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:: Tax Incentives ::

"Tax free" is the key phrase involved in nearly all operations in the Colon Free Zone, and is the phrase that is music to investors' ears. In the Colon Free Zone companies obtain fiscal benefits such as:

  • No sales tax, no production tax.
  • Tax exemption on income derived from abroad.
  • No tax or duty on imports to or re-exports from the Free Zone to foreign countries.
  • Income tax for the companies established in the Colon Free Zone is the same one that applies at the national level.

Copies of the laws dealing with tax incentives are available from the Colon Free Zone Administration. They are Decree 18 of 1948, Decree 23 of 1977 and Decree 48 of 1978. These are laws relating specifically to the Colon Free Zone. Decree 5 of 1979 deals with light assembly operations in the Republic of Panama, including the Free Zone. Write to the Director, Dept. of Industrial and Trade Development, Zona Libre de Colón, P.O. Box 1118, Z.L Colón, Republic of Panama to obtain copies.

Free Zone sales to distributors within the Republic of Panama are treated as normal imports, and taxed accordingly. Profits from such sales are taxed at a rate ranging from 20% up to $30,000 to 50% over $500,000 yearly.

Dividends to offshore stockholders are untaxed.

There is no capital gains tax on the sale of Free Zone assets that have been held at least two years.

There is no capital investment tax.

No municipal or other local taxes apply to Free Zone firms.

There is no tax on any of the shipments sent to or from the Free Zone to any place in the world.

Non-Panamanian executives pay the same personal income taxes, and other levies, as any other resident of Panama. Free Zone companies are responsible for the standard payroll deductions — income tax social security and so forth — for their employees whether Panamanian or foreign.

Additionally a series of discounts from taxable income are provided in proportion to the number of Panamanian nationals employed with the company on a permanent basis. These discounts on income tax are based on the following rates:

  • 0.5% of net taxable income if 30 to 100 Panamanian workers are employed permanently.
  • 1% of net taxable income if 101 to 200 Panamanian permanent
    workers are employed.
  • 1.5 % of net taxable income if more than 200 Panamanian permanent workers are employed.

ABOUT THE CFZ |  ZONE FEATURES | INCENTIVES | SETTING UP A BUSINESS | HELPFUL TIPS | TRAVEL INFO | USERS ASSOCIATION | FREE ZONE ADMINISTRATION