Contents of this guide
Which category fits a technology company
The short answer is that article 24 of Law 32 defines two categories that fit a technology company. The high technology company is the one dedicated to producing high value added goods and services, such as hardware, software, supplies and data processing and storage centers protected by intellectual property rules. The services company is the one that provides services to users abroad, in other free zones or within the same zone, and includes, according to the text, services related to telecommunications and computers for capturing, processing, storing and transmitting data, and the organization, management and operation of databases.
The category determines the study that must accompany the application. Under article 10 of the decree, the high technology company submits a study detailing the specialized high technology services and tools it will offer, and the services company, a study of the type of services it will provide. If the activity requires a sector license from a regulator, the law indicates that this license or authorization must be held beforehand.
A project such as Innovation Smart District (ISD) describes on its About page an ecosystem for startups, corporations and large companies in sectors such as telecommunications, internet of things, artificial intelligence and blockchain, and states that it holds a free zone license issued by the National Free Zones Commission of MICI. At the close of this note, the same website presents the Marie Curie building as the first of 24 and the Leonardo Da Vinci building with construction planned to start in 2027.
The steps, in order
The following order is built from articles 24 to 29 of the law and 10 to 12 of the decree. Each step gives its basis.
- Classify the activity. The article 24 category that matches the business is chosen, high technology or services in the case of a software, data or digital services company.
- Choose a licensed zone and obtain the promoter’s authorization. The decree requires a promoter certification stating that the applicant’s installation was authorized, subject to approval of its license (article 10 of the decree).
- Keep the company and its documents up to date. Incorporation deed and amendments with registration data, a recent Public Registry certificate with officers, directors, legal representative and resident agent, national good standing and the Taxpayer Registry number. The piece on how to open a company in Panama covers incorporation and the one on searching the Public Registry, verification of the company.
- Prepare the study. It describes the activity, the origin of equipment and materials, the planned jobs, the initial investment and the investments of the following two years, and the schedule.
- Gather the certifications. Shareholder certification down to the individual owners (except for listed companies) and a certification of invested capital issued by an authorized public accountant.
- File through a lawyer. The application carries a power of attorney to a practicing lawyer and is filed with the Commission’s Technical Secretariat. Under the decree, it is delivered digitally with the information scanned in the order of the list, in Spanish and with foreign documents authenticated or apostilled and translated.
- Wait for the evaluation. The Technical Secretariat reviews the file, may ask for explanations or corrections, verifies the promoter’s authorization and may carry out an inspection. If the Commission finds it viable, it records it in minutes and the license is issued (article 11 of the decree).
- Receive the resolution and registration. The law sets a maximum of ninety days to approve the license, and the resolution ordering registration in the official registry confers the right to the law’s benefits from its date (articles 26 and 29).
Who does what
The process involves several actors, and the table separates them to show who handles each task.
| Actor | What it does in the process | Basis |
|---|---|---|
| Applicant company | Defines the activity, prepares study, documents and certifications | Decree 62, art. 10 |
| Practicing lawyer | Receives the power of attorney and files the application | Decree 62, art. 10 |
| Zone promoter | Certifies that it authorized the company’s installation | Decree 62, art. 10 |
| Zone operator | Administers the zone and ensures customs and tax compliance from its office | Decree 62, art. 8 |
| Technical Secretariat | Receives, reviews, inspects if needed and issues license and registration | Law 32, arts. 8 and 26; Decree 62, art. 11 |
| National Free Zones Commission | Approves the license within a maximum of ninety days | Law 32, art. 26 |
| Foreign Trade Single Window and Customs | Process the commercial movement declaration for goods | Decree 62, arts. 20 and 21 |
Radar’s compilation from Law 32 of 2011 and Executive Decree 62 of 2017, read in the copies of the Gaceta Oficial published by MICI. Both texts are in Spanish and the content is paraphrased.
After the license
Registration opens a series of obligations. Article 28 of the law requires investing at least the capital stated in the application, starting the investment within one year of registration and the activity within a period not exceeding two years, unless the nature of the business requires more. Each year the company sends the Commission statistics on jobs, investment made, type of goods or services and main destination markets. Registration resolutions are published in the official bulletin of MICI’s Industrial Property Registry (article 29).
