Concept in Definition ABC

A free zone is a territory destined for production of goods and services within the framework of a legislation specific in relation to foreign trade, taxes and customs activity. These areas can be used for services, industrial activities, health-related businesses, port activities, the technological area, as well as fairs and conventions on any productive activity. In any case, these territories have in common a unique tax treatment, since their main purpose is to stimulate exports.

It must be borne in mind that in most cases a free zone is a customs destination in which the arrival of goods has a series of advantages (more agile customs procedures compared to other territories, facilities to store merchandise and a tax regime own self).

General characteristics and their different types

Free zones are located within the territory of a nation but outside the conventional customs territory.

They do not usually have population resident, since its purpose is merely industrial or commercial and with an export projection. It must be borne in mind that production in these areas is not oriented to the local market.

There are permanent, special and transitory free zones and each of them has its own legal requirements. For example, permanent ones require a minimum of space, a infrastructure determined and an initial liquid equity. Normally in these areas the main activity is related to logistics, transportation and distribution of products.

Free zones can be public or private or of a mixed nature and are normally managed by an administering entity.

Why do free zones exist?

Most countries have the need to promote foreign trade, since it is a strategy key to the whole economy national. It should be emphasized that a fundamental indicator of a national economy is the balance foreign, that is, the final balance between imports and exports. In this way, for the external balance to be satisfactory, areas such as free zones are very useful.

From a historical point of view, in the seventeenth and eighteenth century some port areas were used in a similar way to the current free zones, as happened with Gibraltar, Hong Kong or Singapore.

Finally, free zones must be understood as a strategic element in the economy of a country, since in addition to promoting exports, they facilitate foreign investment and serve to generate job.

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