Countries › Panama › Guide › 9. Trade and customs › Colón Free Zone: duty free trade, income tax exemption on foreign operations with substance tests, 5 percent dividend tax and the 2023 reform

Colón Free Zone: duty free trade, income tax exemption on foreign operations with substance tests, 5 percent dividend tax and the 2023 reform

Argentina. For full detail on Argentina, go to The Argentine Thread.

Last verified: 2026-10-29 · Status: Changing

The Colón Free Zone (Zona Libre de Colón) is a State institution that operates a walled international free trade area where goods enter, are stored, processed and re-exported free of all taxes, and users operate under an operating code (clave de operación) instead of an Aviso de Operación. Ley 412 de 2023 widened permitted activities to manufacturing, nearshoring, logistics and services, and exempts users from income tax on income produced outside Panama, subject to substance tests for logistics and data services. Sales into Panama's fiscal territory pay normal import taxes and income tax.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates as legal tender; the Superintendencia de Bancos states that the balboa's value is on a par with the US dollar (checked 29 October 2026). USD figures therefore equal the balboa figures.

Key facts

Income tax on Colón Free Zone users' income produced abroad	Exempt, with substance tests for logistics and data services textLey 8 de 2016 arts. 46-A and 46-B (Ley 412 de 2023), as of 2026-10-29 · in force
Dividend tax for Colón Free Zone and free zone companies	5 %Código Fiscal art. 733 literal b (Ley 8 de 2016), as of 2026-10-29 · in force
Complementary tax on profits of pure logistics services	2 %Ley 8 de 2016 art. 46-D numeral 5, as of 2026-10-29 · in force
Annual tax on capital of free zone companies	0.5 %Código Fiscal art. 1004 (Ley 412 de 2023), as of 2026-10-29 · in force
End of the Colón Free Zone capital tax waiver	2028-01-01 dateCódigo Fiscal art. 1004 (Ley 412 de 2023), as of 2026-10-29 · in force
Minimum investment for Colón Free Zone investor residence	250000 PABLey 8 de 2016 art. 53, as of 2026-10-29 · in force
Deadline for the annual substance report	6 months after fiscal year end monthsLey 8 de 2016 art. 46-B, as of 2026-10-29 · in force
Exchange rate used for USD conversions	1 PAB per USDBalboa at par with the US dollar (Superintendencia de Bancos), as of 2026-10-29 · in force

The rule

1. Goods that enter the international free trade area, and services provided within it for the activities listed in art. 44, are exempt at all times from national, provincial or other taxes and charges, including consular fees, on their introduction, stay, export and re-export; only rents and storage, custody and similar service charges set by the Board are payable.Ley 8 de 4 de abril de 2016, art. 47 as worded by Ley 412 de 21 de noviembre de 2023 art. 14, art. 47, 2023-11-21 official text · verified 2026-10-29

2. With authorization on their operating code, users may provide services to persons, multimodal and logistics services including supply chain management and nearshoring, real estate and office services, sell all goods not expressly restricted, run data and digital services, trade among themselves and with other free zones, sell to individuals through accompanied baggage and electronic commerce, provide film industry services, manufacturing, processing and repair services, research centres, aviation, port and vessel services and high technology manufacturing. Multinational headquarters (SEM), EMMA manufacturing services companies, City of Knowledge companies and call centres may also establish there with their own regime's benefits.Ley 8 de 2016, arts. 44 and 45 as worded by Ley 412 de 2023 arts. 8 and 9, arts. 44 and 45, 2023-11-21 official text · verified 2026-10-29

3. Users are exempt from income tax on income from the activities in art. 44 produced outside national territory; transactions with persons in the national fiscal territory follow the general income tax regime, and users must keep records separating exempt and taxable operations. Users providing logistics or data services (art. 44 numerals 2 and 5) keep the exemption for a fiscal year only if they carry out their core activities in Panama, keep an adequate number of full time employees and adequate operating expenses there, and file an annual substance report with the Colón Free Zone within six months after year end; otherwise they pay income tax at the general rate for that year, with fines, surcharges and interest.Ley 8 de 2016, arts. 46-A and 46-B added by Ley 412 de 2023 arts. 10 and 11, arts. 46-A and 46-B, 2023-11-21 official text · verified 2026-10-29 · changed: Ley 412 de 21 de noviembre de 2023 added the statutory income tax exemption for foreign source income of Colón Free Zone users and the substance tests for logistics and data services, in force from its promulgation.

4. Users are exempt from ITBMS on goods introduced with a final destination abroad, on services they provide inside or outside Panama including among themselves, and on services they receive, except as the tax law provides. They are also exempt from stamp tax, property and real estate transfer tax on improvements, export and re-export taxes, the FECI surcharge on loans financing their operations, ISC (except certain vehicles), tax on transfers of shares of user companies, direct or indirect, and income tax on foreign source capital gains. They are exempt from complementary tax, except logistics and multimodal services without transformation, which pay 2 percent of the profit from those activities.Ley 8 de 2016, arts. 46-C and 46-D added by Ley 412 de 2023 arts. 12 and 13, arts. 46-C and 46-D, 2023-11-21 official text · verified 2026-10-29

