Other Commercial Regimes
Introduction
Because Panama has an excellent location, it offers economic benefits for any company looking to access regional markets. The national government executes stimulus plans for new and existing special trade regimes, which are created to provide services to different types of activities and in turn promote the distribution and redistribution of goods and the production of food and value-added technology. These aircraft will also seek to attract FDI and generate jobs in the different regions of the country. Some special systems of interest are:
1. Operating companies and developers of agroparks
2. Logistics Customs Warehouses
3. Oil free zones
Operating and Developing Companies of Agroparks
With Law 196 of February 8, 2021, a new special regime was created as part of the economic recovery of the country. One of the objectives is to encourage the development of parks with added value and technology focused on agri-food, agro-industrial production, services and related industries.
Benefits
- 3% as import tax on raw materials, semi-finished or intermediate products and other inputs that enter the product manufacturing process.
- Revocation of the import tariff on construction materials, equipment and furniture that are necessary to carry out the activities for a period of 5 years.
- Revocation of the property tax on new commercial or industrial improvements for 20 years, counted from the occupancy permit.
- 50% reduction in income tax.
- Reduced rate of 50% dividend tax
The entity in charge of promoting, managing applications and supervising the agroparks will be the National Directorate of Agribusiness (DINAGRON) of the Ministry of Agricultural Development.
For more information go to Law 196
Oil Free Zones
By having the benefit of the country’s geographical position, which makes Panama a logistics link (Hub), it must have processing, distribution and redistribution centers for oil and its derivative products. Therefore, through Cabinet Decree 36 of September 17, 2003, the legal framework is created to establish a policy concerning the oil industry and by extension for all derived products.
Companies that show interest in investing or operating in any Petroleum Free Zone must pass a classification process and meet the requirements to be considered in one or more of the different categories:
- Petroleum Free Zone Contractor
- Type A and Type B Permit for Oil Free Zone
- Permit to Provide Petroleum Products by Barge
- Permit as importer-distributor of petroleum products for sale in the national market
- Permit as importer-distributor of petroleum products for electricity generation
- Permit as Sub-Distributor of petroleum products in wholesale distribution in the national market
- Permit as Importer-Distributor of Liquid Petroleum Gas (LPG) for the National Market
- Permission to Recycle or Allow for Lubricating Plants (Oils and/or Greases)
- Permit for Importers of Lubricants (Oils and/or Greases)
- Permits for Analysis Laboratory
- Permission for the Independent Inspector
- Contractor to Refine Hydrocarbons
Within this regime of the Free Oil Port, natural or legal, national or foreign companies that are authorized by the National Directorate of Hydrocarbons of the Ministry of Commerce and Industries are authorized to carry out different activities depending on the categories described above, which include introducing , store, refine, transform, manufacture, mix, purify, market, transport, transfer, pump, sell for the domestic market, export, re-export and, in general, manage and supply crude oil, semi-processed or any of its by-products, whatever it can even involve the construction of ports or docks; which can be summarized in all kinds of operations or activities of the oil processing industry.
Due to the characteristics of the regime, there is an implicit special tax treatment:
- Exemption from any tax, rate, fee, rights, encumbrance and other fiscal contributions due to the introduction, export or re-export of crude oil and its derivatives, as well as inputs, raw materials, supplements or additives, machinery, equipment, materials, spare parts, containers, containers, equipment and other goods, provided they are entered into the Petroleum Free Zone.
- Exemption from any tax, including income tax, duties, liens and other contributions, due to the sale or delivery of crude oil, semi-processed oil or oil derivatives that have entered said oil-free zones.
- More extensive information can be found by consulting Cabinet Decree 36 of September 17, 2003
Logistics Customs Warehouses
As a mechanism to boost competitiveness in the country’s logistics chain, Cabinet Decree No. 10 of April 27, 2021 is promulgated, through which the Logistics Customs Warehouse regime is created. This regulation is applied to companies with the intention of redistributing merchandise in national ports and airports, with prior authorization from the National Customs Authority to operate under this regime.
The operations that these companies are authorized to carry out include reception, classification, customs controls, in addition to other activities established in the corresponding agreements and treaties, of which Panama is a signatory. It should be taken into account that companies already operating in a Free Zone cannot be transformed into a Customs Warehouse until three years have passed after the Decree’s entry into force.
Requirements
Interested companies must comply with the provisions of the Central American Uniform Customs Code (CAUCA) and its regulations.
Allowed activities
Companies will be authorized to carry out activities for the preservation of merchandise during transport or storage, “such as: aeration, ventilation, drying, refrigeration, freezing, packaging, among others” (Article 5 of Cabinet Decree No. 10 of 27 April 2021). In addition, these companies may carry out the operations permitted in the Central American Uniform Customs Code (CAUCA) and its Regulations.
