Tax Code

SCOPE OF APPLICATION.

• 1)

  The provisions of this Code establish the basic principles and fundamental rules that constitute the legal framework of the tax system and are applicable to all taxes;

• 2)

  Honduras is governed by the principle of territorial income. The Executive Branch is authorized to approve Conventions to prevent double taxation following the procedure required in the Constitution of the Republic; and,

• 3)

  The provisions of this Code shall not be applicable to the Municipal Tax System.

DEFINITIONS. For all purposes regarding the application of this Code, the following glossary of basic concepts is established:

• 1)

  ACTION OF RESTITUTION: It is the right to claim the return of amounts improperly paid by reason of taxes, sanctions and interest, as well as payments on account and other payments due under the substantive rules of the various taxes that generate a credit in favor, even if at the time of payment no legal reservation had been made. The right of restitution is applied between the State and private parties and, between private parties;

• 2)

  ADMINISTRATIVE ACTS: Those issued by the competent authority respecting the procedures provided in the legal system;

• 3)

  ACQUIRER: Natural or legal person who acquires goods and services that are subject by Law to the payment of tax debt;

• 4)

  AMNESTY: Benefit granted by Law to tax debtors that has as its object the forgiveness of the partial or total payment of accessory pecuniary obligations of tax debt;

• 5)

  ANNULABILITY: It is the cause of inefficacy of a legal act; it being understood that: Acts that contain irregularities are annulable at the instance of a party, provided that it is not possible to remedy them; If the party to whom it matters does not challenge an annulable act, it becomes remedied at the time the resolution becomes final. Proceedings conducted outside the established time may only be annulled if the nature of the term or deadline so requires;

• 6)

  TAX RATE: It is the rate, fixed or variable and expressed in the form of a coefficient or percentage, which, when applied to the taxable base, results in the tax amount;

• 7)

  TAX CAPACITY: Economic capacity that a natural or legal person has to pay taxes;

• 8)

  FORCE MAJEURE: An event not provoked by the tax obligor that prevents the fulfillment of an obligation, without responsibility for the same for not having been able to foresee it or, which, being foreseeable, has proven inevitable;

• 9)

  CONDONATION: It is the forgiveness of a tax debt granted by Law;

• 10)

  CONFUSION: Method of extinguishing obligations that occurs when the concepts of creditor and debtor are merged in one and the same person;

• 11)

  TAX CODE: This legal body;

• 12)

  AGREEMENTS BETWEEN PRIVATE PARTIES: Agreement made between natural or legal persons, different from the Tax Administration and Customs Administration, in which they reciprocally undertake to give, do or not do something;

• 13)

  COMPENSATION OF PAYMENTS: Form of extinction of the tax obligation, by means of which the liquid and enforceable credits of the tax obligor are compensated totally or partially with credits for taxes, their accessories and sanctions, liquid, enforceable and not prescribed, provided that they are administered by the same Tax Administration or the Customs Administration;

• 14)

  LIQUID, FINAL AND ENFORCEABLE DEBT: It is the character acquired by the debt determined by the Tax Administration and Customs Administration in the liquidation process, which once its period expires, becomes enforceable for payment and against which no administrative or legal remedy is available;

• 15)

  DENUNCIATION: Act by means of which facts or situations are made known to the competent authority that may be constitutive of administrative infractions or tax crimes;

• 16)

  FISCAL DOCUMENT: Documents authorized by competent authority that must be used by tax obligors to support activities, operations or transactions that have fiscal effects;

• 17)

  FORCE MAJEURE: Any event that could not be foreseen or that, being foreseen, could not be resisted, that prevents doing what was due or was possible and lawful. It appears as an obstacle, alien to natural forces and that opposes the exercise of a right or the spontaneous fulfillment of an obligation;

• 18)

  MERGER: Act by which two or more entities dissolve to integrate a new one or, when an existing entity absorbs another or others. The new entity or the incorporating entity acquires the ownership of rights and obligations of the dissolved entities;

• 19)

  CONNECTED TAX OR INSTALLMENT TAX OF THE INCOME TAX: Those established in the Income Tax Law, special laws and Decrees, such as: Solidarity Contribution; Net Asset Tax; Tax on Interest generated in transactions with securities, fixed-term deposits and stock market transactions; Tax on Dividends and Capital Gains Tax. Without being limited to them;

• 20)

  TAX INFRACTION: Action or omission that contravenes the precepts of the Tax Code and other tax laws and that is not constitutive of the commission of a crime;

• 21)

  MEASURES FOR BETTER RULING: Extraordinary evidentiary measures that after the hearing or written arguments of the parties, may the Authorities practice or have practiced ex officio to better inform themselves and issue the corresponding resolution without being bound solely to the means proposed by the parties;

• 22)

  TAX OBLIGATION: Link established by Law between a creditor, which is the State and the debtor, which are natural or legal persons, whose objective is the fulfillment of the tax obligation;

• 23)

  PEREMPTORY DEADLINE: That whose expiration automatically determines the lapse of the same for whose exercise it was granted;

• 24)

  CREDIT PRIORITY: Order of priority or preference in which the various concurrent credits must be satisfied in case of forced execution of a delinquent or insolvent debtor;

• 25)

  TAX PROCEDURE: Sequential actions by the Secretary of State in the Office of Finance, Tax and Customs Superintendency, Tax Administration and Customs Administration, aimed at guaranteeing the effective fulfillment of tax rights and obligations, whether formal or substantive;

• 26)

  SANCTIONS: Pecuniary obligations imposed by the Competent Authority, in accordance with the Law, derived from non-compliance with formal or substantive tax obligations;

• 27)

  SUCCESSOR BY CAUSE OF DEATH: It is the heir by reason of death; and,

• 28)

  TAX OBLIGOR: Natural or legal person who must comply with the tax and customs obligations established by Law, whether in the capacity of taxpayer or responsible party.

CONCEPT AND CLASSIFICATION OF TAXES. Taxes are the pecuniary obligations that the State exacts in the exercise of its tax power and as a consequence of the realization of the taxable event provided in the Law, to which the latter links the duty to contribute, with the object of satisfying public needs. Taxes are classified as:

• 1)

  Income Taxes;

• 2)

  Fees;

• 3)

  Contributions; and, 4) Monotax or Single Tax.

INCOME TAX. Income tax is the tax whose obligation has as its generating event and as its legal foundation a situation relative to the taxpayer taking into consideration the taxpayer's tax capacity, without the State being obligated to an equivalent consideration.

FEE. 1) A fee is the sum of money that the State or any of its decentralized agencies collects for the actual provision of a public service to a specific natural or legal person, whose amount must correspond to the cost or maintenance of the service; and, 2) For the approval of a Fee, a technical-economic and social impact study is required that supports its price or amount.

CONTRIBUTION.

• 1)

  Contribution is the tax whose obligation has as its generating event special benefits or an increase in the value of the goods of the tax obligor, derived from the realization or expansion of works or public services;

• 2)

  The proceeds from the payment of the contribution must not finance the totality of the realization or expansion of the work or public services, but rather the part of the work or services attributable to the special benefits and must not have a purpose other than the financing of the works or activities that constitute the prerequisite of the obligation; and,

• 3)

  For the approval of a contribution, a technical-economic and social impact study is required that supports its price or amount.

MONOTAX OR SINGLE TAX. 1) The Monotax or Single Tax is created based on the constitutional principles of legality, proportionality, generality and equity, considering the economic capacity of the tax obligor, to which the organizations of the Social Economy Sector, other economic sectors and professionals that the Law determines are subject, and those that develop economic and non-profit civil activities. Development Non-Governmental Organizations (DNGOs) without profit motive subject to a Special Law for the Promotion of Development Non-Governmental Organizations and Churches are excluded from the obligation of the Monotax or Single Tax; and, 2) This special regime is based on tiered tax rates, according to the parameters established by the Law that regulates it. The Monotax or Single Tax must replace the obligation to pay any tax on direct or connected income in the national tax system.

SOURCES AND HIERARCHY OF TAX AND CUSTOMS LAW. 1) The following constitute sources of Honduran tax and customs law and must be applied in the order indicated below:

• a)

  The Constitution of the Republic;

• b)

  Treaties or international agreements in tax and customs matters or that contain provisions of this nature of which Honduras is a party;

• c)

  The Tax Code;

• d)

  General or special laws of a tax and customs nature;

• e)

  Other general or special laws that contain provisions of a tax or customs nature;

• f)

  Jurisprudence established by the Supreme Court of Justice (CSJ) that deals with tax or customs matters;

• g)

  Regulations authorized by the President of the Republic, through the Secretary of State in the Office of Finance (SEFIN), that develop the rules referred to in subsections d) and e) above, issued in accordance with and within the scope of the Law; and,

• h)

  General principles of Tax and Customs Law. 2) In cases not provided for in the hierarchy of tax and customs provisions cited above, other administrative laws and the principles of administrative law and other legal branches must be applied supplementarily as applicable according to their nature and purposes; and, 3) When in the exercise of its constitutional powers, the National Congress approves laws relating to the tax and customs system, it must endeavor to ensure that they are in harmony with the spirit of the provisions of this Code; likewise, the Executive Branch, in the exercise of regulatory power, must issue regulations of such a nature that their scope is within the legal rules established in this Code, which in no case and under no circumstance must go beyond its contents or precepts. This rule is applicable to other administrative acts that are issued in the exercise and application of legal rules of a tax and customs nature.

APPROVAL OF GENERAL RULES. 1) The President of the Republic, through the Secretary of State in the Office of Finance (SEFIN), is empowered to issue administrative acts of a general nature called Regulations, in the area of competence of tax and customs policy and all those powers that by provision of the Constitution of the Republic and by Law correspond to him, by himself or through the aforementioned Secretary of State; and, 2) The Tax Administration and the Customs Administration, through their respective heads, are empowered to issue administrative acts of a general nature that contain the procedures and technical criteria necessary for the application of regulations in these matters, provided that their approval is justified and such administrative acts do not exceed, restrict, distort, contradict or modify the current legal and regulatory precepts and contents.

APPROVAL OF APPLICATION CRITERIA AND EFFECTS OF THEIR PUBLICATION.

• 1)

  The administrative acts that are approved in accordance with the provisions of the preceding Article, once published in the Official Gazette "La Gaceta", are mandatory;

• 2)

  Modifications to existing general character acts must be approved by an administrative act identical to and of the same rank as the one that gave rise to the previous act and must likewise be published in the Official Gazette "La Gaceta";

• 3)

  The new criterion must not be applied to situations that occurred during the validity of the previous criterion;

• 4)

  Once approved and published in the Official Gazette "La Gaceta", both the criteria originally approved and their modifications must be published by any means of national communication, so that the content of the same is known to the greatest number of persons possible; and,

• 5)

  The Tax Administration and Customs Administration are responsible for compiling all approvals and publications regarding the administrative acts referred to in this Article and are obligated to publish annually an updated single text that incorporates all modifications and amendments that occur over time, noting the reference to each modification or amendment individually. CHAPTER II GENERAL TAX AND CUSTOMS PRINCIPLES

PRINCIPLE OF LEGALITY. It is the exclusive competence of the National Congress through tax and customs laws and, consequently, cannot be the subject of regulatory power:

• 1)

  To create, modify or suppress taxes, define the taxable event generating the tax and customs obligation, establish the taxable base, the tariff and the term of the tax, establish the tax point, the sanctions and define the active subject and the tax obligor;

• 2)

  To grant exemptions, exonerations, deductions, liberations or any kind of tax or customs benefit;

• 3)

  To establish and modify fines and the obligation to pay interest;

• 4)

  To establish the obligation to present declarations and self-assessments relating to the principal tax or customs obligation and to the realization of payments on account or advance payments;

• 5)

  To impose accessory or secondary obligations in tax or customs matters;

• 6)

  To typify crimes and misdemeanors and establish the penalties and sanctions applicable to the same;

• 7)

  To grant tax or customs privileges or preferences or establish general or special guarantees for credits of such nature;

• 8)

  To regulate matters relating to payment, compensation, confusion, condonation, prescription and extinction of obligations regulated in this Code; and,

• 9)

  To establish and modify statute of limitations periods.

INTERPRETATION OF TAX AND CUSTOMS RULES. 1) Tax and customs laws must always be interpreted strictly, so that to determine their meaning and scope, extensive or analogical methods of interpretation must not be used. In particular, analogy is not admissible to extend beyond its strict terms the scope of the taxable event or exemptions and exonerations, nor that of tax or customs crimes; and, 2) In the interpretation of the provisions of this Code the following rules are also observed:

• a)

  It is forbidden to attribute to the Law a meaning other than that which explicitly results from its own terms;

• b)

  When the legislator expressly defines words, they must be given their legal meaning; and,

• c)

  Insofar as they are not defined by the tax and customs legal system, the terms contained in its rules are understood in accordance with the following order: i. Their legal meaning; and, ii. Their technical meaning.

TEMPORAL VALIDITY OF TAX AND CUSTOMS RULES.

• 1)

  Tax and customs laws and regulations enter into force from the date provided therein. If they do not establish one, they enter into force after twenty (20) business days have elapsed following their publication in the Official Gazette "La Gaceta";

• 2)

  Laws regulating periodic taxes must be applied to the fiscal periods that begin after their entry into force, unless otherwise provided therein and the Principle of Non-Retroactivity of the Law is not violated. In this sense, the Law that modifies the tax rate of taxes whose fiscal period is the calendar year or the elements used to determine their base enters into force from January first of the year following its publication and the taxes, including advance payments, that must be paid from that date onward are subject to the new Law. This rule must be applied to tax obligors subject to special periods, respecting the specific special period authorized;

• 3)

  Notwithstanding the provisions of the preceding paragraph, the law that establishes, increases, modifies or suppresses a tax with monthly periodicity must enter into force on the first day of the third month following the date of its publication. Tax or customs rules that establish or increase taxes with monthly periodicity must not be enforceable in any case before that deadline;

• 4)

  The forms, declarations and reports that must be submitted by tax obligors must be approved by Agreement of the Tax Administration or Customs Administration and must be published in the Official Gazette "La Gaceta", so that they enter into force. Notwithstanding the foregoing, the instruments described herein must be promulgated by publishing the Agreement of the Tax Administration or Customs Administration on the electronic portal of the same, and must publish in the Official Gazette "La Gaceta" a notice containing the name of the approved document, its legal basis, the date of its publication and validity on the electronic site;

• 5)

  Tax or customs rules do not have retroactive effect. Rights definitively incorporated into the patrimony of tax obligors under the authority of a previous law are not affected by a subsequent tax or customs law; and,

• 6)

  The repeal of a tax or customs rule does not prevent its application to facts produced during its validity. Acts, facts, relationships or situations that began to occur under the authority of a previous law, but which have not been completed or perfected at the time the new Law enters into force, remain subject to the provisions thereof.

COMPUTATION OF DEADLINES. Legal and regulatory deadlines are counted until midnight on the corresponding day in the following manner:

• 1)

  Without prejudice to the provisions of Article 91, deadlines begin from the day following the date on which the notification or publication, as the case may be, of the act in question takes place;

• 2)

  In deadlines established by days, only administrative business days are counted, unless otherwise provided by law or unless the competent authority has authorized business hours ex officio or at the request of interested parties, provided there is urgent cause and in particular cases, in accordance with the procedure contained in this Code;

• 3)

  Deadlines fixed in months are counted from date to date, except that the month of expiration does not have an equivalent day to that on which the computation begins, in which case it is understood that the deadline expires on the last day of the month;

• 4)

  When the deadline is in years, these are understood as calendar years in all cases;

• 5)

  In the case of obligated subjects with special periods, the deadline of the special authorized period must be respected;

• 6)

  If the deadline is established in hours, using the expression "within such hours" or another similar or equivalent expression, it is understood that it extends until the last minute of the last hour inclusive; and if the expression "after such hours" or another similar or equivalent expression is used, it is understood that it begins in the first minute of the hour following the last of the deadline;

• 7)

  In all cases, terms and deadlines that expire on a non-business day for the Secretary of State in the Office of Finance (SEFIN), the Tax and Customs Superintendency, the Tax Administration and the Customs Administration, are understood to be extended until the first business day following;

• 8)

  For purposes of this Article, all days of the year are understood as administrative business days. Non-business days are Saturdays, Sundays, national holidays and the days that the Law orders public offices not to work, as well as those days when, due to exceptional and notorious circumstances, access to the offices of the Secretary of State in the Office of Finance (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration is made impossible;

• 9)

  Business hours to the public are a matter of discretion of the Tax Administration or Customs Administration, considering its growth plan and work flow within Executive Branch schedules. For extraordinary reasons and circumstances, the Tax Administration and Customs Administration may authorize special schedules for such purpose;

• 10)

  Deadlines established in this Code or other laws are peremptory, non-extendable and mandatory for interested parties, the Secretary of State in the Office of Finance (SEFIN), the Tax and Customs Superintendency, Tax Administration and Customs Administration, as appropriate, except as expressed in the following paragraph;

• 11)

  The Secretary of State in the Office of Finance (SEFIN), the Tax and Customs Superintendency, the Tax Administration and the Customs Administration, within the scope of their competencies, except for express contrary precept and other rules contained in this Code, must grant at the request of interested parties an extension of the procedural deadlines established for the proceedings and remedies contained in this Code or other laws, provided that it does not exceed more than half of the same, when the following circumstances concur:

  • a)

    That it be requested before the deadline expires;

  • b)

    That force majeure or duly proven and documented case of force is alleged; and, c) That it does not prejudice third parties. No more than one extension of the respective deadline should be granted. No remedy is admissible against the order that grants or denies the extension.

