Panama Pacific Special Economic Area

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Panama Pacific Special Economic Area

Aware of a historic opportunity for progress and renewal after the former Canal Zone was transferred to Panama in 1999, the Republic of Panama launched an ambitious economic modernization program and legal reforms, affecting laws related to production, labor, maritime affairs, tourism, and allowing for the privatization of state-owned companies and assets. Various investment incentives were created through these groundbraking changes.

Under these reforms, the Government of Panama´s Agency of the Panama-Pacific Special Economic Area is now seeking to develop Howard with private sector participation. A former U.S. Airforce Base endowed with substantial real estate assets and modern infrastructure, Howard is expected to become an economic and employment generator. With this goal in mind, Panama is investing the required resources and making long-term commitments to investors to enhance their success.

Howard is located on the west bank of the Panama Canal, the fastest growing area of Panama City. The conversion of the former air force base into a civilian area was carefully designed by the Government of Panama, with advice from the International Financial Corporation (member of the World Bank Group) and leading consultants. The objective is to combine world-class logistics and telecommunications infrastructure now available in Howard with Panama´s expertise in the business, financial and service sectors. This combination will make Howard into one of the most successful business hubs in the Americas and strengthen Panama´s regional leadership as a sea and air transport center.

Howard now has the status of a special economic area, providing an ideal regulatory and business environment to investors. For example, companies investing in Howard enjoy special regulations that allow them to operate 24 hours a day, 365 days a year in a modern and efficient labor environment.

Some of the best investment opportunities include the establishment of:

  1. Companies engaged in light manufacturing, such as assembly plants related to electronic business.
  2. Storage/logistics businesses dealing with trade and traffic to/from the Pacific coast.
  3. Companies specialized in information, communications and technology, such as call and internet data centers.
  4. Residential installations.

Howard has extensive and renovated commercial and residential properties and important transportation and utility assets. Area:2,005 hectares (5,000 acres) Buildings:Seventeen, 3,000 m2 (32,292 ft2) administrative buildings, 706 housing units, schools, gym, theater. Airport:International airport with a 2,591x45 meter runway; passenger terminal; and four, 8,800-10,700 m2 hangars (95,000-115,000 ft2). Utilities:Electricity, water, sanitary services, telecommunications, utilities in good working order with the capacity to serve a self-contained city of 10,000 inhabitants.

REGULATIONS

According to Law 41 of 20 July, 2004, companies starting business within the AEEPP zone will benefit from the following:

ONE STOP OFFICE

  • Agency integrated by representatives from several government institutions such as Immigration, Labor Department and Customs, to handle and take care of all formalities and transactions in situ, under new and expedite procedures.

FISCAL TREATMENT

  • Exemption of direct and Indirect taxes, contributions, rates, duties and local taxes, with the exception of the following: 
    1. Taxes over earnings, which are:dividend revenue, complimentary and remittance or money transfer overseas.
    2. Import and ITBM (tax on transfer or movable property and services) taxes for services related to liberal professions.
    3. Importation taxes, ITBMS and selective tax over consumption for retail sales. 
  • Earnings from the following activities will be tax exempted:

    1. Offshore services
    2. Sale and transfer of shares of companies established within the AEEPP.
    3. Transfer of goods and services between companies in the area, developer and/or operator or between these and companies established in other zones with special regulations.
    4. Sale of goods and services offered to visitors, passengers or crew members in transit to other country or vessels crossing the Panama Canal or aircrafts using ports in Panama with destination elsewhere overseas, unless the sale is made by the manufacturer himself or a company of the same economic group.
    5. Services or activities related to aviation and airports, transportation, cargo handling and storage, maintenance, repair, aircraft overhauling, parts and/or aircraft parts.
    6. Manufacture of high technology products.
    7. Multimodal and logistic services.
    8. Call centers; capture, processing, storage, exchange, transmission of data and digital information; radio signal, television, audio, video and or data links, administration of offices to users within the area or outside the Panamanian territory; research and development of resource and digital applications to be used in intranet and internet networks.

LABOR TREATMENT

The Labor Code applies with the exception of special treatment regulations for the AEEPP area which are:

  • Only 25% fixed surcharge for overtime.
  • Work performed in mixed shifts and night shifts, paid based on actual worked hours.
  • Flexibility of arranging shifts. · Only 50% fixed surcharge for working on a weekly day off.
  • Possibility to establish the day off in a day other than Sunday.
  • Possibility to negotiate when to use the time of vacation.
  • Decrease of sales and/or demand of services due to market fluctuations, are considered justified reasons for termination.
  • If the reason for termination is of economic nature, the labor authorities will have 15 days to rule, when lack of ruling, termination will be considered justified.

IMMIGRATION TREATMENT

Special visas for expatriate in the area and for investors, investing not less that B/250,000 in risk capital of the companies. Beneficiaries of the visas for technical workers or specialists, and investors visas can import domestic use goods for up to B/.100,000.

CUSTOM TREATMENT

Automated system of movement of goods, based on inventory audits instead of physical controls.

ALLOWED ACTIVITIES

AEEPP companies can carry out any activity not prohibited or restricted legally, except:

  • Display or show rooms will not be allowed of products that are internationally merchandised in other free zones.
  • Importation temporary restrictions for re-exportation of wholesale products that are not transformed in the area is not permitted, with the exception of the following:       

    1. Products leaving the area via air.        
    2. Importation and re-exportation made by manufacturing companies of complementary  products of the ones manufactured by those companies in the area or products  manufactured by those companies in any other place.       
    3. Products related with maintenance, repair, conversion and reconversion of aircrafts and related activities.       
    4. Products related to petroleum free zones operating within the area.       
    5. Provision of vessels and aircrafts.       
    6. Logistics and transport activity (including transportation, handling and storage, goods, handling of information, logistics advisory, and of foreign trade).          
      *This ban is temporary.