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CHARACTERISTICS OF A FREE TRADE ZONE

What are free zones?

Free zones are certain areas that have a country where there are certain benefits generally of a tax nature. For example, the exemption of some taxes or the reduction of them to a minimum in relation to the rest of the territory of this country.

They are usually established in remote or sparsely populated areas and extreme climatic conditions or limited access for the population. The idea of ??free zones is to promote economic growth .

Often these areas are called free ports , this is an analogy with tax-free zones or with reduced rates. In certain opportunities, free ports are part of economic zones. There are different types of free zones and there are also requirements for an area to be declared as such, that is, not any zone can be a free zone.

Characteristics of free zones

  1. Types of free zones

There are different types of free zones:

  • Permanent
  • Special permanents
  • Transitory

On the other hand also the free zones can be:

  • Private
  • State
  • Specials
  • Mixed
  1. Requirements

  • Must have at least 20 hectares.
  • Must have the ability to be endowed with certain infrastructure.
  • The area must possess certain liquid assets. Each country establishes a minimum amount of liquid assets owed by the locality or zone in order to be a free zone.
  1. goals

  • Generation of jobs in the short term.
  • Increase of competitiveness of the products that are made, distributed or elaborated there.
  • Ease in the sales process.
  • Improvement in the process of product quality.
  • Reduction of labor costs.
  1. Delimitation

Each free zone must be physically delimited. This means that the free zones must have a physical limit that divides these zones from the rest of the national territory. This is so since for customs purposes the free zones are considered extraterritorial areas.

  1. Creation of shopping centers and industries

In these areas, the creation of commercial and industrial centers is encouraged. This is the result of the reduction of tax taxes that all products have.

  1. Location

Free zones can be found in different parts of a country but they will always be located outside the customs territory, that is, inside the country but outside the customs territory. In this way the products that are sold, produced or manufactured there are exempt from customs taxes.

  1. Types of services

Logistics, transportation, distribution, packaging, labeling, fitting, sorting, packaging or handling services can be provided. In addition, telecommunication work, transmission and storage of data, databases, and information systems can be carried out.

In other words, the type of user of the free zones can be:

  • Industrial
  • Commercial
  • Of service
  • Taxes
  1. Exemption or reduction of taxes

In addition to the stimulus to exports, other features of the free zones are the lack of tax collection or regulation of these. In other words, there is a reduction for industry and trade of internal taxes for free zones.

  1. Export and imports

All products or manufactures that enter or leave a free zone are considered imports and exports respectively, although each free zone is within a specific country.

Free zones favor the local economy since they have tax benefits. That is to say those products that are made in free zones do not pay tax or pay with a decrease of them. In this way the products that are made or assembled in these areas have a lower final cost.

  1. Quantity

In the world, the first free zone was established in Ireland. Then followed Taiwan, Korea, Hong Kong, South Korea and Singapore. Currently, there are more than 2,500 free zones worldwide.

 

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