• 12)

  After a deadline for the tax obligor or the extension granted in time has elapsed, the procedural step or remedy that was not used is automatically forfeited and irreversibly lost, with the passage of the term being noted ex officio and the respective procedure being continued, if applicable.

PRESUMPTION OF LEGALITY. 1) The legality of administrative acts issued by the Secretary of State in the Office of Finance (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration is presumed, without prejudice to the actions and rights that the Law recognizes to tax obligors for the challenge and, where applicable, suspension of the execution of those administrative acts; 2) In respect of the Principle of Legality, the Executive Branch agencies responsible for implementing this Code must not:

• a)

  Violate, through acts of a general or particular character, the provisions issued by a higher-ranking agency or the Judicial Branch;

• b)

  Issue orders, resolutions or agreements that disregard what the same agency or entity has provided through acts of a general character;

• c)

  Recognize, declare or limit rights of natural or legal persons, if they do not have such powers attributed by Law;

• d)

  Execute administrative acts that diminish, restrict or distort the rights and guarantees recognized in favor of natural or legal persons by the Constitution of the Republic and the laws; and,

• e)

  Perform or execute material actions that limit rights of natural or legal persons without the resolutions or agreements that serve as their legal foundation having been previously adopted and legally communicated. 3) Non-compliance or transgression of these provisions and others concerning the rights and guarantees of private parties, carry with them the nullity of what was done, without prejudice to the administrative, civil and criminal sanctions that correspond to the public servant or public servants involved in such violations. CHAPTER III TAX AND CUSTOMS EXEMPTIONS AND EXONERATIONS

EXEMPTIONS. 1) These are all provisions approved by the National Congress and expressed in tax or customs norms with the rank of Law that create taxes, which free taxpayers totally or partially from the payment of the tax obligation; and, 2) To enjoy the benefit of an exemption in declarations or self-assessments, one should not be subject to authorizing administrative procedures.

EXONERATION. It is the total or partial waiver of payment of the tax or customs obligation approved by the National Congress, whose individual processing corresponds to the Executive Branch, through the State Secretariat of the Office of Finance (SEFIN).

EFFECTS OF EXEMPTION AND EXONERATION.

• 1)

  The tax or customs exemption and exoneration, legally effected, waive the obligated taxpayers from the total or partial payment respectively;

• 2)

  The tax or customs exemption and exoneration does not exempt the obligated taxpayer from the duties of submitting declarations, withholding taxes where applicable, declaring their domicile and other matters set forth in this Code except when a special tax or customs law expressly provides otherwise; and,

• 3)

  The exemptions and exonerations contained in special laws must be governed by the legal framework that regulates them.

LAWS OF EXEMPTION AND EXONERATION.

• 1)

  Laws approved after the entry into force of this Code and granting exemptions and exonerations must clearly and precisely indicate the following:

  • a)

    Objective of the measure;

  • b)

    Beneficiary subjects;

  • c)

    Formal and material requirements to be met by beneficiaries. Such requirements must be clearly set forth in the Law and are of strict application, so that no authority must require requirements different from these;

  • d)

    Term or period of the benefit; and, e) Taxes waived.

• 2)

  The Bill must be accompanied by a study containing the impact of the measure quantified in relation to the incentive or benefit, with the measurement of improvement delimited on social, economic and administrative aspects. The impact study must include, at minimum, the influence regarding the geographic zone, activities and beneficiary subjects, the increase of investments, generation of foreign currency and generation of direct and indirect jobs related to the tax cost. In order to make it more expeditious, in the case of non-profit and/or humanitarian institutions, a technical report must be presented;

• 3)

  Every Bill that reduces totally or partially the payment of taxes or any Bill that contains provisions of a tax or customs nature, prior to its approval by the National Congress, requires the technical opinion of the State Secretariat of the Office of Finance (SEFIN), for the purpose of providing information to the legislators on the fiscal and budgetary consequences in case the bill is approved;

• 4)

  The National Congress must establish, for each particular bill, a period of up to forty-five (45) business days in which the State Secretariat of the Office of Finance (SEFIN) must present the required technical opinion; once the established period has elapsed, without the technical opinion having been sent, the discussion of the bill must proceed without considering such requirement; and,

• 5)

  For the issuance of the technical opinion described above, the State Secretariat of the Office of Finance (SEFIN) must consider the following:

  • a)

    The quantification of the impact of the tax or customs benefit that the exemptions or exonerations of payment of taxes contemplate granting;

  • b)

    The study of impact on social, economic and administrative aspects, which must be provided by the potential beneficiaries; and, c) A comparative analysis of regional tax behavior, always provided by the potential beneficiaries.

SCOPE OF EXEMPTION OR EXONERATION.

• 1)

  Tax or customs exemptions and exonerations are personal. Consequently, they cannot be ceded to persons other than the beneficiaries, unless special laws provide otherwise;

• 2)

  Exemptions and exonerations only cover taxes expressly mentioned in the Law; and,

• 3)

  The State Secretariat of the Office of Finance (SEFIN) must verify and confirm that the obligated taxpayers benefited by exonerations comply with the commitments and objectives stipulated in the bill that was at that time submitted to the competent authority. Non-compliance with the commitments results in the cancellation of the benefits granted, except in cases of acts of God or force majeure duly proven.

PROCESSING OF EXONERATIONS, REFUNDS AND CREDIT NOTES.

• 1)

  The processing of exonerations, refunds and credit notes derived from them must be done by the State Secretariat of the Office of Finance (SEFIN);

• 2)

  For the benefit and enjoyment of exonerations recognized by Law, the natural or legal person who qualifies for it must register in the Registry of Exonerated Persons administered by the State Secretariat of the Office of Finance (SEFIN);

• 3)

  For registration, for the first time, the interested party or their legally accredited representative must complete the form approved by said State Secretariat, accompanying the documents and digital supports upon which it is based, for which the cited State Secretariat must form a single file for use in their technological systems;

• 4)

  The State Secretariat of the Office of Finance (SEFIN) must issue the respective certificate of registration to accredit the beneficiary of the tax or customs exoneration, without prejudice to the resolution that accredits the waiver of payment of taxes as requested by the beneficiary. No administrative or judicial authority must require any other accrediting document;

• 5)

  The obligation to update the registry must be annual and done through the written or electronic means provided by the State Secretariat of the Office of Finance (SEFIN);

• 6)

  The credit for taxes paid by the obligated exonerated taxpayer and accredited through a resolution issued by the State Secretariat of the Office of Finance (SEFIN) must be applied by the Tax Administration or Customs Administration;

• 7)

  The application of the credit must be made by the beneficiary of the exoneration with the aforementioned administrative resolution, in which case it must always refer to the amounts indicated in said resolution;

• 8)

  In the event that the option is for the refund of what was paid, the obligated taxpayer must request it from the State Secretariat of the Office of Finance (SEFIN) which must resolve it within the period contained in this Code;

• 9)

  The State Secretariat of the Office of Finance (SEFIN) is authorized to enter into agreements with financial system institutions to authorize and issue automated control systems so that obligated taxpayers may make local purchases according to the goods and services exonerated in each Law. In such agreements, the mechanisms for verification and inspection by the State Secretariat of the Office of Finance (SEFIN), the Tax Administration or the Customs Administration, where appropriate, which both financial system institutions must implement in their systems, as well as those that obligated taxpayers must comply with, must be established;

• 10)

  For members of the diplomatic or consular corps, supranational financing bodies, non-profit and humanitarian organizations and other bodies or entities that, by mandate of the Constitution of the Republic, Conventions or International Treaties, enjoy tax or customs benefits, the State Secretariat of the Office of Finance (SEFIN) may continue using the manual or electronic purchase order system, unless agreements are voluntarily signed to implement automated systems described in the previous numeral;

• 11)

  In the case of imports of goods exonerated to the country, the obligated exonerated taxpayer must request from the State Secretariat of the Office of Finance (SEFIN), through its dependency, the issuance of the corresponding waiver of taxes, fees and duties, that correspond according to each Law or Decree of exoneration. The provisions of the preceding paragraph are excepted for natural or legal persons operating in special customs regimes, free zones, duty-free zones, warehouses or tax deposits and civil society organizations without profit according to the Special Law for the Promotion of Non-Governmental Development Organizations, established in the Constitution of the Republic or special laws, may continue operating under the corresponding special systems, procedures and regimes;

• 12)

  The request for waiver of payment of taxes may be made directly by the interested party or their legally accredited representative, accompanying the form approved by said State Secretariat, without need or requirement to provide requirements, documents or digital supports, being sufficient to indicate that they are registered in the Registry of Exonerated Persons, except for the detailed description of the goods and their tariff classification; as well as, the certificate of tax compliance for tax obligations other than the waiver of payment of taxes requested. The State Secretariat of the Office of Finance (SEFIN) must resolve within a period not exceeding sixty (60) business days, and must issue to the applicant the certification of the respective waiver, which must be communicated to the customs service by electronic means, being the only valid document to accredit the benefit of exoneration before the tax or customs authority. No administrative or judicial authority may require any other accrediting document;

• 13)

  The State Secretariat of the Office of Finance (SEFIN), through its dependency, must perform the verifications and controls necessary before any public or private authority to validate each of the registrations made in the Registry contained in this Article; as well as the transactions made and reported through automated systems and mechanisms or authorized import waivers. Should it be found that the data and information provided by the applicant are false or inaccurate, that the transactions made by the use of electronic means are not in conformity with the exonerations of Sales Tax according to Law, or, the goods imported are not used or destined for the purposes of the exoneration granted in each Law, the corresponding report and resolution must be issued canceling the registered exoneration and suspending the electronic mechanisms or waivers to enjoy the benefit of the exonerations granted by Law. This resolution must also contain the administrative sanctions that are applicable, determining whether it causes the payment of any tax left unpaid and, in cases appropriate due to their classification, ordering its communication to the Office of the Public Prosecutor so that it investigates and deduces the criminal liabilities that correspond. The resolution that is issued in such case must be notified to the responsible party and may be challenged according to the remedies and procedures contemplated in this Code; and,

• 14)

  When obligated taxpayers who enjoy benefits fail to comply with their obligations, they must be sanctioned according to this Code. SECOND TITLE TAX AND CUSTOMS RELATIONS, THE SUBJECTS AND THE RIGHTS OF OBLIGATED TAXPAYERS CHAPTER I GENERAL PROVISIONS

CONCEPT OF TAX AND CUSTOMS LEGAL RELATION. The tax and customs legal relation is the set of obligations and duties, rights and powers that arise from the application of the legal norms that constitute the sources of Tax and Customs Law.

DETERMINATION OF FACTS AND SIMULATION. 1) Facts with tax or customs relevance must be determined with the same criteria, formal or material, used by the Law when defining or delimiting them; and, 2) In case of simulated acts or transactions, the tax must be applied according to the acts or transactions actually carried out.

VALIDITY OF ACTS. The tax or customs obligation must not be affected by circumstances relating to the validity of the acts or to the nature of the object pursued by the parties, nor by the effects that the facts or acts taxed have in other branches of law.

TAX OR CUSTOMS OBLIGATIONS.

• 1)

  From the tax or customs legal relation may derive material and formal obligations, both for the State and for the obligated taxpayers;

• 2)

  Material obligations are those that entail the realization of a payment by the obligated taxpayer themselves or on behalf of another, as well as all other accessory obligations that have as their object a provision of economic content; and,

• 3)

  The rest of the obligations must be considered as formal obligations.

TAX PERIOD AND ACCRUAL.

• 1)

  In periodic taxes, each period determines the existence of an autonomous tax or customs obligation;

• 2)

  The accrual of the tax is the moment in which the generating fact is legally considered to have occurred and must be determined in the applicable norm;

• 3)

  When tax or customs laws that establish taxes with annual periodicity are established, they must be calculated by fiscal years, which must coincide with the natural civil or calendar year, which begins on the first (1) day of January and ends on the thirty-first (31) day of December. If obligated taxpayers begin their activities after January first, the fiscal year is understood to begin on the day they initiate activities and ends on the thirty-first (31) day of December of that year;

• 4)

  When tax or customs laws establish taxes with monthly periodicity, the tax period must be calculated from the first day to the last day of the corresponding natural, civil or calendar month;

• 5)

  Notwithstanding the foregoing, the Tax Administration may, in exceptional cases duly justified by the interested parties, authorize a special fiscal period;

• 6)

  If the extinction, cessation of activities or death of the obligated taxpayer occurs before December 31, the fiscal year is understood to begin from January 1 and end on the day on which the extinction, cessation or death of the obligated taxpayer occurs; and,

• 7)

  In case of merger or absorption of an obligated taxpayer, the fiscal year must end on the date on which the merger or absorption has been legally carried out. The obligated taxpayer that is established or subsists, as the case may be, must assume the tax obligations and tax credits of the one that has disappeared.

AGREEMENTS BETWEEN INDIVIDUALS. Tax and customs laws are of public order and, consequently cannot be avoided or modified by agreements of individuals. However, the rights conferred by them may be waived provided that they only affect the individual interest of the obligated taxpayer who waives and that the waiver is not prohibited. CHAPTER II ACTIVE SUBJECT AND OBLIGATED TAXPAYERS

ACTIVE SUBJECT. The active subject of the tax and customs legal relation is the State, which delegates in the public entity constituted for this purpose the administrative power for the management and enforcement of the tax, although it does not have the power to create the tax nor be the recipient of its revenue.

OBLIGATED TAXPAYERS. The obligated taxpayers are the following:

• 1)

  The contributors;

• 2)

  Those obligated to make payments on account or anticipated;

• 3)

  Withholding agents;

• 4)

  Those obligated to make payments in kind;

• 5)

  Collection agents;

• 6)

  Successors;

• 7)

  Third responsible parties;

• 8)

  Trusts and other autonomous patrimonies;

• 9)

  Associations or de facto partnerships lacking legal personality;

• 10)

  Subjects to whom exemptions, exonerations or other tax benefits apply; and,

• 11)

  Those who must comply with formal obligations, including those obligated according to regulations on mutual administrative assistance in tax matters.

CONTRIBUTORS.

• 1)

  Contributors are natural or legal persons directly subject to compliance with the tax obligation due to being, with respect to the generating fact, in the situation provided by the Law;

• 2)

  Consequently, they have such character:

  • a)

    Natural persons;

  • b)

    Legal persons, including civil and commercial partnerships, cooperatives and associative enterprises and, in general, associations or entities that according to Public or Private Law have the status of subjects of law;

  • c)

    Other entities, collectivities, organizations or legal transactions, with or without legal personality, that constitute a functional or patrimonial unit and that acquire the status of person or contributor by Law; and, d) In laws where so provided, pending estates, community of property and other entities that, lacking legal personality, constitute an economic unit or a separate estate, subject to taxation.

• 3)

  Only by provision of Law can contributors be exempted, totally or partially, from compliance with their tax or customs obligations;

• 4)

  Contributors are obligated to comply with the formal and material duties established by this Code or the legal norms that constitute sources of Tax and Customs Law. In particular, the contributor is obligated to: a) Satisfy the tax to the Tax Administration or Customs Administration; and, b) Reimburse the amount of the tax or have it withheld or collected from them, in case it is paid by the responsible party, the withholding agent or collection agent, or, in general, that a third party must satisfy it by imposition of Law.

• 5)

  Contributors who participate in the realization of the same generating fact are considered jointly and severally obligated; and,

• 6)

  Centralized and decentralized entities of the State, as well as public and mixed capital enterprises, are obligated to pay taxes, unless special laws provide otherwise.

OBLIGATED TO MAKE PAYMENTS ON ACCOUNT OR ADVANCE PAYMENTS. The taxpayer is obligated to make advance payments when the law of each tax imposes upon them the duty to deposit amounts on account of the principal tax or customs obligation prior to such obligation becoming enforceable.

WITHHOLDING AGENT AND TAXPAYER MAKING PAYMENTS IN KIND.