Period of permanence of the goods
One year is established as the period of permanence of the merchandise in the warehouses, which can be extended for another year if requested. After said term has expired, the goods may be considered abandoned, with all that this implies.
More extensive information can be found by consulting Cabinet Decree No. 10 of April 27, 2021
Colon Logistics Park
The Colon Logistics Park (CLP) is presented as a Logistics Customs Warehouse located within the Colon Container Terminal (CCT) port, on the Panamanian Atlantic coast. Being able to carry out operations directly within a primary zone, such as this one, streamlines the processes of operation and re-export of the merchandise that transits through it.
The first phase of the project consists of three warehouses with a space of 18,000 m2 each, which in turn meet the NFPA standards for the fire extinguishing system. Building 1 has dimensions of 85 by 209 meters, with 44 loading docks on the west side and 3 access ramps at street level.
Benefits
- Because the CLP is located within the CCT boundaries, it facilitates the rapid and economical movement of containers from the terminal storage yard to the warehouse warehouses.
- Since the CLP is located within the same customs zone as the CCT, a continuous movement between the dock and the warehouses is obtained, which gives tenants maximum flexibility to manage their supply chains.
- As for inventory, you get shorter lead times for key markets, resulting in reduced inventory costs. In turn, since the CLP can be reached through all land transport nodes from Colón, there is direct access to Panama City through the Panama-Colón highway.
Zal PPC
The Hutchinson Ports company, when proposing that its ports of Balboa and Cristóbal have their own logistics zone, in order to diversify the consolidation and deconsolidation services of the cargo that circulates through them, created ZAL PPC, a new logistics zone within the port de Balboa (on the Pacific side of Panama), to manage port and logistics services in one place.
This logistics area includes within its port facilities a 1,500 m2 warehouse, equipped to offer cross-docking (reordering of goods by consolidation). One of the advantages offered by the area is that the cargo can be adapted for its processing to different markets, with which ZAL PPC can be used to make inventories more flexible and reduce them optimally.
In the second stage of the park there are three (3) warehouses of 10,000 m2 each, for the development of regional storage and services such as:
In the second stage of the park there are three (3) warehouses of 10,000 m2 each, for the development of regional storage and services such as:
- Distribution center and value-added services.
- Assembly, repair and reconditioning operations.
- BPO, ITO services.
- Free Zone for transformation process.
Special Investment Regimes
One of the most successful strategies in increasing investment is based on the formulation of laws that promote the creation of companies that opt for tax, migratory and labor benefits, which seek to promote the development of specific economic activities.
This legal framework seeks an increase in investment, job creation, an adequate transfer of technology and knowledge, and an increase in the consumption of goods and services, which are essential for the growth of the country’s economy.
Public Private Association Regime
Co-financed APP are those that require financial support from the State for the financial support of the project, either through money transfers, fiscal guarantees, or a combination of both.
Public-Private Associations (APP), as defined by Law 93 of 2019, are:
Modalities of linking private capital in which experiences, knowledge, equipment, technologies and technical and financial capacities are incorporated, and risks and resources are distributed, with the objective of creating, developing, improving, operating and/or maintaining public infrastructure for the provision of public services.
This new regime seeks to strengthen and coordinate investment between the public, private and financial sectors, as well as boost the economy through job creation and the development of quality infrastructure.
According to the law that regulates APP, two types of PPP projects are established: self-financed and co-financed.
Self-financed APP are projects in which all costs are recovered through the revenue earned by the contractor from providing infrastructure or public service, through the collection of fees, prices, tolls, or charges collected directly from the final beneficiary.
APP contracts have by law a maximum term of 30 years, extendable for up to 10 more years, with an investment that must not be less than 15 million dollars (amount that is excepted for projects developed by municipalities). In addition, state banks can only provide financing of up to 25% of these projects.
The legal norm also establishes the creation of a National APP Secretariat that will have the function of providing technical and operational support to the projects, as well as developing promotional and publicity activities for the program. In turn, it establishes the creation of a governing body made up of the Ministry of the Presidency, the Ministry of Economy and Finance, the Ministry of Public Works, the Ministry of Commerce and Industries, the Ministry of Foreign Affairs and the Comptroller General of the Republic, in charge of establishing priority areas for project development, studying applications for their endorsement or rejection, among other functions. It also establishes the creation of a Consultative Committee, made up of members of the private company of Panama, members of the academic sector and representatives of organized groups of workers.
More legal information on the APP project can be found at this link to Law 93.