For the movement of goods, the decree creates the free zone Commercial Movement Declaration, which backs every entry, transfer and exit of goods and is processed through the Foreign Trade Single Window. Article 22 of the decree states that goods arriving in the zone must be consigned to an individual or legal entity established in it. A pure services company, with no merchandise, uses that circuit little, but one that imports equipment for its operations does need it.
The company’s tax regime, with income from foreign operations and domestic ones, is explained in Radar’s piece on the tax incentives of Law 32, and the comparison with other regimes in the one on special regimes. For the country’s technology context, the piece on Panama as a digital hub gathers submarine cables and data centers.
Foreign staff and hiring
The law requires hiring Panamanian workers, with the exception of foreign experts, technicians and trusted staff needed for the operation (article 28). For those foreigners, article 44 recognizes the right to apply for a temporary resident permit valid for the term of their contract, and article 50 states that applications for permits under this chapter are filed with the National Immigration Service through the Technical Secretariat. Article 46 provides a nine month short stay visa for people coming to evaluate investments or do business in free zones. The requirements for each permit are set by decree and the immigration regime has changed since 2011, so they are confirmed with Immigration.
On labor, article 58 requires payment of the legal minimum wage and article 62 applies the Labor Code where it does not contradict the law. The company must also offer Panamanian workers training facilities related to its activities.
Mistakes that delay the process
The most repeated mistakes can be read straight from the requirements. The first is applying for the license without the promoter’s certification, which the decree requires. The second is filing foreign documents without an apostille or without a translation by an authorized public translator, because everything must be in Spanish. The third is a shareholder certification that stops at an intermediate company, when it must reach the individuals. The fourth is filing a Public Registry certification that is not recent, when the decree asks it to show the company and its officers are current. The fifth is lacking the sector license the activity requires, for example for regulated services.
Another point is the timeline: the law sets ninety days as the maximum for the Commission to approve the license, and the Technical Secretariat may ask for corrections, so an incomplete file lengthens the time. The piece on special regimes helps confirm that the Law 32 free zone is the right vehicle before starting.
ISD’s website presents Innovation Smart District as an innovation ecosystem with a free zone license issued by the National Free Zones Commission of MICI, open to startups, corporations and large technology companies. The About page gathers that information.
Frequently asked questions
How do you set up a company in a Panama free zone?
The Established Company License is requested from the Technical Secretariat of the National Free Zones Commission, through a lawyer, with a study of the activity, corporate documents, a capital certification and the certification from the zone’s promoter. The Commission approves it within a maximum of ninety days.
Can a software or data company be in a Panama free zone?
Yes. Article 24 of Law 32 defines the high technology company, which includes hardware, software and data processing and storage centers, and the services company, which includes computer services, data processing and database operation.
How long does the license take for a company in a free zone?
Article 26 of the law sets a maximum of ninety days for the National Free Zones Commission to approve the established company license. An incomplete file may need corrections that lengthen the process.
What documents does a technology company need for a free zone?
Power of attorney to a lawyer, application, a study of the activity with jobs and investment, incorporation documents and Public Registry certification, national good standing, Taxpayer Registry number, a capital certification from an authorized public accountant, a shareholder certification and the promoter’s certification.
What obligations does a company have after setting up in a free zone?
It must invest at least the stated capital, start the investment within one year and the activity within two, unless the nature of the business requires more, hire Panamanian workers with exceptions for foreign experts and send statistics to the Commission each year.
This content is informational and does not replace the advice of a lawyer or a professional specialized in free zones.
Related articles
- How to open a company in Panama: steps, Notice of Operation and taxes
- Panama as a digital hub: submarine cables, data centres and what it means for a technology company
- Panama’s special regimes: Colón Free Zone, Panamá Pacífico, SEM and EMMA
- How to search the Public Registry of Panama online: companies, properties and mortgages
Sources
- Law 32 of April 5, 2011, Gaceta Oficial Digital 26757 B: articles 8, 24, 26, 28, 29, 44, 46, 50 and 58. Copy published by MICI.
- Executive Decree 62 of April 11, 2017, Gaceta Oficial Digital 28257 A: articles 8, 10, 11, 20, 21 and 22.
- MICI, General Directorate of Free Zones: regulations.
- Innovation Smart District, About: free zone license, ecosystem and buildings.
- Radar Panamá, how to open a company, digital hub, special regimes and Public Registry.
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