• 1)

  A withholding agent is a person or entity to whom the law of each tax, the Tax Administration or Customs Administration, taking into account their activity, function, or contractual position, imposes the obligation to withhold and remit the taxes or amounts on account thereof from other taxpayers;

• 2)

  The withholding must be effected at the moment in which the payment or accrual of the tax is made, whichever occurs first;

• 3)

  Taxes that special laws explicitly exempt from such obligation are not subject to withholding; and,

• 4)

  Any natural or legal person that makes payments in kind as a result of their contractual relationships of a commercial nature is obligated to remit the withholdings of applicable taxes in accordance with the tax or customs laws in force that would have been applicable if the payment had been made in cash. The withholding agent has the right to recover the payment made from the recipient of the payment in kind.

COLLECTION AGENT.

• 1)

  A collection agent is a person or entity to whom the law of each tax, taking into account their activity, function, or contractual position, imposes the obligation to collect and remit to the State the amount collected as a result of payments received from other taxpayers, as a tax or payment on account of the tax corresponding to them. Upon effecting the collection, the agent must deliver to the taxpayer a receipt for the withholding of the act performed;

• 2)

  Such agent is the sole responsible party before the State for the amount collected and for any amount that should have been collected but was not;

• 3)

  It is responsible before the State for collections made and not remitted. The State has in all cases the right to demand that the agent pay damages and losses that may have been caused; and,

• 4)

  It is responsible before the State for collections made without legal basis and for those not remitted. The State has in all cases the right to demand that the agent pay damages and losses that may have been caused.

SUCCESSOR MORTIS CAUSA. 1) The rights and obligations of the deceased taxpayer correspond to the universal successor and, in the absence thereof, to the legatee, without prejudice to the benefit of inventory; and, 2) Their tax or customs responsibility is limited to the amount of the inherited portion or amount received.

THIRD-PARTY RESPONSIBLE PARTIES.

• 1)

  Third-Party Responsible Parties are natural persons, legal entities, or organizations that by express provision of Law must fulfill the obligations of taxpayers included in items 1) through 7) of Article 29 to which this Code refers, when such taxpayers have failed to fulfill their obligation;

• 2)

  Responsible parties have the right of recovery against the principal debtor under the terms provided in civil legislation; and,

• 3)

  In addition to the cases regulated in this Code, laws may establish other tax responsibility scenarios.

SCOPE OF TAX AND CUSTOMS RESPONSIBILITY. 1) Tax or customs responsibility extends only to the principal obligation and not to sanctions, except in the case of those who are causative parties in the commission of an infraction and without prejudice to the accessory responsibilities in which the responsible party may incur by failing to fulfill their obligation; and, 2) The burden of proof corresponds to whoever asserts the facts.

TYPES OF TAX AND CUSTOMS RESPONSIBILITY.

• 1)

  Tax or customs responsibility may be subsidiary or joint and several;

• 2)

  Responsibility is joint and several in the following cases:

  • a)

    With respect to withholding agents and/or collection agents;

  • b)

    When acting in bad faith or fraud declared judicially; and, c) In cases of merger or transformation.

• 3)

  They are subsidiary responsible parties when fulfillment of the obligation may be demanded from another subject due to the relationships existing between such subject and the principal obligated party;

• 4)

  They are jointly and severally responsible obligated parties those taxpayers with respect to whom the same tax-generating event occurs, which must be sufficient for both to respond before the State for fulfillment of such obligation; and,

• 5)

  Subsidiary responsibility can only be deduced once the Tax Administration or Customs Administration has exhausted all collection actions and remedies against the principal taxpayers.

TAX AND CUSTOMS RESPONSIBILITY. Tax or customs responsibility must be declared by administrative act, in accordance with the respective procedure, wherein the grounds for attribution and the amount of the debt subject to such responsibility are indicated, without prejudice to the applicable sanctions.

JOINT AND SEVERAL RESPONSIBILITY. Joint and several liability implies that:

• 1)

  Persons with respect to whom the same tax-generating event occurs are jointly and severally responsible for its payment;

• 2)

  The tax or customs obligation may be demanded in full or in part from any of the debtors, at the discretion of the active subject, preferably from the principal obligated party;

• 3)

  Payment of the total debt made by one of the debtor taxpayers releases the others, and the one who has paid has the right of recovery. Partial payment of the debt by one of the debtor taxpayers releases that party only if it has been paid in the proportion that corresponds to it;

• 4)

  The fulfillment of a formal duty by one of the obligated parties does not release the others when it is useful for the active subject that the other obligated parties fulfill it;

• 5)

  The exemption, forgiveness, or exoneration of the tax or customs obligation releases all debtors, except when the benefit has been granted to a specific person, in which case the active subject may demand fulfillment from the others with deduction of the proportional share of the beneficiary; and,

• 6)

  The interruption of prescription or lapse of rights in favor of or against one of the debtors benefits or harms the others.

JOINT AND SEVERAL RESPONSIBILITY IN CASE OF INCAPABLE PARTIES. Parents, guardians, curators, legal or judicial administrators of incapable parties are jointly and severally responsible for the tax debt.

JOINT AND SEVERAL RESPONSIBILITY IN CASE OF DONATIONS AND SUCCESSIONS. Heirs, donees, and legatees are jointly and severally responsible for the tax or customs debt, for payment of the tax that may affect the assets and rights acquired through donation or legacy, up to a maximum amount equivalent to the value of the assets or rights acquired in the donation, inheritance, or legacy.

JOINT AND SEVERAL RESPONSIBILITY IN MERGERS AND TRANSFORMATIONS. 1) The commercial company resulting from the merger of two (2) or more companies or that has absorbed another or others, assumes the rights, tax and customs obligations, as well as the credits that the prior companies may have left pending; and, 2) The provisions of the preceding item are also applicable when a company is transformed, when the company name or corporate designation is changed, and when the cessation of activities is due to sale, cession, or transfer of assets, shares, or corporate interests.

JOINT AND SEVERAL RESPONSIBILITY OF WITHHOLDING OR COLLECTION AGENTS.

• 1)

  Withholding or collection agents are responsible before the State when they omit the withholding or collection to which they are obligated;

• 2)

  Once the withholding or collection is effected, the agent is the sole responsible party before the Tax Administration or Customs Administration; and,

• 3)

  If the agent, in fulfillment of this joint and several liability, satisfies the tax, it may recover from the taxpayer for the amount paid to the State.

SUBSIDIARY RESPONSIBILITY OF ADMINISTRATORS.

• 1)

  Subsidiary responsible parties for the tax or customs debt are:

  • a)

    De facto and de jure administrators;

  • b)

    Members of a bankruptcy administration;

  • c)

    Liquidators of companies and entities in general;

  • d)

    Legal or judicial administrators of estates; and, e) Holders of the managers or administrators of public enterprises or mixed-capital enterprises;

• 2)

  Subsidiary responsibility must be applied when any of the following circumstances concur:

  • a)

    There has been consent to the commission of infractions;

  • b)

    The necessary acts for fulfillment of obligations have not been performed; and, c) When the necessary steps have not been taken for payment or agreements or measures have been adopted for non-payment of accrued or pending obligations at the time of cessation of activities.

• 3)

  Subsidiary responsibility should only be deduced once the Tax Administration or Customs Administration has exhausted all collection actions and remedies of the tax obligations of the principal taxpayer; and,

• 4)

  The action for subsidiary responsibility is limited to the value of the assets administered by the company, unless the representatives act with fraud, duly proven before the competent judicial authority.

SUBSIDIARY RESPONSIBILITY OF ACQUIRERS. Natural or legal persons acquiring assets affected by Law to the payment of taxes are subsidiary responsible parties for the tax or customs debt, up to the amount of the value owed on the assets they acquire.

SUBSIDIARY LIABILITY OF THE COMPANY FOR THE TAX OR CUSTOMS DEBT OF THE PARTNERS. Legal entities are subsidiarily liable for the tax or customs debt of the partners, associates, members or co-participants, once these have been sentenced by final judgment issued by the competent criminal judicial body, provided that in these cases it is accredited in the same criminal proceeding that such legal entities have been constituted to defraud the State. CHAPTER III TAX AND CUSTOMS CAPACITY AND REPRESENTATION

TAX AND CUSTOMS CAPACITY. Have tax and customs capacity, natural or legal persons, communities of assets, estates pending settlement, de facto companies, conjugal partnerships or other collective entities and other entities, even if they are limited or lack capacity to act or legal personality according to private or public law, provided that the Law attributes to them the status of subjects of tax and customs rights and obligations.

REPRESENTATION OF NATURAL PERSONS AND ENTITIES LACKING LEGAL PERSONALITY. 1) In the case of natural persons lacking civil capacity, they must act through their legal or judicial representatives, in accordance with the applicable legislation; and, 2) The representation of entities lacking legal personality corresponds in the first place to whoever is designated for such purpose and, in default thereof, to the de facto administrator or to any of its members, indifferently.

REPRESENTATION OF TAX OBLIGORS WITH TEMPORARY OR PERMANENT ABSENCE FROM HONDURAS. 1) Tax obligors who are absent from the country for six (6) or more months or who have their domicile abroad are obliged to designate a temporary or permanent representative, as applicable, domiciled in Honduras; and, 2) The failure to comply with this obligation does not prevent the exercise of the corresponding legal actions regarding tax or customs obligations. In such case, tax obligors must be represented by those who direct, manage or have control of the assets or businesses.

TAX DOMICILE OF NATURAL PERSONS. 1) Natural persons must declare their tax domicile to the Tax Administration, in accordance with the following order:

• a)

  The place of their residence;

• b)

  The place where they conduct their habitual civil or commercial activities, in case the residence is unknown or there is difficulty in determining it;

• c)

  The place where the taxable event occurs, in case no domicile exists; and,

• d)

  The one chosen by the active subject, in case there is more than one domicile in the sense of this Article, after prior notification to the tax obligor; 2) Notwithstanding, for all cases of exercise of economic activities, the Tax Administration must consider as domicile the one declared by the tax obligor or the place where the administrative management or direction of business is conducted.

TAX DOMICILE OF LEGAL PERSONS AND ENTITIES. The tax domicile of legal persons and other entities without legal personality is the one they declare to the Tax Administration, in accordance with the following order:

• 1)

  That of their principal domicile stated in the document containing their legal personality or legal standing;

• 2)

  The place where their effective direction or management is located;

• 3)

  The place where the principal center of their activity is situated, in case such direction or management is not known;

• 4)

  The place where the taxable event occurs, in case no domicile exists in accordance with the preceding sections; and,

• 5)

  The one chosen by the active subject, in case there is more than one domicile in the sense of this Article, after prior notification to the tax obligor.

TAX DOMICILE IN THE COUNTRY OF PERSONS DOMICILED ABROAD. The tax domicile in the country of natural or legal persons and other entities without legal personality domiciled abroad is the one they declare to the Tax Administration, in accordance with the following order:

• 1)

  If they have a fixed place of business or permanent establishment in the country, the one established according to the preceding articles for natural or legal persons and other entities without legal personality;

• 2)

  In other cases, they have the tax domicile of their legal representative in the country;

• 3)

  In the absence of a legal representative domiciled in the country, they have as tax domicile the place where the taxable event occurs; and,

• 4)

  The one chosen by the active subject, in case there is more than one domicile in the sense of this Article, after prior notification to the tax obligor.

DECLARATION AND CHANGE OF TAX DOMICILE.

• 1)

  Tax obligors have the obligation to declare their tax domicile and the change or rectification thereof, in the manner and conditions established in this Code;

• 2)

  The tax domicile shall be considered as continuing so long as its change is not notified to the Tax Administration; and,

• 3)

  The Tax Administration may change or rectify ex officio the tax domicile of tax obligors through appropriate verification, following the rules established in the preceding articles and after prior notification to the tax obligor.

SINGLE TAX DOMICILE. For tax and customs purposes, every natural person, legal person or entity must have only one domicile. CHAPTER V RIGHTS OF TAX OBLIGORS

RIGHTS AND GUARANTEES OF TAX OBLIGORS. In addition to those established by other laws, the following are rights of tax obligors:

• 1)

  Right to be treated with decorum, respect, dignity, impartiality and ethics by personnel in the service of the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration;

• 2)

  Right to register and obtain their National Tax Registry (RTN). The issuance for the first time must be immediate and free of charge, in accordance with the procedure contained in this Code. When issued through electronic means, its issuance and replacements must be free of charge;

• 3)

  Right to the confidential treatment of data, reports and tax and customs background, as well as of the information contained in the statements, reports and studies of tax obligors submitted to the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, in the terms provided by Law;

• 4)

  Right to be informed in writing and verbally; and to be assisted personally by the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, in the exercise of their rights and the fulfillment of their obligations;

• 5)

  Right to make all petitions and questions that are formulated in the proceedings for the application of taxes, as well as to obtain access to the files and other causes instructed before the competent administrative authorities;

• 6)

  Right to obtain at their cost a copy of:

  • a)

    The documents that make up the files as long as they are not in the process of resolution;

  • b)

    The statements, reports and studies that the Tax Obligor has submitted;

  • c)

    Other actions carried out in the terms provided by Law, except those derived from tax investigations that have not been concluded; and, d) Right to obtain a complete copy of all actions contained in the file, which must be delivered once the respective administrative authority has concluded an audit and notified the corresponding resolution.

• 7)

  File complaints or grievances with the National Human Rights Commission (CONADEH) and other competent authorities, when the corresponding administrative authority does not guarantee or respect their rights;

• 8)

  Right not to provide documents already submitted in any proceeding, file or procedure that are in the possession of the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration or Customs Administration;

• 9)

  Right of repetition of payments made and return of excess payments that are warranted within the time limit established in this Code;

• 10)

  Right to have the statute of limitations applied ex officio or at the request of a party, for the corresponding action, to determine obligations, impose sanctions and demand payment of the tax or customs debt in the cases provided for in this Code;

• 11)

  Right to know the status of administrative actions and the processing of procedures in which they are a party and to have physical access to them;

• 12)

  Right to identification of personnel of the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, under whose responsibility the procedures in which they are a party are executed;

• 13)

  Right to be informed at the beginning of verification or inspection actions, about the nature and scope thereof, as well as their rights and obligations in the course of such actions and that they are developed within legal time limits;

• 14)

  Right to the rectification of statements in accordance with the provisions of this Code;

• 15)

  Right that no material action limits the rights established in this Code and other tax and customs laws, without the decision that serves as legal basis having been previously adopted and legally communicated;

• 16)

  Right to challenge resolutions issued by the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, that affect them, in accordance with what is established in this Code and to obtain an express pronouncement thereof within the time limits contained in this Code;

• 17)

  Right to the presumption of innocence, due process, to be heard and to be defeated in court and to the right of defense; and,

• 18)

  Right to present allegations and evidence, within the legal time limits. Valid evidence in favor of the tax obligor shall be any information that has been published in official electronic media of the Tax Administration or Customs Administration, when applicable. Tax obligors may act on their own or through a procedural representative or legal agent. The rights enumerated above do not exclude those provided for in other laws and those derived from Treaties or International Conventions.

INFORMATION RIGHTS IN FAVOR OF THE TAX OBLIGOR AND STATE ASSISTANCE OBLIGATION TO FACILITATE VOLUNTARY COMPLIANCE. The Tax Administration and Customs Administration must provide assistance to tax obligors in the voluntary fulfillment of their obligations, through such means as it deems appropriate, in particular its websites or other electronic mechanisms, and to do so must:

• 1)

  Provide tax obligors with computer programs to assist in the preparation and filing of statements, self-assessments and data communications, as well as for the fulfillment of other obligations;

• 2)

  Explain tax and customs rules using, where possible, clear and accessible language and, in cases of a complex nature, prepare and distribute through physical or electronic means explanatory materials to tax obligors;

• 3)

  Prepare, socialize and distribute declaration forms in such a way that they can be completed by tax obligors and inform the dates and places of submission;

• 4)

  Disseminate, publish and keep updated the procedures and requirements of all actions that, by mandate of this Code, other laws or regulations, must be carried out before specific administrative authorities of a tax and customs nature, and must also publish the flowcharts of the corresponding processes, detailing the authorities and departments that must issue opinions and pronounce themselves for each process;

• 5)

  Indicate precisely which document is to be submitted in the requests through which tax obligors are required to submit statements, communications, reports and other documents to which they are obliged;

• 6)

  Disseminate and keep updated all information referring to instructions, help software, procedures, procedural rules for the application of regulations in tax and customs matters, among others, in its electronic portal;

• 7)

  Systematize by dates and thematic axes the legislation, regulations and other rules enacted and in force, in a manner that facilitates their knowledge by tax obligors. It must also keep separately all those rules that have been repealed for permanent consultation;

• 8)

  Keep available to tax obligors, through electronic and similar means, updated versions of tax and customs procedural rules. The Administrations must update their files of rules within no more than ten (10) business days after their publication in the Official Journal "La Gaceta";

• 9)

  Disseminate among tax obligors the remedies and means of defense that can be exercised against resolutions and general acts issued by public entities related to tax and customs matters;

• 10)

  Promote training workshops for tax obligors from different social sectors and the country's economy on the application of tax and customs rules; likewise, establish help and tax and customs instruction desks during the main periods of filing statements or when new tax or customs laws are to be approved;

• 11)

  Disseminate, publish and keep updated information about tax collection goals and the behavior of income by tax; all information related to imports through the country's customs, reporting at a minimum on the goods and merchandise imported, their tariff positions and taxes paid; as well as all statistics that the State Secretariat of the Office of Finance (SEFIN) and the Tax Administration and Customs Administration produce regarding the fulfillment of income goals, tax evasion, the behavior of tax obligors, among others;

• 12)

  Publish and keep updated annually the programs, projects and operational plans of the different work units. Likewise, the criteria for classification of the different categories of tax obligors, the criteria for the performance of collection functions; and,

• 13)

  Undertake any other action aimed at achieving the stated objectives.

