Free Trade Zones in Colombia: Benefits, Procedures, and Regulations for Exporters

Free trade zones in Colombia are designated geographic areas offering tax, customs, and logistical incentives to promote investment, production, and exports. These zones are key tools for Colombian companies to optimize costs, enhance competitiveness, and access international markets. This article delves into what free trade zones are, the benefits they offer, the procedures to access them, and the current regulations.

What Are Free Trade Zones?

A free trade zone is an area within the national territory where companies can operate under a special regime that provides:

• Tax Incentives: Reduced taxes such as VAT and tariffs.
• Customs Simplification: Streamlined import and export processes.
• Logistical Advantages: Infrastructure designed to improve production and international trade efficiency.

In Colombia, free trade zones are regulated by Decree 2147 of 2016, which outlines the requirements and conditions for their operation.

Types of Free Trade Zones in Colombia

1. Permanent Free Trade Zone (ZFP):

   • Defined areas where multiple companies can operate.
   • Designed for industrial, commercial, and service activities.

2. Special Permanent Free Trade Zone (ZFPE):

   • Applies to a single company.
   • Aimed at large investment projects in strategic sectors such as manufacturing, agribusiness, and services.

3. Temporary Free Trade Zones:

   • Temporary areas designated for events such as international fairs and exhibitions.

Benefits of Free Trade Zones for Exporters

1. Tax Benefits

   • Reduced income tax rate of 20% (compared to the general 35%).
   • Exemption from VAT and tariffs on raw materials, inputs, and imported machinery used in production processes.
   • Exemption from wealth tax.

2. Customs Benefits

   • Simplified import and export processes.
   • Ability to store goods indefinitely without paying tariffs.
   • Flexibility to re-export products without additional taxes.

3. Logistical Incentives

   • Modern infrastructure with access to ports, airports, and highways.
   • Reduced transportation and storage costs.

4. International Competitiveness

   • Increased ability to compete globally through cost optimization and access to fiscal incentives.

Requirements to Access a Free Trade Zone

1. Registration in the Free Trade Zone Regime

   • Companies must register with DIAN (Colombia’s tax and customs authority) and comply with the requirements outlined in Decree 2147 of 2016.

2. Permitted Activities

   • Free trade zones are designated for activities such as:
     • Industrial production.
     • Provision of technological, logistical, or healthcare services.
     • Agribusiness.

3. Investment Projects

   • Projects must meet minimum investment and employment requirements, depending on the type of free trade zone:
     • ZFP: Minimum investment of COP 11.5 billion and at least 20 direct jobs.
     • ZFPE: Specific requirements based on the sector and location.

Steps to Access a Free Trade Zone

1. Submit an Application to DIAN

   • Include a detailed project plan outlining the economic activity, investment amount, and expected impact on employment and exports.

2. Obtain Approval from the Free Trade Zone Committee

   • The committee evaluates the project’s feasibility and ensures it aligns with the regime’s objectives.

3. Start Operations Under the Special Regime

   • Once approved, the company can begin operating under the granted tax and customs benefits.

Current Regulations

• Decree 2147 of 2016: Establishes the general provisions for creating and operating free trade zones.
• Customs Code (Decree 1165 of 2019): Defines the customs procedures applicable within free trade zones.
• Law 1004 of 2005: Provides the foundation for developing free trade zones as tools for international trade.

Success Stories in Colombian Free Trade Zones

1. Rionegro Free Trade Zone (Antioquia):

   • Pharmaceutical and technology companies have used this zone to produce and export to North American and European markets.

2. Pacific Free Trade Zone (Valle del Cauca):

   • Agribusiness exporters benefit from proximity to the Buenaventura port to boost international sales.

3. Bogotá Free Trade Zone:

   • Logistics and e-commerce companies have optimized international operations from this strategic location.

Advantages and Disadvantages of the Free Trade Zone Regime

Advantages

• Significant reductions in tax and logistical costs.
• Modern infrastructure that facilitates production and international trade.
• Preferential market access through free trade agreements.

Disadvantages

• High initial investment and employment requirements.
• Strict regulations requiring ongoing compliance.
• Internal competition with companies outside the free trade zone regime.

How to Maximize Free Trade Zone Benefits

1. Identify Strategic Locations:

   • Choose a free trade zone close to ports or airports relevant to your target market.

2. Design a Competitive Business Plan:

   • Optimize production and logistics processes to maximize fiscal and operational benefits.

3. Seek Specialized Advice:

   • Work with foreign trade experts to ensure regulatory compliance and fully leverage available incentives.

Conclusion

Free trade zones in Colombia are invaluable tools for exporters looking to reduce costs, improve competitiveness, and expand their presence in international markets. With fiscal, customs, and logistical benefits, these zones provide a favorable environment for boosting foreign trade and attracting strategic investments. However, success in this regime requires careful planning, regulatory compliance, and smart utilization of available resources. If you are considering operating from a free trade zone, explore this option to enhance your business growth.