5. Companies in the Colón Free Zone, oil free zones, other free zones and special economic areas withhold dividend tax at 5 percent on profits distributed from the listed sources.Código Fiscal art. 733 literal b as worded by Ley 8 de 2016 art. 63, art. 733 literal b, 2016-04-04 official text · verified 2026-10-29

6. Companies in free trade areas, free zones and special economic areas do not need an Aviso de Operación but have paid since fiscal year 2016 an annual tax of 0.5 percent of capital, minimum B/.100 and maximum B/.50,000. Colón Free Zone companies with a valid operating code are exempt from that 0.5 percent tax from 1 January 2023 to 1 January 2028 and must notify the number of jobs they plan to preserve.
Cost to do it: 0.5 percent of capital, B/.100 to B/.50,000 a year (US$ equal), waived for Colón Free Zone companies with a valid operating code from 2023 to 2028.
Example: A user with B/.2,000,000 of capital would owe B/.10,000 a year at 0.5 percent, but pays nothing until 1 January 2028. / US$2,000,000 of capital: US$10,000 a year, waived through 1 January 2028.Código Fiscal art. 1004 as worded by Ley 412 de 2023 art. 19, art. 1004, 2023-11-21 official text · verified 2026-10-29

7. Users need only their operating code or represented company code to operate in the zone and do not need an Aviso de Operación from the Ministry of Commerce and Industries; activities directed outside the zone need the ordinary registrations, and sector licences for health, security, labour, consumer protection, competition, banking, insurance and finance still apply.Ley 8 de 2016, art. 51 as worded by Ley 412 de 2023 art. 16, art. 51, 2023-11-21 official text · verified 2026-10-29

8. Goods may leave the zone for export or re-export, sale to travellers and crew in transit, sale to ships transiting the Canal and to international flights, transfer to other special zones, destruction, donation, or sale into the national fiscal territory after payment of import duties and ITBMS on a customs declaration filed by a licensed broker. Products manufactured, processed or assembled in the zone and imported into Panama pay duties only on the foreign inputs incorporated, and nothing if the finished product qualifies as duty free under a trade agreement.Ley 8 de 2016, art. 48 and art. 49-A added by Ley 412 de 2023 art. 15, arts. 48 and 49-A, 2023-11-21 official text · verified 2026-10-29

9. Retail trade and private residences are not allowed inside the international free trade area. A foreigner who invests at least B/.250,000 in a company authorized to operate in the zone may apply for permanent residence as a Colón Free Zone investor and, after two years, for definitive residence with an identity card.Ley 8 de 2016, arts. 52 and 53, 2016-04-04 official text · verified 2026-10-29

10. From the promulgation of Ley 412 de 2023, Colón Free Zone companies enjoy legal stability of investments under Ley 54 de 1998.Ley 412 de 21 de noviembre de 2023, art. 20, 2023-11-21 official text · verified 2026-10-29

Tax	Treatment
Import duties and taxes on goods entering the zone	Exempt (art. 47)
Income tax on income produced abroad	Exempt, substance tests for logistics and data services (arts. 46-A, 46-B)
Income tax on sales into Panama	General regime (art. 46-A)
ITBMS on goods destined abroad and on services	Exempt (art. 46-C)
Dividend tax	5 percent (Código Fiscal art. 733 b)
Complementary tax	Exempt; 2 percent on pure logistics profits (art. 46-D)
Annual capital tax 0.5 percent	Waived 2023 to 1 January 2028 (Código Fiscal art. 1004)
Imports into Panama	Duties, ITBMS and ISC on clearance (art. 48)

Tax treatment of Colón Free Zone users under Ley 8 de 2016 as amended by Ley 412 de 2023.

Worked example

A regional distributor in the zone sells B/.20,000,000 (US$20,000,000) of goods a year to buyers in Central America and the Caribbean and B/.1,000,000 to buyers in Panama City.
The B/.1,000,000 of local sales bear import duties and ITBMS on exit and income tax under the general regime; the foreign sales are exempt from income tax.
If it distributes B/.1,000,000 of profit, it withholds B/.50,000 (US$50,000) of dividend tax at 5 percent.

Step by step

Incorporate or register the company and apply to the Colón Free Zone for an operating code (or a represented company code).
Lease a lot or warehouse from the zone or from a holder of improvements, and enable each activity on the code.
Register with ANA's customs system for movement declarations and re-export certificates.
Keep separate records of exempt foreign operations and taxable local operations.
If you provide logistics or data services, staff and spend locally and file the annual substance report within six months after year end.

Common traps

Missing the substance tests in one year makes all exempt income of that year taxable at the general rate with penalties.
Selling to buyers in Panama is an import; the buyer pays duties and ITBMS and the user pays income tax on that income.
The 0.5 percent capital tax waiver ends on 1 January 2028.
Retail sales inside the walled area are prohibited; individual sales only through accompanied baggage and electronic commerce channels.

Sources

Related: Panama country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide

← Courier and low value imports in Panama: tax free shipments up to B/.100, the B/.100 to B/.2,000 simplified band and courier licensingFree zones in Panama under Ley 32 de 2011: promoter and company licences, tax exemptions, 5 percent dividend tax and flexible labour rules →

Get rule changes weekly

Free. One email a week from The LatAm Thread.

One more step after you press the button: we take you to Substack, where your email is already filled in. Confirm there to start. No spam, unsubscribe anytime, we never share your address. By subscribing you agree to the privacy policy.