SPECIAL OFFICE FOR PROTECTION OF TAX OBLIGORS. There is hereby created the Special Office for Protection of Tax Obligors, as a unit or department attached to the National Commissioner of Human Rights (CONADEH), so that within the framework of its powers in the defense of fundamental rights of natural or legal persons, with or without legal personality, it may watch over the rights of tax obligors before the tax and customs authorities.

DUTIES AND OBLIGATIONS IN GENERAL. The duties and obligations of tax obligors, whether subjects of taxation or not, include among others the following:

• 1)

  Register in the records of the Tax Administration and Customs Administration, to which they must provide the necessary data and notify modifications within the legally established time limits;

• 2)

  Register in the records of the State Secretariat of the Office of Finance (SEFIN) in accordance with what the Law establishes, to which they must provide the necessary data and notify modifications in accordance with what is established in this Code. In case of non-compliance with this provision, the State Secretariat of the Office of Finance (SEFIN) must impose the sanctions directly or, at its discretion, must communicate such non-compliance to the Tax Administration or Customs Administration so that it proceeds to impose the corresponding sanctions;

• 3)

  Submit statements, notifications, self-assessments and other documents required by the Tax Administration and Customs Administration for the fulfillment of their functions;

• 4)

  Keep at their tax domicile the accounting books and tax records that the corresponding rules establish, and must preserve them for a period of five (5) years for tax obligors registered in the National Tax Registry and for a period of seven (7) years in other cases;

• 5)

  Attend to communications and notifications by electronic means or any other valid means, in accordance with law, made by the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, as applicable;

• 6)

  Support transactions of sale or transfer of assets and provision of services by means of receipts issued in legal form;

• 7)

  Provide to the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, as applicable, in the manner and time limits contained in Law, the information they require for the fulfillment of their functions; and,

• 8)

  Attend to the State Secretariat of the Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, as applicable and provide them with the proper collaboration in the development of their functions.

CLASSIFICATION OF TAXPAYERS. The Tax Administration, through Executive Agreement, in coordination with the Customs Administration, must determine categories of tax obligors; as well as establish procedures for the fulfillment of their duties instituted by the tax and customs regulatory rules. In such agreements, it must publish all the criteria used for the categorization of tax obligors. This categorization must be carried out and published at least every two (2) years.

DUTY OF COLLABORATION. The Tax Administration and Customs Administration, within the scope of their competence, in accordance with Inter-institutional National Agreements with other institutions of the Public Administration of the country, with private entities without profit motive or with institutions or organizations without profit motive representative of social, labor, business or professional sectors or interests, among others, may receive collaboration in the following:

• 1)

  Issuance of the National Tax Registry (RTN) and registration in other specialized registries ordered by Law;

• 2)

  Assistance in the conduct of self-assessments, statements and communications;

• 3)

  Submission of any documentation with tax or customs significance, for purposes of being referred for resolution;

• 4)

  Information campaigns; and,

• 5)

  Performance of studies or reports related to tax or customs matters.

DUTY OF PUBLIC COMPLAINT AND ITS PROCESSING. 1) The public complaint filed before the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration must be made by natural or legal persons, with respect to facts or situations that they know and may be constitutive of administrative infractions or tax crimes or may otherwise have significance for tax administration; and, 2) The complaint received by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration must be forwarded to the competent authorities to carry out the appropriate proceedings. SECTION TWO FORMAL OBLIGATIONS OF TAX OBLIGORS

DECLARATIONS AND MANIFESTATIONS.

• 1)

  The tax obligor must submit the declarations, self-assessments and reports established by Law;

• 2)

  In declarations, the exact address must necessarily be indicated where notifications should be made, unless that address has already been registered, as appropriate; and,

• 3)

  Any information required from tax obligors, within the framework of their legal powers, shall be denominated "Manifestations" and the failure to present them shall be sanctioned in accordance with the provisions of this Code.

FORMAL OBLIGATIONS OF TAX OBLIGORS. Tax obligors must facilitate the tasks of review, verification, control, inspection, investigation, determination and collection carried out by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration, in the fulfillment of their functions, observing the duties imposed on them by laws, regulations and internal regulations. In particular, they must:

• 1)

  Preserve and support all operations of alienation, transfer and provision of goods and services through the issuance of vouchers issued in legal form;

• 2)

  Keep accounting books and records related to activities and operations linked to taxation in the terms established in the following Article and by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration. For the purposes of the evidentiary value of the records made, they must be supported by vouchers of the transactions carried out;

• 3)

  Preserve accounting books and special registers, documents and records of the taxable events, electronic files, programs, subprograms and other records processed through electronic systems or computing in an orderly manner and maintain them at their tax address at the immediate disposition of the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration, when requested or when duly accredited civil servants present themselves at their tax address, in order to request documentation or information of a tax nature. Such information must be preserved for a period of five (5) years for tax obligors registered in the National Tax Registry (RTN) and for a period of seven (7) years for other cases;

• 4)

  Immediate availability implies that accounting records must be exhibited in the execution of mass operations, at the moment of the request and has the purpose of confirming that tax obligors are indeed maintaining such records correctly;

• 5)

  When third parties are responsible for preparing the accounting of tax obligors, the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration, through citation, must grant a period of five (5) business days following the request, for them to present the documents;

• 6)

  Present in a timely manner the sworn declarations that determine the tax and customs laws; as well as informative manifestations and reports, in the form and means established by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration;

• 7)

  Provide a copy of the information and documentation in the form required by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration, with the safeguard of the limitations, prohibitions and conditions contained in the Transparency and Access to Public Information Law, of the statements issued by the Institute of Access to Public Information (IAIP), as well as any legislation that protects the information of the tax obligor;

• 8)

  Make available all information and documentation related to computing equipment and system programs (or basic or base software) and application programs (or application software) that are used in the computer systems for recording and accounting of operations linked to the taxable matter, whether processing is carried out on own equipment, leased equipment or the service is provided by third parties. This form of availability does not imply the physical or electronic delivery of manuals, source codes, copies, backups or any other form of delivery of equipment and programs, nor does it provide for the ability to establish remote connections by any means or physical or electronic form; the power of the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration is limited to its observation in the place where they are located. These institutions cannot make copies of software or programs, nor can they share the verified knowledge and information; likewise, they are liable for damages caused by the negligent conduct of any civil servant to the detriment of the tax obligor. In the same manner, they may consult the databases of tax obligors in specific instances to comply with their functions of inspection, control, verification and inspection;

• 9)

  Permit the use of application programs and utilities in tax and customs audit owned by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration, in computing services of their own or third parties, at times when it does not hinder the normal development of the tax obligor's activity. Tax obligors have the right to be present, with the assistance of such persons and professionals as they deem fit, in the execution of the programs or utilities. These programs or utilities cannot be installed permanently or temporarily without the presence of the technicians of the institution that practices it and the personnel that the tax obligor deems appropriate to incorporate;

• 10)

  Notify in writing or by legally recognized and authorized electronic means by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration, any change that is likely to produce a modification of its tax or customs responsibility, without prejudice to these verifying the truthfulness of the reported changes;

• 11)

  Notify in writing or by legally recognized and authorized electronic means by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, the Tax Administration or the Customs Administration, as appropriate, in the form and deadlines provided in this Code or in the tax and customs laws, its tax address, the exact location of the establishments or premises where it carries out the activities generating its tax obligations and the sites where it stores goods or documents; as well as changes in activities or cessation, mergers, absorptions or transfers of the business. The provision contained in this item shall apply without prejudice to the verification and inspection exercised;

• 12)

  Respond within five (5) business days following calls or citations that, in writing or by electronic means, are made by the competent authority; and,

• 13)

  Any other obligations determined by laws and their regulations.

OBLIGATION TO MAINTAIN ACCOUNTING. Tax obligors must maintain accounting in accordance with the following rules:

• 1)

  Maintain and keep the accounting records determined by laws, their respective regulations and the International Financial Reporting Standards generally accepted in Honduras;

• 2)

  Entries in accounting must be made with due clarity, and must be made within thirty (30) days following the date on which the taxable event of the operation occurred; and,

• 3)

  Maintain and keep accounting at their tax address, without prejudice to having contracted accounting services within the country.

OBLIGATION TO ISSUE FISCAL DOCUMENTS. Tax obligors must issue fiscal documents for the activities they carry out and must do so in such a way as to identify who issues them and, as the case may be, receives them and the operation in question in accordance with what is established for this purpose by tax or customs laws or regulations.

OBLIGATION TO REGISTER IN THE NATIONAL TAX REGISTRY.

• 1)

  Natural persons, legal persons and organizations or entities that lack legal personality but that engage in activities that make them tax obligors must register in the National Tax Registry (RTN) maintained for this purpose by the Tax Administration, in accordance with the applicable legal framework;

• 2)

  The issuance of this document must be immediate and free of charge for the first time, without the need to provide supporting documents, except for the Identity Card, Passport or Resident Card for natural persons; as well as the document that accredits the address. The issuance of the document may be physical or electronic; in the case of electronic issuance, replacements must be free of charge. The request and delivery of this document must be personal. Notwithstanding, it may be requested and delivered to a third party provided they present a power of attorney or letter of authorization from the tax obligor duly authenticated. This procedure is excepted for requests and deliveries of the National Tax Registry (RTN) made through electronic means using electronic signature;

• 3)

  In the case of natural persons, their National Tax Registry (RTN) is the same as the registration number in the National Registry of Persons (RNP) and has the duration of their natural life. The Tax Administration must enter into the necessary agreements with the National Registry of Persons (RNP) to incorporate natural persons who are born, settle or are naturalized in Honduras. For the purposes of fulfilling the functions of the Tax Administration, the assigned National Tax Registry (RTN) must be activated in its systems at the moment the tax obligor carries out acts with tax significance;

• 4)

  Other natural persons must obtain the National Tax Registry (RTN) through the procedure contained in this Article;

• 5)

  Legal persons must register in the National Tax Registry (RTN) in the same act as their registration or incorporation, and they must automatically be issued the tax identification number, without requiring any additional requirement. It cannot be required as a prerequisite the obtaining of the National Tax Registry (RTN) of the partners or shareholders, whether they are natural or legal persons, resident, domiciled or not in the national territory. However, the document accrediting the identification of the partners or shareholders must be presented. The National Tax Registry (RTN) of legal persons, with or without profit motive and those organizations or entities that lack legal personality, must be canceled only in cases where in accordance with Law the legal person has been dissolved and liquidated; and,

• 6)

  Foreign residents and domiciled foreign legal persons that carry out actions with tax significance must request their registration in the National Tax Registry (RTN) through a simplified special form that must be issued by the Tax Administration. The National Tax Registry (RTN) of domiciled foreign legal persons must be canceled when their agreement to cease operations in the country is registered in the corresponding Mercantile Registry.

OBLIGATIONS IN CASE OF COMMENCEMENT OF ACTIVITY. 1) Natural persons, legal persons and organizations or entities that lack legal personality and are subject to taxation must submit to the Tax Administration, within forty (40) calendar days following the date of commencement of their activities, a Sworn Declaration on such event; and, 2) The declaration in question must be made in forms established for this purpose by the Tax Administration.

OBLIGATIONS IN CASE OF CESSATION OF ACTIVITIES.

• 1)

  Tax obligors who for any reason cease the activities generating tax obligations must submit within sixty (60) calendar days following the date of its occurrence the Sworn Declaration on such event and when applicable must pay at the authorized financial institution;

• 2)

  Within the aforementioned deadline, the tax obligor must notify the Tax Administration of the cessation of activities, attached the corresponding financial statements, without prejudice to subsequent verification;

• 3)

  For natural persons, the National Tax Registry (RTN) can only be canceled due to death, provided there are no pending tax obligations with the State or until the commercial or professional activities of the deceased have ceased or are transferred to a third party. For these purposes, with the frequency that the Tax Administration agrees with the National Registry of Persons (RNP), information on the deaths of all natural persons, nationals and foreign persons domiciled or resident must be sent. The Tax Administration must communicate this to the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency and the Customs Administration for the purposes that correspond to them; and,

• 4)

  For legal persons, the National Tax Registry (RTN) can only be canceled when it has been dissolved and liquidated and there are no pending tax or customs obligations with the State. SECTION THREE FORMAL OBLIGATIONS OF CIVIL SERVANTS AND OTHER TAX OBLIGORS

GENERAL DUTIES OF CIVIL SERVANTS OF THE STATE OFFICE OF THE TREASURY, THE TAX AND CUSTOMS SUPERINTENDENCY, THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION. 1) When civil servants request documentation or information of a tax or customs nature, for the purpose of confirming that tax obligors are indeed maintaining accounting records in the correct form as established by Law, they must draw up a report on the status of such records, which must be signed by the civil servant and by the tax obligor or their legal representative, expressing their agreement or partial or total disagreement with its content. In the event that the tax obligor or their representative refuses to sign the report, this fact must be recorded in it. This report constitutes evidence for the purposes of subsequent legal proceedings sustained by the State or tax obligors; 2) In case indications are found of the commission of a tax crime, the superior Authority of the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, Tax Administration or Customs Administration, as the case may be, must communicate it to the Public Prosecutor's Office so that it may conduct the investigations that correspond within the framework of its legal competencies.

CONFIDENTIALITY DUTIES OF CIVIL SERVANTS AND OTHER COLLABORATORS OF THE STATE OFFICE OF THE TREASURY, THE TAX AND CUSTOMS SUPERINTENDENCY, THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION. 1) Civil servants who intervene in the various proceedings relating to the application of tax and customs provisions are obligated to maintain absolute confidentiality with respect to declarations and data supplied by tax obligors or by third parties, as well as information obtained in the exercise of inspection powers. Such confidentiality does not include cases in which they must supply data to:

• a)

  Judicial authorities through the corresponding official communication, in criminal proceedings or for the execution of judicial resolutions that are final;

• b)

  Judicial authorities responsible for the protection of minors and incapacitated persons, as well as those dealing with alimony pensions;

• c)

  The Public Prosecutor's Office (MP) and the Attorney General of the Republic (PGR), to combat tax crime, fraud in obtaining or receiving aid or subsidies and fraud in the contribution and collection of social security system fees, as well as in obtaining and enjoying benefits provided by such systems, provided there is an investigation file;

• d)

  The Public Prosecutor's Office (MP) and the National Banking and Insurance Commission (CNBS), for the prevention of money laundering, monetary infractions and financing of terrorism;

• e)

  The Supreme Electoral Court (TSE), regarding persons aspiring to elective public office;

• f)

  The remaining bodies that administer taxes, insofar as the information is strictly linked to the inspection and collection of the taxes of their respective jurisdictions, in accordance with what is established in the Constitution of the Republic or the laws that correspond and are applicable to the extent applicable;

• g)

  The Superior Audit Court (TSC) for its functions of controlling the management of the State Office of the Treasury (SEFIN), Tax and Customs Superintendency, Tax Administration or Customs Administration, in the exercise of its inspection functions that by Law correspond to it; and,

• h)

  Tax or Customs Administrations of other countries in compliance with mutual administrative assistance in their respective matters, agreed in International Law Conventions on the subject matter of this Code, including conventions or international agreements to avoid double taxation in the matter of assets and Income Tax.

