Export Processing Zones

For legal effects, in Panama an export processing zone is a free zone located in an area specifically defined, in which physical establishments, the operative and administrative organization is developed, as well as the service systems and the necessary support for the establishment of companies of all parts of the world that produce goods and services solely for export.

The export processing zones in Panama are regulated by Law 25 of 1992, which has the objective of attracting light manufacturing companies dedicated to the transformation and ensemble of products. To grasp the attention of these types of companies, the national legislation offers incentives of tax, migratory and labor type.

In tax matter, the law that regulates the export processing zones establishes that those companies that settle in Panama in a processing zone will be exempt of the income tax, import tax on required assets for its operation, the export tax on the produced assets, the real estate tax, the patents and licenses tax, tax on the capital and the dividends that the company generates.

In migratory matter, the foreigners that prove they have invested a sum no less than US$250,000.00 in an export processing zone will have the right to a permanent resident visa as an investor. The foreigners hired as trusted personnel, expert or technical executives for promoting companies or companies established in export processing zones will have the right to a temporary resident visa for the term of the contract duration. And foreigners that travel to Panama to make transactions in export processing zones, established or to be established in Panama will have the right to a merchant resident visa valid for a year. These visas are granted to the requestor’s spouse, children underage and those of age that are still dependents.

In labor matter, the law of incentives to the export processing zones establishes for promoting companies or companies established in a processing zone, a requirement of justified layoff of its special workers, consistent in the market loss or clients’ loss.  It also establishes that for legal effects, the production premiums, bonuses and rewards that are granted to the worker will not be considered as part of their salary. Finally, the law of incentives empowers these companies to rotate their workers in the different production lines of the company, and to split the annual vacation period in two equal parts.