# Free Trade Zones

> Free Trade Zones regime (Law 32 of 2011) allows establishing private free zones anywhere in Panama. 0% income tax on external operations, 5% dividends, labor flexibility with 25% overtime. Minimum B/.250,000 investment for promoter, 2 hectares minimum. Open to Panamanian companies.

[Canonical page](https://investpanama.biz/en/incentives/free-zones)

Law 32 of 2011 created a special, comprehensive and simplified regime for the establishment and operation of free trade zones in Panama. Unlike traditional special economic zones (Colon, Panama Pacifico), this regime allows private investors to establish free zones in any location in the country. Companies in free zones enjoy 0% income tax on external operations and exports, with labor flexibility including 25% overtime (vs. 50% standard). The promoter requires a minimum investment of B/.250,000 and at least 2 hectares of land.

## Benefits

### Tax Benefits

- **External Operations Income Tax** (0%) — 100% Income Tax exemption for external operations and transactions between free zone companies.
  - _Source: Ley 32 de 2011, art. 21 — “Las empresas instaladas en zonas francas estarán exentas del Impuesto sobre la Renta en las siguientes operaciones: operaciones exteriores y ventas a otras empresas instaladas en zonas francas.”_
- **Dividend Tax** (5%) — 5% dividend tax regardless of operation source.
  - _Source: Ley 32 de 2011, art. 21 — “Las empresas instaladas en zonas francas pagarán un impuesto del 5% sobre los dividendos sin importar de qué operación provenga la utilidad.”_
- **Complementary Tax** (2%) — 2% complementary tax if no dividend distribution.
  - _Source: Ley 32 de 2011, art. 21 — “En caso de que no haya distribución de dividendos, se pagará un impuesto complementario del 2%.”_
- **Capital Tax** (1%) — 1% annual on business capital (minimum B/.100, maximum B/.50,000).
  - _Source: Ley 32 de 2011, art. 21 — “Un impuesto del 1% anual sobre el capital del negocio, con un mínimo de B/.100.00 y un máximo de B/.50,000.00.”_
- **Equipment Import** (0%) — Import tax exemption for equipment, materials and raw materials.
  - _Source: Ley 32 de 2011, art. 32 — “Los promotores y empresas están exonerados del pago de todo impuesto y gravamen por la importación de mercancías, productos, equipos, materiales y materia prima.”_
### Labor Flexibility

- **Overtime** (25%) — 25% surcharge on overtime (vs. 50% standard Labor Code rate).
  - _Source: Ley 32 de 2011, art. 29 — “El recargo por jornadas extraordinarias será del 25% sobre el salario ordinario.”_
- **Weekend Work** (50%) — 50% surcharge for weekend work.
  - _Source: Ley 32 de 2011, art. 29 — “El recargo por trabajo en día domingo o de fiesta o duelo nacional será del 50%.”_
### Immigration Benefits

- **Investor Visa** — Permanent residency for investors with minimum B/.250,000 investment.
  - _Source: Ley 32 de 2011, art. 31 — “Los inversionistas y ejecutivos de las empresas instaladas en zonas francas tendrán derecho a obtener permiso de residencia permanente.”_
- **Employee Visa** — Temporary residence permits for free zone company personnel.
  - _Source: Ley 32 de 2011, art. 31 — “El personal técnico y ejecutivo extranjero podrá obtener permisos de trabajo y residencia temporal.”_

_The information provided is for guidance only and does not constitute legal or tax advice. Consult with legal and tax advisors for your specific case. Rates and requirements may change. Source: Law 32 of 2011 and Executive Decree 62 of 2017._