• i)

  The State Office of the Treasury (SEFIN), Tax and Customs Superintendency, Tax Administration or Customs Administration, in the exercise of its powers granted by Law. 2) Confidentiality shall also not include information relating to final tax or customs debt of tax obligors that has not been paid or guaranteed or is subject to a payment plan that is in a situation of non-compliance. For these purposes, a credit shall not be considered "final" if it is still under administrative or judicial review; Neither shall a credit be considered "final" if a Judicial Court has issued a precautionary measure so that the Tax Administration or the Customs Administration provisionally ceases an activity, refrains temporarily from carrying out a conduct or temporary prohibition of interrupting or ceasing the performance of a service that was being carried out; 3) Tax obligors dissatisfied with the publication of their data may carry out clarification or correction before the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, Tax Administration or Customs Administration in accordance with the procedure contained in the Regulation approved by the President of the Republic through the State Office of the Treasury (SEFIN); in which they can provide the evidence that best serves their rights. The aforementioned institutions must resolve the request within a period not exceeding ten (10) business days; and, in case it is resolved in favor of the claimant, the published information that corresponds must be eliminated, without prejudice to liability for damages caused to the tax obligor as determined by a competent judge and, furthermore, without prejudice to the criminal action that may proceed for constituting a crime against honor, a situation of responsibility that falls on the civil servant who directly or indirectly participated in the delivery of the published information or was the authorizer of its publication; 4) Independently of the criminal or civil liabilities that could be derived for the offending civil servant, the violation of this particular duty of confidentiality is considered a very serious disciplinary fault; and, 5) In any case, the obligor to whom the information refers may give its written consent for it to be shared or disclosed.

COLLABORATION DUTIES OF CIVIL SERVANTS OTHER THAN THOSE OF THE STATE OFFICE OF THE TREASURY (SEFIN), THE TAX AND CUSTOMS SUPERINTENDENCY, THE TAX ADMINISTRATION OR THE CUSTOMS ADMINISTRATION.

• 1)

  The authorities of all levels of the political organization of the State of whatever nature, the heads or persons in charge of civil or military offices and other public territorial entities, autonomous bodies, decentralized entities and public companies, auxiliaries of the Public Administration, legal entities of private law that by ownership or management are controlled by the Public Administration, entities or bodies that for reasons of efficiency or economy exercise one or more public administrative functions, chambers and corporations, colleges and professional associations, social welfare mutuals; other public entities, including those managing Social Security and whoever, in general, exercise public functions, are obligated to provide to the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, Tax Administration and Customs Administration, such data and records with tax or customs significance as they require through specific requests and to provide their civil servants the support, cooperation, assistance and protection for the exercise of their functions;

• 2)

  The provision of this Article is understood without prejudice to what is established as safeguards in the general and special laws that regulate each of the State institutions required by the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, Tax Administration or Customs Administration. In these cases, the competent Judge must be requested to authorize the delivery of the information required;

• 3)

  Likewise, they must report to the Public Prosecutor's Office the tax crimes that come to their knowledge in the fulfillment of their functions;

• 4)

  When they find indications of tax crimes, such civil servants who have knowledge of them must bring them, by the appropriate means, immediately to the attention of the Public Prosecutor's Office, for the corresponding legal purposes;

• 5)

  The same obligations are binding on political parties, unions and civil associations and other business associations; and,

• 6)

  The Courts and Tribunals of the Republic must provide to the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, Tax Administration or Customs Administration, either ex officio or at the request thereof, such data with tax or customs significance as are derived from the judicial proceedings they know, respecting in all cases the restrictions that Law contemplates.

INFORMATION DUTIES OF OTHER TAX OBLIGORS.

• 1)

  Tax obligors, natural or legal persons and economic units or collective entities, of public or private law, are obligated to cooperate with the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, Tax Administration or Customs Administration, within the scope of their competencies, in the functions of verification, determination, investigation, inspection and collection, being obliged to provide them with all kinds of data, reports or records with tax or customs significance, derived directly from their economic, professional or financial relations with other persons, that are required of them, except for those data, information and documentation protected by Law and this Code;

• 2)

  In accordance with what is provided in the preceding item, in particular: a) Withholding and collection agents, as well as those obligated by payments in kind, are obligated to submit reports of the amounts paid to other persons as returns on labor, capital and business or professional activities; and, b) Companies, associations, professional colleges or other entities that among their functions carry out collection on behalf of their members, associates or colleagues, of professional fees or other income derived from intellectual or industrial property or copyright, are obligated to report such income and to bring them to the attention of the Tax Administration, except for the protections and confidentiality of data, information and documentation protected by Law and this Code.

• 3)

  The obligations referred to in the preceding item must be fulfilled, in response to individualized requests on the part of the holder of the State Office of the Treasury (SEFIN), the Tax and Customs Superintendency, Tax Administration and Customs Administration, in the form and deadlines determined by Law;

• 4)

  When it comes to individualized requests relating to the movements of current accounts, savings and fixed-term deposits, loans and credits and other active and passive operations, in charge of banks and financial companies, savings banks, credit unions and as many natural or legal persons and other entities without legal personality that perform credit operations, these must be made through the main regulatory entities. Individualized requests must detail the identifying data of the check or payment order in question or, alternatively, the operations being investigated, the affected tax obligors and the period of time to which they refer; and,

• 5)

  Professionals cannot invoke professional secrecy for the purpose of preventing a possible verification of their own tax or customs situations.

OBLIGATION OF CONFIDENTIALITY. 1) Withholding or collection agents of taxes, as well as those to whom the Tax Administration or Customs Administration entrust the processing of tax or customs information; collection or collection of taxes, are obligated to maintain confidentiality or secrecy regarding such facts under the terms provided in this Code; and, 2) The violation of what is prescribed in this rule must be sanctioned in accordance with the provisions of the Criminal Code. SECTION FOUR OBLIGATIONS OF WITHHOLDING OR COLLECTION AGENTS

OBLIGATION TO SUBMIT DECLARATIONS AND REMIT TAXES. 1) The amounts withheld or collected by withholding or collection agents must be remitted to the General Treasury of the Republic (TGR) or to the banking institution that the State Office of the Treasury (SEFIN) has authorized for this purpose, within the deadlines indicated in the special tax or customs laws and in the forms determined by the Tax Administration or the Customs Administration, as appropriate; and, 2) When carrying out the remittance referred to in the preceding item, the withholding agent must submit a Sworn Declaration of the operations carried out, in the form determined for this purpose by Law.

OBLIGATION TO DELIVER FISCAL DOCUMENTS. Withholding or collection agents are obligated to give to each tax obligor a fiscal document of the amount withheld in the concept of tax, in accordance with the requirements of the applicable legal framework in force. TITLE FOUR PROCEEDINGS AND PROCEDURES IN TAX OR CUSTOMS MATTERS CHAPTER I GENERAL PROVISIONS SECTION ONE PRELIMINARY PROVISIONS

OBJECT OF ACTIONS AND PROCEDURES. The actions or procedures contained in this Title are intended to facilitate taxpayers' voluntary compliance with their tax obligations, verify their proper compliance, or enforce compliance when it has not been performed or has been performed incompletely or incorrectly.

VERIFICATION OR AUDIT OF DATA AND FACTS DECLARED. The data and facts declared by taxpayers in their declarations and administrative statements must be subject to verification, verification, or audit by the Secretary of State in the Office of Finance (SEFIN), the Tax-Customs Superintendence, the Tax Administration, or the Customs Administration, as applicable, in accordance with the procedures established in the applicable current legal framework.

ENFORCEABILITY AND UNITY OF THE TAX OR CUSTOMS OBLIGATION. 1) Tax or customs obligations are enforceable through administrative proceedings as from the day following the day on which the legal term or period for payment expires; and, 2) The debt or tax or customs obligation, as applicable, is single and indivisible, regardless of whether the obligation is divisible or whether there are two (2) or more obligated taxpayers.

ACCESS TO PROCEEDINGS. Interested parties have access to administrative proceedings and may consult them and obtain, at their expense, copies or photographic reproductions of the documents contained in the file at their own cost, with no requirement other than proof of their identity and legitimacy, except when verification, audit, and investigation proceedings are involved and these have not been concluded, in which case they shall have access to the file after the conclusion of such proceedings by resolution, so that they may exercise their right of defense or comply with the proper application of taxes, except in cases of investigations referred by the Secretary of State in the Office of Finance (SEFIN), Tax-Customs Superintendence, Tax Administration, or Customs Administration to other administrative authorities, and without prejudice to the rights of the taxpayer in the audit process.

MEASURES FOR BETTER RESOLUTION.

• 1)

  The competent authority must advance the procedure of its own motion. At any stage of the proceedings, it may order measures for better resolution, in which case the computation of administrative deadlines for the conclusion of the corresponding proceeding shall be suspended for a maximum of two (2) months, without the possibility of ordering a new suspension, with the exception of the special deadlines contained in this Code;

• 2)

  In the case of proceedings related to the printing and invoicing regime, customs operations, or others related to the ordinary operations of taxpayers or those in which the Secretary of State in the Office of Finance (SEFIN), Tax-Customs Superintendence, Tax Administration, or Customs Administration, as applicable, must resolve summarily without any processing, the authorization of measures for better resolution is not applicable; and,

• 3)

  No body of the Secretary of State in the Office of Finance (SEFIN), the Superintendence of the Tax-Customs Administration, the Tax Administration, or the Customs Administration, shall require private parties to submit documents or information to prove facts or acts that are or should be recorded in their own registers or archives or those that exist in other entities of the Public Administration.

TIMING OF PROCEEDINGS.

• 1)

  The Secretary of State in the Office of Finance (SEFIN), the Tax-Customs Superintendence, the Tax Administration, and the Customs Administration must fulfill their legal and regulatory obligations during business days and hours. However, they may enable non-business hours and days or continue during non-business hours or days a proceeding initiated during business hours and days;

• 2)

  The enablement of non-business days and hours must be decreed by Agreement duly reasoned by the head of the institution, which must be notified to the affected party prior to executing any proceeding under the same; and,

• 3)

  Under no circumstances may enablements of non-business days and hours be decreed on a general basis, except in those cases in which the Secretary of State in the Office of Finance (SEFIN), Tax Administration, or Customs Administration, in the exercise of its audit functions, has contemplated the execution of programs, operations, mass inspections, verifications, and checks. In these exceptional cases, the enablement must last for the period allocated for the execution of such activities and may not exceed three (3) months.

USE OF ELECTRONIC, COMPUTER, AND TELEMATIC TECHNOLOGIES.

• 1)

  The Secretary of State in the Office of Finance (SEFIN), Tax-Customs Superintendence, Tax Administration, or Customs Administration must prioritize the use of electronic, computer, and telematic techniques and means necessary for the development of its activities and the exercise of its competencies, powers, and faculties, with the limitations established by law; and,

• 2)

  The proceedings and procedures in which electronic, computer, and telematic techniques and means are used must guarantee the identification of taxpayers and of public servants or bodies of the aforementioned institutions; and,

• 3)

  In any case, the aforementioned institutions must inform the taxpayer of the electronic, computer, and telematic technologies that are used, and in the event they fail to do so, the electronic information cannot be used against the taxpayer.

EQUIVALENCE OF DOCUMENTARY MEDIA.

• 1)

  Documents issued, regardless of their media, by electronic, computer, or telematic means by the Secretary of State in the Office of Finance (SEFIN), Tax-Customs Superintendence, Tax Administration, or Customs Administration, or those issued by them as copies of originals stored by these same means, as well as electronic images of original documents or their copies, have the same validity and efficacy as original documents, provided that their authenticity, integrity, and preservation are guaranteed and, where applicable, the receipt by the interested party, as well as compliance with the guarantees and requirements required by applicable law;

• 2)

  Documents printed from electronic means must guarantee their authenticity and integrity through a verification security code. Documents issued on paper by electronic, computer, or telematic means may guarantee their authenticity and integrity through electronic signature, generated and linked to their author, which, where applicable, allow their content to be verified by accessing the files of the issuing body or agency through telematic means;

• 3)

  When at the time of issuing the paper document the information system generates a document with the same content in electronic media, both have the status of originals;

• 4)

  The Secretary of State in the Office of Finance (SEFIN), the Tax-Customs Superintendence, the Tax Administration, and the Customs Administration may obtain electronic images of their own documents, with the same validity and efficacy, through digitalization processes that guarantee their authenticity, integrity, and preservation of the image document, leaving evidence thereof. In such case, the original document may be destroyed, unless a legal or regulatory rule imposes a specific duty of preservation;

• 5)

  The Secretary of State in the Office of Finance (SEFIN), the Tax-Customs Superintendence, the Tax Administration, or the Customs Administration may issue paper copies of any type of electronic document, whether original or an electronic image of an original;

• 6)

  In tax or customs procedures, administrative files may be electronic or physical, provided that the documents and archives that constitute them meet the necessary characteristics for their validity and efficacy. Such files may incorporate archives with recordings of conversations or videos, consented to by the parties involved or with recordings of images lawfully obtained. All this information, together with its media, may be used only for the purposes of the procedures individually processed;

• 7)

  Administrative files that integrate tax or customs proceedings and procedures may be documented on paper or electronic media, using in the latter case information or telematic technologies with the conditions established by law. The transmission of files provided for in tax or customs law may be replaced by making the electronic file available; and,

• 8)

  The Secretary of State in the Office of Finance (SEFIN), the Tax-Customs Superintendence, the Tax Administration, or the Customs Administration may adopt any other technological method that allows verification of the authenticity and integrity of an electronic document.

ELECTRONIC MAILBOX.

• 1)

  The electronic mailbox is hereby created as a technological tool of permanent character, which must replace the tax domicile as the place for receiving notifications and carrying out any activity related to tax or customs matters by all taxpayers who register therein. For these cases, the competent authority must implement a reasonable system of electronic alerts of the existence of a notification;

• 2)

  The electronic mailbox shall be used for the receipt or sending of applications, writings, orders, notifications, requirements, and any other decision, communications, and resolutions transmitted by telematic means, subject to the same requirements established for the rest of the administrative procedures. The electronic mailbox must comply with the criteria of availability, authenticity, integrity, confidentiality, and preservation of information equally indicated in the aforementioned rule;

• 3)

  The electronic mailbox must be enabled every day of the year for twenty-four (24) hours. For purposes of deadline calculation, an action carried out on a non-business day, for the body, entity, or taxpayer, shall be understood to be effected on the first following business day;

• 4)

  The presentation of electronic documents in the aforementioned mailbox has identical effects to that effected by other admitted means and is mandatory in accordance with the provisions of this Code;

• 5)

  The Tax Administration must manage and control the entire computer process required by the electronic mailbox. The electronic mailbox must be implemented under a proprietary domain system; and,

• 6)

  In the event that the electronic mailbox is out of service or the corresponding information is not attached for technical reasons, the deadline shall be extended by one additional business day counted from the day the system was restored, an event that must be recorded in the file of each interested party.

USES OF ELECTRONIC MEANS IN THE SECRETARY OF STATE IN THE OFFICE OF FINANCE, THE TAX-CUSTOMS SUPERINTENDENCE, AND THE CUSTOMS ADMINISTRATION. The provisions contained in this Section are applicable to the Secretary of State in the Office of Finance (SEFIN), the Tax-Customs Superintendence, and the Customs Administration, as applicable within the scope of their competencies. SECOND SECTION PETITIONS

PETITIONS.

• 1)

  Taxpayers may exercise the right of petition before the Secretary of State in the Office of Finance (SEFIN), Tax-Customs Superintendence, Tax Administration, or Customs Administration, as applicable, regarding the application or non-application of the law to a specific situation;

• 2)

  For this purpose, the petitioner must expose and establish with clarity and precision all the circumstances, antecedents, and other constituent data of the situation motivating the petition;

• 3)

  The presentation of the petition does not suspend the duty to comply with the corresponding tax or customs obligations;

• 4)

  Petitions that cannot be resolved summarily or as a mere matter of procedure, understood as those whose legal processing is terminated or decided with the first decision issued, the Tax Administration, the Customs Administration, or the Secretary of State in the Office of Finance (SEFIN), as applicable, have a maximum period of sixty (60) business days counted from the presentation thereof, unless the complexity of the petition warrants an extension for a maximum period of thirty (30) days. When the delay is due to causes attributable to the taxpayer, the aforementioned deadlines shall be suspended until the petition is completed within the deadlines established in this Code, without prejudice to the power to declare the corresponding instance forfeited. The effect of the response covers the specific case petitioned;

• 5)

  Petitions that are not resolved within the terms established by this Code or by special tax or customs laws are understood to be resolved against the petitioner;

• 6)

  To establish the foregoing, it is sufficient that the initial writing or application of the proceedings in question be presented for its application or execution, with evidence of the date of official presentation of the referred writing or application; and,

• 7)

  The duly proven damages and losses caused by negative administrative silence or omission to the taxpayer shall be charged to the State and jointly to the negligent public servant or servants directly involved. Damages and losses must be claimed through the corresponding civil judicial proceeding, prior to the administrative claim contained in the Law. THIRD SECTION REQUIREMENTS AND NOTIFICATIONS

REQUIREMENTS AND DEADLINES.

• 1)

  When the tax or customs regulation does not establish the deadlines for submitting communications and other documents, the Secretary of State in the Office of Finance (SEFIN), Tax-Customs Superintendence, Tax Administration, or Customs Administration, as applicable, must require their submission within a maximum period of ten (10) business days;

• 2)

  The Secretary of State in the Office of Finance (SEFIN), Tax-Customs Superintendence, Tax Administration, or Customs Administration, as applicable, in the processes of verification, verification, and audit, must grant taxpayers a period of five (5) business days to respond to information requirements that were not included in the initial requirement; and,

• 3)

  When taxpayers have the obligation to submit communications and other documents and do not do so within the deadlines established in tax or customs regulations, without prejudice to the corresponding sanctions for untimely submission, the Tax Administration, the Customs Administration, or the Secretary of State in the Office of Finance (SEFIN), as applicable, must require their submission within a maximum period of five (5) business days.

