Countries › Panama › Guide › 9. Trade and customs › Free zones in Panama under Ley 32 de 2011: promoter and company licences, tax exemptions, 5 percent dividend tax and flexible labour rules

Free zones in Panama under Ley 32 de 2011: promoter and company licences, tax exemptions, 5 percent dividend tax and flexible labour rules

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

Ley 32 de 2011 lets private, State or mixed promoters develop free zones anywhere in Panama, licensed by the National Free Zones Commission, where companies producing goods, services, logistics, high technology, research, higher education, health and environmental services operate. Their operations and inputs are exempt from national direct and indirect taxes, and income from exterior operations and from operations among themselves is exempt from income tax, while they pay 5 percent dividend tax, an annual capital tax and normal taxes on sales into Panama. Special labour and migration rules apply.

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

Dividend tax for free zone companies (any source)	5 %Ley 32 de 2011 art. 32 numeral 2, as of 2026-10-29 · in force
Complementary tax if free zone profits are not distributed	2 %Ley 32 de 2011 art. 32 numeral 2, as of 2026-10-29 · in force
Income tax on exterior operations of free zone service and production companies	Exempt textLey 32 de 2011 art. 33, as of 2026-10-29 · in force
Annual tax on capital of free zone companies	0.5 %Código Fiscal art. 1004, as of 2026-10-29 · in force
Minimum area for a new free zone	2 hectaresLey 32 de 2011 art. 16, as of 2026-10-29 · in force
Minimum investment for free zone investor residence	250000 PABLey 32 de 2011 art. 43, 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. Free zones are delimited areas with infrastructure and services where companies from anywhere in the world produce goods and services, high technology, scientific research, higher education, logistics, environmental, health and general services. They may be private, State or mixed and may be set up anywhere in the country if they cause no irreversible environmental damage; new zones need at least two hectares unless the National Free Zones Commission grants an exception.Ley 32 de 5 de abril de 2011, arts. 11, 12, 16 and 23, 2011-04-05 official text · verified 2026-10-29

2. Promoters and operators need a Free Zone Licence from the National Free Zones Commission, recorded in the Official Free Zones Registry; the licence is permanent but may be revoked or cancelled. Companies need a Licence of Companies Established in Free Zones and registration in the official registry. National or municipal land leased or granted for a free zone cannot be sold and reverts if the project is cancelled.Ley 32 de 2011, arts. 17, 18, 21, 22, 26 and 27, 2011-04-05 official text · verified 2026-10-29

3. All activities, operations, transactions and transfers of movable and immovable goods, construction materials, raw materials, machinery and any goods or services companies in free zones need for their operations are exempt from all national direct and indirect taxes, contributions, fees and charges, and from the operating licence tax. Promoters and companies must keep accounts that clearly separate exempt and non exempt operations.Ley 32 de 2011, art. 31, 2011-04-05 official text · verified 2026-10-29

4. Free zone companies still pay: income tax and ITBMS on local leasing and subleasing (promoters excepted); dividend tax at 5 percent whatever the source, and complementary tax of 2 percent only if profits are not distributed; ISC; the FECI surcharge except on loans secured by bank deposits; and labour and social security contributions.Ley 32 de 2011, art. 32, 2011-04-05 official text · verified 2026-10-29

5. Service, logistics, high technology, research, higher education, general services, health and environmental companies and centres are exempt from income tax on their exterior operations and operations among themselves; their interior operations destined to Panamanian territory pay income tax and other taxes under general law.Ley 32 de 2011, art. 33, 2011-04-05 official text · verified 2026-10-29

6. Free zone companies do not need an Aviso de Operación but, from fiscal year 2016, pay an annual tax of 0.5 percent of capital with a minimum of B/.100 and a maximum of B/.50,000; this replaced in practice the 1 percent annual tax written in Ley 32 art. 32 numeral 3. ITBMS applies to services billed to free zone companies by providers located outside the zones.
Cost to do it: Annual capital tax 0.5 percent, B/.100 to B/.50,000 (US$ equal).
Example: A free zone company with B/.500,000 of capital pays B/.2,500 a year. / US$500,000 of capital: US$2,500 a year.Código Fiscal art. 1004 as worded by Ley 412 de 2023 art. 19 (originally Ley 8 de 2016 art. 64); Código Fiscal art. 1057-V parágrafo 27 added by Ley 8 de 2016 art. 67, art. 1004; art. 1057-V parágrafo 27, 2023-11-21 official text · verified 2026-10-29

7. Goods produced in or brought into free zones and imported into the national fiscal territory pay customs duties and generate income tax; products manufactured with foreign inputs pay duties only on the foreign raw materials and components incorporated, at the rate of the finished product, on an input and output sheet approved by ANA. Free zone companies cannot use the agro export promotion certificate or other tax benefits outside this law.Ley 32 de 2011, arts. 36 and 37, 2011-04-05 official text · verified 2026-10-29

8. Labour rules in free zones allow rotating workers across production lines, incentive pay of up to 50 percent of base salary exempt from educational insurance and social security contributions, dismissal for significant loss of sales volume with prior authorization of the labour authority, employer scheduling of collective vacations and splitting vacations into two halves, and free agreement on the weekly rest day. The minimum wage applies and wages are paid at least every two weeks.Ley 32 de 2011, arts. 57 to 63, 2011-04-05 official text · verified 2026-10-29

9. A foreigner who invests at least B/.250,000 from abroad in a licensed free zone promoter or company may apply for permanent residence as a free zone investor and opt for permanence after two years.Ley 32 de 2011, art. 43, 2011-04-05 official text · verified 2026-10-29

Item	Treatment	Source
Inputs, equipment, operations	Exempt from national direct and indirect taxes	Ley 32 art. 31
Income from exterior operations and among zone companies	Exempt	Ley 32 art. 33
Income from sales into Panama	Taxable under general law	Ley 32 arts. 33 and 36
Dividends	5 percent, any source	Ley 32 art. 32
Undistributed profits	2 percent complementary tax	Ley 32 art. 32
Annual capital tax	0.5 percent, B/.100 to B/.50,000	Código Fiscal art. 1004
Local leasing by companies	Income tax and ITBMS	Ley 32 art. 32
Services bought from providers outside zones	ITBMS applies	Código Fiscal art. 1057-V parágrafo 27

Taxes of free zone companies under Ley 32 de 2011 and the Código Fiscal.

Worked example

A medical devices assembler in a free zone exports B/.8,000,000 (US$8,000,000) a year and sells B/.500,000 into Panama.
Export income is exempt from income tax; the local sales are imports into Panama, on which duty is paid only on the foreign components, and that income is taxable.
Distributing B/.2,000,000 of profit costs B/.100,000 (US$100,000) of dividend tax at 5 percent.

Step by step

Choose an existing licensed free zone or, as promoter, apply to the National Free Zones Commission for a Free Zone Licence.
Incorporate or register the company and obtain the Licence of Companies Established in Free Zones.
Register with ANA for customs control of entries, exits and temporary transfers.
Set up accounting that separates exempt exterior operations from taxable local ones.
Plan the workforce using the free zone labour rules and obtain MITRADEL approval for performance systems where needed.

Common traps

Ley 32 still says 1 percent annual capital tax, but the Código Fiscal now sets 0.5 percent; use the Código Fiscal.
Services bought from providers outside the zones carry ITBMS despite the zone exemptions.
Free zone companies cannot stack other incentive regimes such as the agro export certificate.
Investor residence requires the B/.250,000 to come from abroad and be kept; losing the investment cancels the benefits.

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

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