26 September 2001

Special Economic Zones for Exports in Colombia (Law 677 of 2001)

Colombia International Law
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Article By Álvaro Parra Gómez and Ignacio Vélez Vergara

a. On August 4, 2001, Law 677 of 2001 created special legal conditions for the production of goods and services to be exported from the Special Economic Zones for Exports (hereinafter "SEZE") at Buenaventura, Cúcuta, Valledupar and Ipiales.

b. Legal entities (regardless of their nationality) executing "admission contracts" with the Committee established by the National Government to enter into the SEZE, may be considered as users of the corresponding Zone, with the benefits described in items e, f and g below.

The "admission contract" that is approved by the Committee will grant the other party the right to operate in the corresponding Zone.

Furthermore, the following local or foreign legal entities will be considered as users:

    1. entities developing city planning, construction and infrastructure for basic services, technological and urban works; and
    2. entities dedicated to prepare specialized personnel.

c. The term of each contract shall not be less than five years and shall not exceed twenty years. The contract may be extended as long as the provisions related to the SEZE are in force.

d. The minimum investment shall be of US$1'000,000 during the first two years. This amount shall be increased to US$1'500,000 during the third year. Finally, the investment shall be increased to US$2'000,000 on the fourth year.

e. Labour contracts executed between the workers and the companies that enter into admission contracts shall be ruled by special labour conditions including, inter alia:

    1. working periods not exceeding nine hours per day and eighteen hours per week;
    2. working periods not exceeding six hours per day and thirty six hours per week, not including overtime for evening work and for Sunday or holiday work, for companies having two or more working shifts;
    3. contributions to the Colombian Institute for Family Welfare, the National Service for Learning and the Employees' Families Welfare, which shall be equal to 50% of contributions required by labour law;
    4. integral salaries which, besides paying for the work, include all contributions, overtime and benefits provided by law as well.

f. With relation to the tax matters, industrial projects at the SEZE may avail of various advantages which include, inter alia, the following:

    1. the proportional part of the income resulting from export sales will be levied with income and complementary taxes, applying at a rate of 0%;
    2. remittance abroad resulting from interests and technical services will not be subject to income and remittance taxes, provided they are related to industrial activities.
    3. Incomes resulting from authorized activities related to infrastructure projects at SEZE will be exempt from income and complementary taxes.

g. With relation to customs matters, special provisions for industrial users of goods and services at the free trade zones shall be applied, establishing certain advantages, such as:

    1. Entrance of goods to the corresponding zone arriving from other countries shall not be considered as imports;
    2. shipment of raw materials, spare parts, consumer goods and final products shall be considered as permanent exports. Such export operations will grant the right to obtain the corresponding certificate for tax reimbursement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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