NOTIFICATIONS.

• 1)

  Interested parties must be notified of resolutions and proceedings that affect or favor the rights and interests of the taxpayer;

• 2)

  Every notification must contain:

  • a)

    The complete text of the resolution or the description of the proceeding in tax or customs matters;

  • b)

    The indication of whether the resolution is or is not final in the administrative proceeding;

  • c)

    The statement of the remedies that proceed for the resolutions and the legal basis for proceedings in tax or customs matters; and, d) The body before which the remedies that proceed to the resolutions must be presented and the deadline for filing them. In notifications, no response from the interested party is admissible nor should be recorded, unless so ordered.

• 3)

  Notifications that omit any of the requirements provided for in the preceding paragraph are voidable as a matter of right and must be corrected ex officio or at the request of a party. All administrative remedies provided for in this Code proceed against the resolution that decides the voidability of a notification. While the remedies are not resolved and the challenged act does not acquire the character of final and binding, the principal process of the proceeding that originated the notification must be suspended;

• 4)

  Notifications must be made by any means that allows proof of receipt by the taxpayer, legal representative, or procedural representative, as well as of the date, the identity of the notified party, and the content of the resolution or tax proceeding made known. A record of the notification must be left in the file; and,

• 5)

  Deadlines must begin to run as from the following business day to the day on which the notification is understood to have been made, regardless of the means used, without prejudice to the provisions of paragraph 3) of this Article and the following Article.

FORMS. Notifications must be made in the following order:

• 1)

  Personally or to a duly authorized person;

• 2)

  By telematic communication systems, including the electronic mailbox through the Tax Administration Portal, in which cases reliable evidence must be left of the receipt of the communication sent;

• 3)

  By public or private certified mail, with return receipt, sent to the tax domicile or to the place expressly indicated by the taxpayer for receiving notifications; and,

• 4)

  By the physical or electronic notice board.

PERSONAL NOTIFICATION. 1) Personal notification must be made by delivery of the complete copy of the administrative act. Such notification must be made at the tax domicile of the taxpayer, the legal representative, or the attorney-in-fact; and, 2) In cases in which the taxpayer, the legal representative, or the attorney-in-fact, being present, refuse to sign the corresponding evidence, the notification must be carried out by posting it in a visible place at the domicile, leaving the documents in a sealed envelope, and an act of such proceeding must be drawn up.

NOTIFICATION BY TELEMATIC SYSTEMS.

• 1)

  The State Secretary's Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Tax Administration, as appropriate, may carry out notifications through telematic communication systems, fully identifying the sender and recipient of the notification. For these purposes, the aforementioned institutions must be certified as Certifying Authorities in conformity with the aforementioned regulations;

• 2)

  Notifications made through telematic communication systems have the same legal effects as those made in person and must be executed by the head of the General Secretariat or by persons to whom such functions have been expressly delegated through an Agreement, which must be noted in the act notified by telematic means. Telematic notifications must comply with the requirements established in the Law on Electronic Signatures and its Regulations;

• 3)

  For notifications to be made using telematic communication systems, it is a requirement that the interested party has designated such means as preferred or expressly consented to its use. In these cases, the notification shall take legal effect as of the second business day following the date the document was sent by telematic means;

• 4)

  The tax obligor must previously notify the change of email address;

• 5)

  The notification system must certify in the transmission, the date and time in which: a) The sending of the notification by the electronic means used; and, b) The receipt of the notification by the electronic means used. If the requirements established in the preceding paragraphs of this section are not met, it must be understood that the corresponding notification has not been made.

• 6)

  In the case of notifications by electronic means, a reliable record must be kept in the digital file of the notification having been received, its content, and the date thereof.

NOTIFICATION BY PUBLIC OR PRIVATE CERTIFIED MAIL. Notification by public or private certified mail shall be made by delivery of a sealed and closed envelope that must contain a complete copy of the resolution or document that must be brought to the knowledge of the interested party, such diligence being noted in writing, with proof of receipt and indication of the day, time, and place where such delivery was made.

NOTIFICATION BY PHYSICAL AND ELECTRONIC NOTICE BOARD.

• 1)

  For purposes of the provisions of this Code, notifications by notice board shall only be made in those cases where notification by appearance has already been made at least once to the interested party in the same proceeding;

• 2)

  Notifications by this means shall be made by posting for five (5) business days the document intended to be notified in a public place of the offices of the authority making the notification and by also publishing the aforementioned document, during the same period, on the electronic website of the State Secretary's Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration and Customs Administration, as appropriate; and,

• 3)

  The notification takes effect as of the day following the expiration of the period indicated in the preceding section. The authority must keep a record thereof in the respective file.

PRINCIPLES AND RULES APPLICABLE TO EVIDENCE. All principles, means, and procedures related to evidence shall be subject to the rules of the Administrative Procedure Law and, on a supplementary basis, Book Two of the Civil Procedural Code.

ADMISSION AND APPRAISAL OF EVIDENCE.

• 1)

  All means of evidence recognized by Honduran law are admissible, provided they are presented within the terms and periods established in this Code, the Administrative Procedure Law, and the Civil Procedural Code, the latter in a supplementary manner;

• 2)

  Evidentiary means are not admissible in the processing of the corresponding appeal if, having been requested by the Tax Administration, Customs Administration, or the State Secretary's Office of Finance (SEFIN), during the verification, determination, or inspection process, they have not been presented within the legal period for the discussion of adjustments, except for reasons beyond the will of the required party duly justified and documented;

• 3)

  The State Secretary's Office of Finance (SEFIN), the Tax and Customs Superintendency, Tax Administration, and Customs Administration must admit all means of evidence proposed by tax obligors, except as provided in the preceding section, being obligated to justify and appraise in their resolution each of the evidentiary means presented and admitted in the process;

• 4)

  Documents, books, and accounting records constitute elements of evidence, provided they are maintained in legal and proper form, faithfully reflecting the financial situation. Nevertheless, the aforementioned institutions may object to the content of accounting through other elements of evidence external thereto, without prejudice to the right of the tax obligor to challenge the objection made to him;

• 5)

  Evidence shall be appreciated and appraised excluding in all cases arbitrariness, in accordance with the rule of sound judgment, human knowledge and criteria, as well as the rules governing logical reasoning.

EVIDENTIARY PERIOD. 1) Unless this Code establishes a specific period or term for certain processes, the ordinary and general evidentiary period to which a tax obligor is subject for the admission and production of evidence is one (1) month, counted from the day following the date the order opening said period is notified; and, 2) If the tax obligor deems he does not need to present evidentiary means or considers he has produced all necessary means available to him, prior to the expiration of the period contained in the preceding section, he may request that the evidentiary period be closed for the continuation of the corresponding proceedings.

SUBSTANTIATION OF PROCEEDINGS. The facts known as a result of exercising the powers of determination, inspection, and investigation provided for in this Code, whether they appear in the files or documents in the possession of the State Secretary's Office of Finance (SEFIN), Tax and Customs Superintendency, Tax Administration, and Customs Administration, may serve as evidence to substantiate their resolutions, without prejudice to the right of the tax obligor to object to them through the mechanisms established in this Code.

ARGUMENTS. After the evidentiary period has elapsed, a period of ten (10) business days shall be opened ex officio for the tax obligor to argue regarding all proceedings and the value and scope of the evidence produced.

DEADLINE FOR ISSUING THE RESOLUTION. Within twenty (20) business days, counted from the day following the date of the order concluding the period for arguments, the resolution corresponding in law must be issued, which must resolve all issues raised during the course of the process. The resolution must be notified at the earliest possible time, provided that the period thereof does not exceed five (5) days counted from the date on which it was issued.

FORMAL REQUIREMENTS AND CONTENT OF THE RESOLUTION. Every resolution issued in any proceeding related in this Code must contain, at a minimum, the following requirements:

• 1)

  It must be reasoned and contain, in separate and numbered paragraphs, the factual background and the legal grounds on which the operative part is based;

• 2)

  The heading must express the name, denomination, or business name of the tax obligor, including the tax identification number, the capacity and representation by virtue of which he acts and the name of the legal professional representing him, if applicable, as well as the object of the proceeding;

• 3)

  The factual background must be set forth with clarity and concision, in separate and numbered paragraphs, the claims, the facts on which they are founded and which have been alleged in a timely manner, the proposed and conducted evidence, its appreciation and appraisal, and the proven facts, if applicable. When applicable, a brief account of the content of the minutes of the adjustment discussion must be made and in particular the arguments and means of evidence presented, substantiating on an individualized basis the imputations or charges made to him;

• 4)

  The legal grounds must be expressed in separate and numbered paragraphs, the legal issues, the controversial matters, giving the reasons and legal grounds of the resolution to be issued, with concrete expression of the legal rules applicable to the case;

• 5)

  The resolution or operative part must contain, in a separate and numbered paragraph, the rulings corresponding to the claims of the tax obligor, even though the granting or denial of all or some of such claims could be inferred from the legal grounds. It must also determine the amounts and the concepts that are appropriate and correspond;

• 6)

  In the case of a determination of taxes, it must indicate the tax, fiscal period liquidated, amount owed or to be refunded and its determining elements and, where applicable, the sanction to be applied. In other cases, it must express the object or purpose of the resolution;

• 7)

  The partial character of the liquidation, if applicable, with indication of the elements of the tax or customs obligation subject thereof;

• 8)

  Date, name, position, and autographic or electronic signature, of the competent public official, as well as the same information for the authority that endorses such signature; and,

• 9)

  The appeals available against the resolution, the periods for filing them, and the body before which they must be filed.

INTERNAL REQUIREMENTS OF THE RESOLUTION. Every resolution issued in accordance with this Code must meet the following internal requirements:

• 1)

  The resolution must be clear, precise, and exhaustive;

• 2)

  It must resolve, without departing from the cause and object of the process, in accordance with the rules applicable to the case, even if they have not been properly cited or alleged by the tax obligor;

• 3)

  When the controversial, disputed, or debated issues have been multiple, proper separation of the ruling corresponding to each of them must be made;

• 4)

  It must be reasoned by expressing the factual and legal reasoning that lead to the appreciation and appraisal of the evidence, as well as to the application of the Law;

• 5)

  The reasoning must focus on the different factual and legal elements of the process, considered individually and collectively, always adjusting to the rules of logic and reason;

• 6)

  It must be consistent with the claims and with the other arguments of the tax obligor, deduced in a timely manner in the process; and,

• 7)

  Rulings on the declarations required must be included, deciding in favor or against and resolving all points that have been the object of controversy.

VOIDABILITY OF THE RESOLUTION. The failure to comply with deadlines or the error or omission of any of the requirements listed in the preceding articles constitutes a defect of form and gives rise to the voidability of the resolution issued and, consequently, to the inapplicability of its effects, in accordance with Article 213 of the Civil Procedural Code.

APPEALS AGAINST THE RESOLUTION. Appeals against the resolutions related in this Code shall be governed by the specific provisions for these acts.

CONCEPTS.

• 1)

  TAXABLE EVENT OR TAXABLE FACT: It is the real or supposed act that, in accordance with the Law, typifies any class of tax and whose realization gives rise to the birth of the tax obligation. The Law must define the taxable event through the mention of situations of non-subjection to the tax, as well as establish situations of exemption;

• 2)

  THE TAXABLE EVENT OF THE TAX OBLIGATION IS CONSIDERED REALIZED:

  • a)

    In situations of fact, that is, when the respective tax or customs law takes into account preferentially factual or economic aspects, from the moment the material or temporal circumstances necessary for the effects that normally correspond to it have been met;

  • b)

    In legal situations, from the moment they are definitively constituted in accordance with applicable law; and, c) If the taxable event were a conditional legal act, it should be considered perfected: i. At the moment of its execution, if the condition were resolutory; and, ii. When the condition occurs, if it were suspensive. In case of doubt, the condition must be understood as resolutory.

• 3)

  SITUATION OF NON-SUBJECTION: It occurs when the act performed by the tax obligor is not included in the legal requirement that gives rise to the tax or customs obligation; and,

• 4)

  SITUATION OF EXEMPTION: Despite the taxable event being realized, the Law exempts from the fulfillment of the principal tax or customs obligation.

TAXABLE BASE, FORMS OF DETERMINATION, AND SELF-ASSESSMENT.

• 1)

  The taxable base is the quantification of the taxable event expressed in money or in specific units and must serve for the calculation of the tax liquidation;

• 2)

  The taxable base must always be established in the Law, so for its determination, the Tax Administration and Customs Administration must be based on economic reality, on normal and ordinary business practices, and on generally accepted accounting rules and standards, as well as on principles and best practices in accounting and financial reporting. It must, furthermore, be proportional to the taxable event and take into account the economic capacity of the tax obligor;

• 3)

  Determination is the execution of the act by which the amount the tax obligor must pay is fixed; and,

• 4)

  Self-assessment is the act executed by the tax obligor, or responsible third party, through sworn statements, in which the amount of taxes to be paid is fixed.

FORMS OF DETERMINATION.

• 1)

  DETERMINATION BY THE TAX ADMINISTRATION OR CUSTOMS ADMINISTRATION: Also called "Ex Officio", this may be: ADMINISTRATIVE LIQUIDATION: It is executed based on the information provided by the taxpayer in the determinative declarations and informative statements presented, which must proceed to liquidate the amount to be paid or its advance payments, if the latter are established in accordance with Law, without prejudice to subsequent inspection. LIQUIDATION THROUGH INSPECTION: The Tax Administration or Customs Administration, through inspection, at any time and before prescription occurs, may determine ex officio the corresponding tax or customs obligation, considering the following facts:

  • a)

    ON CERTAIN BASIS: Taking into account the documents and information that allow knowing in a direct and indubitable manner the facts generating the tax and its amount, being used among others the declarations, books or accounting records, supporting documentation and vouchers in the possession of the taxpayer;

  • b)

    ON THE BASIS OF CONNECTED FACTS: Based on the facts and circumstances that, by their connection or normal linkage with the fact generating the obligation, allow deduction of the existence and amount of the tax or customs obligation; and, c) ON MIXED BASIS: Mixed basis is the determination of the tax or customs obligation using the aforementioned methods.

• 2)

  Without prejudice to what is established in this Article, in customs matters the provisions prescribed in the special legal framework apply;

• 3)

  Once the ex officio determination is made based on connected facts, responsibility remains for the differences that result from a determination on certain basis regarding a non-inspected fiscal period; and,

• 4)

  The Tax Administration or Customs Administration, within the scope of their competencies and powers, must approve Technical Manuals in accordance with the rules of this Code and special tax or customs laws applicable in each case, to define the necessary methodology in the Ex Officio Determination of the Tax or Customs Obligation. Additionally, such manuals must be published on their electronic portal.

ASSUMPTIONS FOR DETERMINATION ON THE BASIS OF CONNECTED FACTS. The Tax Administration or Customs Administration must determine taxes on the basis of connected facts when taxpayers:

• 1)

  Oppose or hinder the initiation or development of their inspection powers;

• 2)

  Do not present accounting books and their records, supporting documentation or do not provide information regarding compliance with tax or customs rules; and,

• 3)

  Do not present declarations within the deadline stipulated in the Law; or, any of the following irregularities occur:

  • a)

    Omission of operation registration, such as: income or purchases, as well as alteration of cost and expenses;

  • b)

    Registration of purchases, expenses or services not performed or not received; and, c) Omission or alteration in the registration of inventory that should appear in inventories or recording such inventory at prices different from cost, without complying with accepted inventory valuation methods.

EVIDENTIARY ELEMENTS FOR DETERMINATION ON THE BASIS OF CONNECTED FACTS. For the determination of the tax obligation on the basis of connected facts, the following must be considered:

• 1)

  The application of data, background and elements that allow determining the existence of the facts generating taxes in their actual magnitude;

• 2)

  The use of those elements that prove the existence of assets, income, as well as income, sales, costs and returns that are normal in the respective economic sector, considering the characteristics of other economic units that may be compared in tax or customs terms; and,

• 3)

  The assessment of indices or indicators that exist among taxpayers with similar or equivalent activities.

