respects functions like any other business established in the Free Zone. As in the case of employing a representative, the advantages are: no overheads such as salaries, rent, telephone. The Administration collects its dues based on the value of the merchandise and offers warehousing and all the facilities required, such as packing, labelling and despatching the merchandise to its export destination.