RELEVANT ECONOMIC DATA FOR DETERMINATION ON THE BASIS OF CONNECTED FACTS. 1) For the purposes of the preceding Article, the Tax Administration or Customs Administration must determine the tax and corresponding sanctions, based on known elements that allow presumption of their existence and magnitude; and, 2) For compliance with the foregoing, an accounting and financial information reconstruction must be made, taking into account the following:

• a)

  Assets;

• b)

  Existing assets and liabilities;

• c)

  Movement of accounts in the financial system;

• d)

  Transactions made in other fiscal periods and profits obtained;

• e)

  Amount of sales transactions made;

• f)

  Normal profitability of the activity in question, of similar or equivalent ones;

• g)

  Expenditures made;

• h)

  Salaries paid or accrued;

• i)

  Value of rents paid or pending payment;

• j)

  Living standards of the taxpayer; and, k) Any other evidence elements supplied by withholding and collection agents or other public or private entities or that may be known by the Tax Administration or Customs Administration, provided that the information and documents have been obtained and known through legally established mechanisms and procedures for investigation or complaints. SECOND SECTION PRESUMPTIONS REGARDING THE TAX BASE

PRESUMPTIONS IN THE DETERMINATION OF THE TAX OR CUSTOMS OBLIGATION. Except for proof to the contrary, in the ex officio determination of tax or customs obligations on the basis of connected or mixed facts, referred to in this Code, the following must be considered:

• 1)

  Gross income and assets obtained or acquired during the fiscal period must be estimated according to gross income and assets obtained or acquired during the previous fiscal period, plus variations in the Monthly Index of Economic Activity and the Consumer Price Index by economic sector, published by the Central Bank of Honduras (BCH). In the absence of this latter information, it must be presumed that gross income and assets obtained or acquired during the fiscal period are equal to those obtained or acquired by another taxpayer engaged in the same comparable activity in terms of economic capacity. The provisions of this numeral are understood as part of the basis for determining the tax or customs obligation, so they do not include deductions authorized by special tax or customs laws. For the purposes of applying the provisions of this numeral, the following factors must be considered:

  • a)

    The merchant business or appropriate commercial activity of the taxpayer;

  • b)

    Demand for goods or services, taking into account the season or seasons in which these are requested in greater or lesser quantities; and, c) Appropriately select the months in which control should be carried out, so that it reflects the actual business activity.

• 2)

  Prices of real property through the application of valuation criteria indicated by applicable legal framework;

• 3)

  Unjustified patrimonial increases must form part of income during the fiscal period subject to verification, without this implying an exemption from other legal responsibilities that could derive from the non-justification of such increases; and,

• 4)

  The differences that exist between the physical inventory of merchandise carried out either by the Tax Administration or Customs Administration and the inventory resulting from accounting records or confirmation by third parties, must be considered as omitted sales when the difference is less or as omitted purchase when the difference is greater.

PRESUMPTIONS OF INCOME. For the verification of income or the value of acts, activities or assets that form part of a tax or customs obligation, the Tax Administration or Customs Administration, as appropriate, must presume, except for proof to the contrary, that:

• 1)

  The information contained in accounting, supporting documentation and correspondence found in the possession of taxpayers forms part of operations carried out by them, even if they appear without their name or in the name of another person, provided that at least one of the operations or activities has been carried out by them;

• 2)

  The information contained in accounting systems in the name of the taxpayer, found in the possession of persons in their service or shareholders, partners, members or owners, corresponds to operations of the taxpayer;

• 3)

  Deposits appearing in accounts of the financial system in the name of the taxpayer that do not correspond to records in their accounting are taxable income;

• 4)

  The deposits made in personal accounts of the Financial System by legal representatives are income of the taxpayer if they carry out operations on its behalf or deposit in such accounts sums belonging to the taxpayer, even if the taxpayer does not record them in its accounting;

• 5)

  The differences between assets recorded in accounting, lower than the actual amounts, correspond to income of the last fiscal year and form part of the tax or customs obligations, as appropriate. The provisions of this numeral are understood without prejudice to what is established in Article 110 numeral 4; and,

• 6)

  Checks drawn, bank transfers or other forms of payment transactions, against the taxpayer's accounts and in favor of suppliers or those who have provided services to the taxpayer, that do not correspond to operations recorded in the taxpayer's accounting, are payments made on behalf of the taxpayer to acquire merchandise or services from which the taxpayer obtained income.

PRESUMPTIONS OF INCOME AND VALUE IN THIRD PARTIES. To verify the income, as well as the value of the acts of taxpayers, the Tax Administration or Customs Administration must presume, except for proof to the contrary, that the information or documents of third parties related to the taxpayer correspond to operations carried out by the taxpayer when:

• 1)

  It refers to the taxpayer designated by their names, business name or corporate denomination;

• 2)

  They indicate as the place for delivery or receipt of goods or provision of services related to the activities of the taxpayer, any of their establishments even if the name, business name or corporate denomination shown is that of a real or fictitious third party;

• 3)

  They indicate the name or address of a third party, real or fictitious, if it is proven that the taxpayer delivers or receives goods or services under that name or at that address; and,

• 4)

  They refer to collections or payments made by the taxpayer or on its behalf, by an intermediary person or by a fictitious entity.

TRANSFER PRICING. 1) The Tax Administration or Customs Administration, as appropriate, for the determination of tax obligations, in accordance with the Law for the Regulation of Transfer Pricing, must verify the existence of transfer pricing in transactions carried out between natural or juridical persons domiciled or resident in Honduras with their related, linked or associated parties and those covered by special regimes that enjoy tax benefits; and, 2) Natural or juridical persons that have related, linked or associated parties within the national territory are not subject to the presentation of a Transfer Pricing Study, except those that are related or linked with natural or juridical persons covered by special regimes that enjoy tax benefits. For these purposes, the Ministry of State in the Office of Economic Development must develop an electronic consultation platform to determine reference prices in the national market, for tax and customs purposes.

DATA FROM FOREIGN TAX AUTHORITIES. To determine omitted tax or customs obligations, the Tax Administration or Customs Administration must consider the facts, information and documentation, whose knowledge has been obtained from foreign tax authorities as proven, except for proof to the contrary, provided that such facts, information and documentation, among other elements, are obtained under the auspices of duly subscribed and approved Tax or Customs Treaties or Agreements, in accordance with the procedure contained in the Constitution of the Republic. CHAPTER IV PROCEDURES FOR DETERMINATION OF OBLIGATIONS FIRST SECTION DETERMINATION PROCEDURES AT THE REQUEST OF THE TAXPAYER FIRST SUBSECTION RESTITUTION AND REFUND

RIGHT OF RESTITUTION AND REFUND.

• 1)

  The taxpayer has the right of action to claim restitution of what was paid in excess or wrongfully, for taxes and sanctions;

• 2)

  Likewise, the taxpayer has the right to authorization of the credit note or refund of balances in their favor that exceed the compensation provided in this Code;

• 3)

  Payments that give rise to refunds and credit notes shall accrue interest once the following procedure has been completed:

  • a)

    In both cases, the Tax Administration or Customs Administration, as appropriate, must verify unduly paid or excess payments of a fiscal period, within the legal deadline established in this Code, and must notify said act to the taxpayer and the Ministry of State in the Office of Finance (SEFIN);

  • b)

    In the case of refunds, once the Ministry of State in the Office of Finance (SEFIN) has been notified of the respective resolution, it must make the refund payment within a maximum of forty (40) calendar days; and, c) When unduly paid amounts are generated by self-liquidation, they do not accrue any interest.

• 4)

  Regarding the payment of interest, the monetary policy rate published by the Central Bank of Honduras (BCH) must be applied, taking as reference the first day on which the obligation accrues interest;

• 5)

  Authorization is granted to the Ministry of State in the Office of Finance (SEFIN) to annually incorporate in the General Budget of Income and Expenses of the Republic, in its own budget, the budget item with the necessary resources to respond for the payment of interest accruing in favor of taxpayers regarding matters within its competence; and,

• 6)

  Similarly, authorization is granted to the Ministry of State in the Office of Finance (SEFIN) to annually incorporate in the General Budget of Income and Expenses of the Republic, in the budget of the Tax Administration and Customs Administration, the budget item with the necessary resources to respond for the payment of interest accruing in favor of taxpayers regarding matters within their competence.

PROCEDURE FOR REFUND OF UNDULY PAID AMOUNTS. 1) The procedure for recognition of the right to refund unduly paid amounts is initiated:

• a)

  When there has been a duplicate payment of tax debts, surcharges or sanctions;

• b)

  When the amount paid has been greater than the amount to be paid resulting from an administrative act or self-liquidation;

• c)

  When payment is made to which the taxpayer is not obligated or a liability has been incorrectly attributed to the taxpayer; and,

• d)

  When so established by tax or customs regulations. 2) The interested party must file a request with the Ministry of State in the Office of Finance (SEFIN), the Tax Administration or Customs Administration, as appropriate, in which the interested party must detail all the facts and grounds that support the existence of one of the indicated circumstances, accompanied by relevant evidence; and, 3) When a taxpayer is affected by an unduly paid amount resulting from an incorrect withholding calculation by the withholding agent, the latter may offset the excess payments received with other payments to be made by the same taxpayer or responsible party, provided it concerns the same tax and the same fiscal year. In any case, the withholding agent must issue in favor of the taxpayer the tax document that evidences the withholding. If offsetting cannot be carried out within the same fiscal period, the withheld taxpayer or responsible party has the right to request offsetting or refund from the same withholding agent, as appropriate, who must inform the Tax Administration or Customs Administration, within the scope of its competence.

RECTIFICATION OF DECLARATIONS.

• 1)

  The rectification of declarations that reduce the tax to be paid or increase the balance in favor of the taxpayer must be made in accordance with the following:

  • a)

    Taxes with annual modality: Two (2) rectifications within the prescription period counted from the date of Tax Declaration;

  • b)

    Taxes with monthly modality: Two (2) rectifications within twelve (12) months counted from the date of Tax Declaration; and, c) Taxes with eventual or non-periodic modality: Two (2) rectifications within one (1) year counted from the date of Tax Declaration. Notwithstanding what is established in this numeral, the Tax Administration or Customs Administration may request that the taxpayer rectify the declaration, when they determine it necessary in accordance with the Law. If the taxpayer does not rectify their declaration upon such request, these authorities may exercise their verification or inspection powers, in accordance with the Law.

• 2)

  To rectify declarations that reduce the tax to be paid or increase the balance in favor of the taxpayer, a new declaration must be properly submitted in the places or means enabled for this purpose;

• 3)

  When taxpayers rectify their declarations and, if applicable, must pay the difference that results between the payment made in the original declaration and the rectification; together with their accessories, such as interest, as well as pecuniary sanctions established for late payment;

• 4)

  The same declaration that is rectified on more occasions than those established in numeral 1) of this Article constitutes a criterion for possible inspection in accordance with the programs implemented by the Tax Administration or Customs Administration; and,

• 5)

  The rectification of declarations referred to in the preceding numerals does not prevent the subsequent exercise of the verification, checking, inspection, determination powers and the performance of respective corrections of arithmetic or, in general, review that the Tax Administration and Customs Administration have, in their respective areas of competence.

PROCEDURE FOR TAX DETERMINATION BY ADMINISTRATIVE LIQUIDATION BASED ON DECLARATIONS. The intervention of the Tax Administration or Customs Administration, as appropriate, to produce the liquidation and payment document must only occur for the cases regulated in this Article, in accordance with the following procedure:

• 1)

  They must proceed with the preparation and proposal to the taxpayer of a new liquidation, when it clearly and indubitably proves:

  • a)

    That the data contained in the declaration or declarations filed do not match the data in its possession, obtained lawfully;

  • b)

    That the data contain discrepancies with those from its other declarations; or, c) That the data contain arithmetic, logical or application errors.

• 2)

  The liquidation proposal must contain the facts and corresponding legal grounds;

• 3)

  The taxpayer must be required to clarify or prove what deemed convenient in order to satisfy the doubts raised. The period to make clarifications is fifteen (15) business days counted from the day following the request that is served;

• 4)

  If after the clarification period has elapsed the taxpayer does not appear or remains silent on the proposed liquidation, the Tax Administration or Customs Administration, as appropriate, must adjust the declaration ex officio, acquiring the same the character of definitive and final for collection purposes;

• 5)

  After the clarification period has elapsed and if the taxpayer did not accept the proposed liquidation, the file must be sent to the corresponding department to conduct the Desktop Verification Determination procedure; and,

• 6)

  If the taxpayer accepts the proposed new liquidation, the payment made is exempt from penalties. The liquidation serves as a valid document to generate debits in the taxpayer's current account.

VERIFICATION PROCEDURE.

• 1)

  The Tax Administration or Customs Administration, as appropriate, may verify the accuracy of self-liquidations through abbreviated verification procedures, understood as those carried out using data and evidence elements, obtained legally and properly, already in the possession of the respective institution or that it requests from the taxpayer themselves, without conducting a comprehensive audit;

• 2)

  It may also conduct verification of liquidations made in accordance with the administrative liquidation procedure in which the taxpayer has objected to or rejected them, such that the truthfulness of the facts and data provided by the taxpayer may or may not be proven;

• 3)

  Once these proceedings are conducted, regularization proposals may be made through liquidation or the taxpayer may be requested to clarify the discrepancies observed, in order to satisfy the doubts raised. In both cases, the period to make clarifications is ten (10) business days counted from the day following the request that is served;

• 4)

  The liquidation issued has the character of non-comprehensive;

• 5)

  If the taxpayer accepts the proposed new liquidation, the payment made is exempt from penalties and is not subject to any type of sanctions. The liquidation serves as a valid document to generate debits in the taxpayer's current account in tax-customs matters;

• 6)

  If the taxpayer does not accept or remains silent regarding the liquidation proposal made, partial or comprehensive inspection as appropriate may be ordered, the result of which must be notified in accordance with the procedure established in this Code; and,

• 7)

  Verification procedures must be concluded within a maximum period of four (4) months, extendable for two (2) additional months, counted from the day following the initiation of the procedure.

GROUNDS AND PROCEDURE.

• 1)

  The Tax Administration or Customs Administration, as appropriate, may exercise its powers to verify compliance with the formal obligations of taxpayers, through the following mechanisms: a) Presence-based actions in establishments open to the public, warehouses and storage facilities, and must identify themselves before the taxpayer prior to exercising their verification functions; and, b) Verification of data contained in their computer systems, without need to notify the taxpayer.

• 2)

  Upon detecting non-compliance, the taxpayer must be urged to correct it within a period not less than ten (10) business days. Upon expiration of the previous period, the corresponding penalty must be imposed according to the range determined for formal infractions. Notwithstanding the foregoing, the sanctioning procedure described in this Code must be initiated and executed. In both cases the corresponding resolution must be issued, which may be challenged through the remedies prescribed in this Code; and,

• 3)

  If there are irregularities in the records, data or information of a taxpayer, the case file may be transferred for the initiation of the corresponding inspection procedure, in accordance with the rules and procedures contained in this Code. THIRD SECTION EX OFFICIO DETERMINATION PROCEDURE

CONCEPT AND CLASSES OF OFFICIAL DETERMINATION.

• 1)

  The Determination carried out by the Tax Administration or the Customs Administration called Official Determination is the resolution act by means of which it verifies the existence of a taxable event, performs the quantification operations and determines the amount of the tax or customs debt, checking or correcting, if appropriate, the self-assessment made by the taxpayer and, determining in this case an amount to be paid, an amount to be refunded, a compensation, or a final seal, in accordance with the tax or customs regulations. Likewise, the determinative act may establish the existence of the grounds for attribution of joint and several or subsidiary liability, and in such case must identify the liable subject and the amount of the debt;

• 2)

  Official determinations are integral or partial. Integral official determinations are also called audits;

• 3)

  Those practiced based on the audit procedure regulated in the following Chapter are considered integral, through the investigation and verification of the elements of the tax or customs obligation;

• 4)

  Those that are not integral have a partial character and in particular the following:

  • a)

    Those of partial scope, a condition that must be expressly stated in the resolution, based on the aspects that have been subject to audit;

  • b)

    Those desktop verifications regulated in this Code that are performed on the basis of information in the possession of the Tax Administration or the Customs Administration or that has been requested from the taxpayer without conducting an audit procedure, including those carried out on the basis of purely differences in legal interpretation or aimed at correcting errors of fact or arithmetic made in the declaration; and, c) Those verifications and preventive checks of compliance with formal obligations of taxpayers.

• 5)

  The elements of the tax or customs obligation investigated and verified in the course of a procedure that concluded with a non-integral determination, of partial scope, under literal a) of the preceding numeral, cannot be subject again to a subsequent audit procedure;

• 6)

  The elements of the tax or customs obligation to which the verification and investigation activities have not extended may be subject to a subsequent determination procedure, unless the audit has been formally declared integral; and,

• 7)

  For partial determinations, public servants must have the same powers as the audit procedure, except in the case of office determination.

STAGES OF THE OFFICIAL DETERMINATION PROCEDURE.

• 1)

  The procedure for determining taxes subject to declaration, liquidation or self-assessment by taxpayers is initiated with verification or audit activities;

• 2)

  The procedure must be initiated ex officio by the competent body which must notify the taxpayers indicating the nature and scope of the procedure and informing them about their rights and obligations during the proceedings. It may also be initiated through a requirement to the taxpayer or appearance of the Administration at the facilities or domicile;

• 3)

  When the data in the possession of the Tax Administration or the Customs Administration are sufficient to formulate the liquidation proposal, the procedure may be initiated by notifying such proposal;

• 4)

  The actions taken by a taxpayer with respect to the declarations or self-assessments subject to a determination procedure are not grounds for initiating a refund, credit, compensation or voluntary payment procedure, in case any payment has been made, while the determination procedure is being conducted;

• 5)

  Notwithstanding the above, any payment made by the taxpayer during the determination procedure must be taken into account without considering the effects and advantages of a voluntary payment;

• 6)

  Payments made by the taxpayer after the initiation of proceedings or procedures and while the procedure has not concluded with the issuance of a determinative resolution have the character of credit against the amount of the liquidation to be practiced in the resolution;

• 7)

  If payment is made by the taxpayer prior to the issuance of the resolution and it satisfies all determinations and penalties accrued, the resolution must be issued containing a final seal, describing expressly and punctually the compliance with the tax obligations that were pending plus the penalties calculated as of the date the payment was made effective;

• 8)

  The Tax Administration or the Customs Administration, within their respective competencies, must make adjustments to the current account of the taxpayer in tax-customs matters in accordance with the resolution issued, so that the credit generated as a result of the payment made is reconciled in accordance with the debits contained in the referenced resolution;

• 9)

  The procedure for discussing adjustments must be adapted in accordance with the provisions of this Code;

• 10)

  A copy of the minutes or equivalent document must be delivered to the taxpayer, accompanied by the working and supporting documents generated in the official determination process;

• 11)

  As a result of these actions, a resolution must be issued, which must contain a regularization proposal, in which the facts and omissions known and involving non-compliance with tax or customs regulations by the taxpayer are stated, a brief summary of the content of the minutes of the adjustment discussion and in particular the allegations and evidence presented, individually substantiating the imputations or charges made against them or the amounts self-assessed improperly to their detriment for purposes of compensation, refund or reduction of the adjustment or to offset with the amount adjusted that the Tax Administration or the Customs Administration proposes; and,

• 12)

  The taxpayer has a period of fifteen (15) business days and ten (10) business days in customs matters, counted from the day following the notification of the resolution issued, to manifest conformity, request a payment arrangement when appropriate or file a reposition resource.

RESOLUTION OF THE OFFICIAL DETERMINATION PROCEDURE.

• 1)

  The resolution referred to in the previous Article must be issued within twenty (20) business days, counted from the day following the date of the allegations presented by the taxpayer regarding the results of the determination;

• 2)

  The resolution must contain, at a minimum, the requirements contained in this Code; and,

• 3)

  Non-compliance with the time periods or the error or omission of any of the requirements stated in the previous articles constitutes a procedural violation and gives rise to the voidability of the resolution issued and, consequently, to the inapplicability of its effects, in accordance with Article 102 of this Code.

POWERS FOR AUDIT. 1) The Tax Administration or the Customs Administration, as appropriate, in order to verify or investigate that taxpayers have complied with the corresponding regulations and, if necessary, determine omitted taxes, as well as to comply with what is established in International Tax or Customs Law Conventions, is empowered to:

• a)

  Require taxpayers to appear before its offices to answer questions posed to them or to acknowledge signatures, documents or goods in accordance with what is established in this Code;

• b)

  Require taxpayers to exhibit, at their domicile or establishments, the documents supporting the accounting or those related to facts linked to the generation of tax or customs obligations, as well as documents and correspondence related to facts susceptible to generating such obligations, in the manner determined by Law;

• c)

  Request the presentation and copy of reports and analyses related to facts susceptible to generating tax obligations in the manner determined by the appropriate authority, within the framework of its legal powers;

• d)

  Conduct system audits, in accordance with the principles, rights and rules contained in this Code;

• e)

  Conduct verifications, checks, audits and investigations at the tax domicile of taxpayers and review their accounting and assets;

• f)

  Request specialized entities to conduct valuation actions of assets, income, products, rights and patrimonies in general of persons and public and private entities. These actions are intended for the appraisal or verification of the declared value. Any valuation, appraisal or verification action conducted by mandate of the appropriate authority must be brought to the attention and view of, with a copy to, the taxpayer, so that he may approve or challenge it through the mechanisms provided in this Code;

• g)

  Check or physically verify all classes of assets, even during their transport, without prejudice to the right to the inviolability of the domicile, except with a court order; and,

• h)

  Safeguard the inspected documents and take security measures for their preservation. 2) The Tax Administration or the Customs Administration, within their respective competencies, may exercise these powers jointly, alternatively or successively, and may request the assistance of public force to exercise them, provided there is evident and notorious resistance by the taxpayer that prevents the exercise of their powers or when these are conducted in places where there is an imminent risk to the physical safety of the public servants of such administrations. In cases where the exercise of these powers involves restriction of constitutional rights and guarantees, prior authorization from a competent Judge is required.

DEVELOPMENT OF THE AUDIT PROCEDURE.

• 1)

  The audit procedure must be initiated by notifying the taxpayer of the commencement of proceedings, which is signed by the head of the Tax Administration or the Customs Administration or by the person to whom he delegates, in which must inform:

  • a)

    Total or partial scope of the proceedings;

  • b)

    Detail of the taxes subject to audit;

  • c)

    Grounds of law for the audit order;

  • d)

    The tax periods that the audit must cover; and, e) The identification of the public servant(s) acting.

• 2)

  The occupant of the farm, premises, establishment or building must allow the auditors to enter without delay. However, if he opposes, it is necessary to obtain a court order from a judge of criminal jurisdiction and with the assistance of public force;

• 3)

  When it concerns a dwelling or residence of the taxpayer, a court order must be previously obtained, unless he manifests his written consent;

• 4)

  All proceedings conducted during the audit and investigation procedure must be documented in minutes, including proceedings in which the audited party directly participates, which state at a minimum:

  • a)

    The facts and omissions that have come to the auditors' knowledge;

  • b)

    The points of agreement of the audited subject during the audit process;

  • c)

    The complete chronology and findings of the process;

  • d)

    The objections or rejections manifested by the taxpayer; and, e) The investigations or other facts related to the other proceedings and actions conducted in an audit process.

• 5)

  If during the development of the audit, the acting public servants find assets not registered in the accounting, in order to ensure the documents and correspondence of such assets, they must request judicial authorization, so that in the presence of the executing judge, they proceed to seal or place marks on the furniture, files or offices where the documents subject to audit are found, as well as leave them as a deposit with the audited party or the person with whom the action is conducted, after an inventory prepared for that purpose. In the event that documents are found in the furniture, files or offices that are sealed and are necessary for the audited or investigated party to conduct their activities, they will be permitted to extract them with the authorization of the competent judge, who may make a copy thereof, leaving a record of this fact.

• 6)

  Audit proceedings must conclude with the issuance of the corresponding resolution, within a maximum period of eight (8) months counted from the day following the date of notification of the audit initiation document. However, it may be extended for six (6) months when any of the following circumstances occur: a) The proceedings are of special complexity; and, b) During the course of them it is discovered that the taxpayer has concealed from the Tax Administration or the Customs Administration any of the business or professional activities carried out.

• 7)

  The extension of the legally established period is, in any case, reasoned, with reference to the facts and grounds of law;

• 8)

  Likewise, audit and investigation proceedings cannot be suspended for more than sixty (60) days due to causes not attributable to the taxpayer.

• 9)

  The suspension period ends, among others, for the following reasons:

  • a)

    By visits to the place where the audit proceedings are conducted;

  • b)

    Hearings in the offices of the Tax Administration or the Customs Administration; or, c) Information requests to the taxpayer.

• 10)

  The same proceedings may be suspended for the same period, at the request of the taxpayer, provided it is for duly justified causes, fortuitous event or force majeure;

• 11)

  In any of the situations provided for in this Article, the suspension is recorded in the audit suspension minutes;

• 12)

  When the audit proceedings are not concluded within the period indicated in numeral 6) above, or the suspension is prolonged beyond the period indicated in numeral 8) above, it is understood that the statute of limitations has not been interrupted by the previous proceedings conducted;

• 13)

  When in the opinion of the acting public servants the necessary data and evidence have been obtained to support the acts that should be issued, they will prepare a final minutes of closure of the audit proceedings. If the audited party is not present at this act, he will be left with notice to be present at a specific time the following business day. If he does not appear, the final minutes will be prepared before whoever has been delegated to be present at that act, at the farm, premises, establishment or building. At that time any of the public servants who have participated in the audit and the audited party or the person with whom the action is conducted must sign the minutes of which a copy will be left with the audited party;

• 14)

  If the audited party or the designated person does not appear, refuses to sign or accept a copy of the minutes, such circumstance must be noted in the same without this affecting its validity and evidentiary value. However, the content of the minutes must be notified to the taxpayer using any of the other notification means provided for in this Code;

• 15)

  Once the field work of the audit process is concluded, the acting public servants within ten (10) business days following such conclusion must issue a provisional regularization and liquidation proposal in which the adjustments or modifications to the self-assessment or declaration of the audited subject or the determination they deem appropriate in case there has been no declaration are stated, as well as the material and formal tax violations, indicating the facts, evidence and legal grounds, granting a period of fifteen (15) business days for the taxpayer to manifest total or partial conformity or to allege what is appropriate to his right. The taxpayer has access to the entire file as of the date of notification of the corresponding resolution;

• 16)

  The regularization and liquidation proposal issued cannot be modified if the taxpayer makes full payment of the same;

• 17)

  The liquidation issued is of an integral or partial character as established in this Code; and,

• 18)

  The proceedings referred to in this Article must conclude with the notification of the corresponding resolution, which may be appealed according to the procedures and resources prescribed in this Code.

PLACE FOR THE EXERCISE OF VERIFICATION, CHECKING, AUDIT AND INVESTIGATION. 1) The acts of verification, checking, audit and investigation may be conducted indiscriminately as determined by the bodies in charge thereof:

• a)

  At the domicile of the taxpayer;

• b)

  Where the taxpayer's activities are conducted in whole or in part;

• c)

  Where the taxable event has occurred; and,

• d)

  In the offices of the Tax Administration or the Customs Administration, as appropriate. 2) Tax auditors may enter farms, business premises and other establishments or places where activities or operations are developed to exercise the functions provided for in this Code. These powers must be exercised guaranteeing the rights of taxpayers.

EXECUTIVE ACTION FOR COLLECTION.

• 1)

  The State has executive and preferential action for the collection of credits for taxes, fines and interest, resulting from self-assessments, liquidations, final resolutions and final sentences. In those cases where special laws contain surcharges, these must be collected in accordance with the procedure contained in this numeral;

• 2)

  In the case of obligations generated by self-assessments and liquidations, the debt certificate stating the principal or ancillary tax obligation, issued by the Tax Administration or the Customs Administration, is sufficient title. In the case of final resolutions and final sentences, these serve as executive title, and may be accompanied by a debt certificate that updates the computation of what is owed to the State;

• 3)

  The certificate referred to in the previous numeral must meet the following requirements:

  • a)

    Place and date of issuance;

  • b)

    Names, surnames, signature and seal of the General Secretary of the Tax Administration or the Customs Administration, as appropriate, or of the person with sufficient delegation to issue it;

  • c)

    Clear and precise indication of the tax or customs obligation and its accessories; and, d) Name, corporate name or legal designation, National Tax Registry (RTN) and domicile of the taxpayer.

• 4)

  The debt certificate serving as executive title referred to in numerals 2) and 3) above must be issued once the Tax Administration or the Customs Administration verifies, through the respective report, the amount of the debt owed and that it is final, past due, liquid and enforceable; and,

• 5)

  Without prejudice to respect for the order of preference for the collection of credits established in this Code, in the case of concurrence of the administrative collection procedure for tax collection with other execution procedures on attached assets, the following rules shall be followed: a) When it concurs with other singular execution processes or procedures, the collection procedure is preferential when the attachment made in the course thereof is the oldest; and, b) In cases of concurrence of the collection procedure with concursal or universal execution processes or procedures, that procedure has preference for the execution of assets or rights that have been subject to attachment in the course thereof, provided that such attachment was made prior to the date of initiation of the concursal process.

NATURE AND NON-ACCUMULATION OF THE COLLECTION PROCEDURE. The Tax Administration or the Customs Administration must carry out collection through civil judicial proceedings, in accordance with the procedures established in this Code and for everything not provided for therein, the Civil Procedural Code shall apply supplementarily.

PERSUASIVE COLLECTION ACTIONS. 1) Prior to judicial collection, the Tax Administration or the Customs Administration may exercise persuasive collection, within a period not exceeding thirty (30) calendar days counted from the date the payment deadline established by Law expires; 2) Persuasive collection is appropriate in the following cases:

• a)

  With respect to tax determinations or liquidations, advance payments and interest, surcharges if applicable, generated by the taxpayer;

• b)

  With respect to tax determinations or self-assessments, advance payments, interest, fines and surcharges if applicable, imposed by the State and accepted by the taxpayer;

• c)

  With respect to tax obligations for which the taxpayer has requested payment facilities not met timely and whose liquidation has acquired final status in administrative proceedings;

• d)

  With respect to advance payments for expired taxes; and,

• e)

  When there is express recognition of the debt by the taxpayer and to the extent of that recognition. 3) Liquid, final and enforceable debts that have not been recovered through persuasive collection must be transferred to the Office of the Attorney General of the Republic (PGR) for collection. Upon receipt of the cases, it has a period of ten (10) business days to file the corresponding judicial actions.

EXCEPTIONS TO JUDICIAL COLLECTION ACTION. In addition to those contained in the Civil Procedural Code, the following grounds for opposition are admissible:

• 1)

  Documented and current payment deferment, granted by the Tax Administration or the Customs Administration prior to the filing of the lawsuit;

• 2)

  Extinguishment of the tax or customs obligation;

• 3)

  Compensation of credits;

• 4)

  Non-existence of the tax or customs obligation, declared by final judicial sentence;

• 5)

  Falsity of the executive title or the act that gave it such force; and,

• 6)

  Failure to exhaust the administrative procedures established to issue the executive title in accordance with Article 127 of this Code; with the exception of self-assessments. The opposition must be raised and substantiated in accordance with the procedure established in the Civil Procedural Code.

UNCOLLECTIBLE TAX DEBTS FOR COST-BENEFIT REASONS AND PURGING OF THE CURRENT ACCOUNT.

• 1)

  The Tax Administration and the Customs Administration, within their respective competencies, ex officio, in the month of February of each year, must proceed to discharge from the taxpayers' current account the tax credits final to the State, whose amount is equal to or less than one (1) average current minimum wage;

• 2)

  Likewise, ex officio, in the month of February of each year, they must proceed to discharge from the taxpayers' current account the accumulated amounts of credits and debts from prior fiscal years already prescribed; and,

• 3)

  The actions described in the previous numerals must be executed once an administrative act is issued by the Tax Administration or the Customs Administration.

ORDER OF PRIVILEGE. Tax or customs debt enjoys general privilege over all assets of taxpayers and has preference over other credits with the exception of: 1) Alimony, wages, salaries, honoraries, benefits, labor and social security indemnifications, contributions to retirement, pension, benefit or mutual aid funds, whether public or private; and, 2) Creditors of ownership, pledge, mortgage or other real right, provided that it has been constituted and registered in the manner prescribed by Law and prior to the registration of the precautionary measure judicially requested by the Tax Administration or the Customs Administration.

BANKRUPTCY, PAYMENT SUSPENSION OR CREDITOR CONCURRENCE PROCEEDINGS. When bankruptcy, payment suspension or creditor concurrence proceedings are initiated, the judge hearing the matter must communicate it to the Tax Administration or the Customs Administration, at the moment of admitting the claim, so that, if appropriate, it may appear through the Office of the Attorney General of the Republic (PGR) and make enforceable the credits owed to it.

MODES OF EXTINGUISHMENT OF TAX AND CUSTOMS OBLIGATIONS. Tax or customs obligations are extinguished:

• 1)

  By payment when the obligation is pecuniary;

• 2)

  By compensation and cession;

• 3)

  By confusion;

• 4)

  By condonation;

• 5)

  By prescription; and,

• 6)

  By abandonment, loss or destruction of merchandise in the country's customs.

PERSONS OBLIGATED TO PAY. 1) The payment of taxes must be made by the taxpayers referred to in this Code; and, 2) Payment may also be made by a third party.

FORMS AND MEANS OF PAYMENT. Payment of taxes, withholdings, collections, payments on account or anticipated payments, payments in kind, pecuniary sanctions and other charges must be made in cash, banker's cashier's check, certified check or transfer or other legally recognized means of payment, using the physical or telematic means that the Tax Administration or the Customs Administration, as applicable, determines in accordance with the Law.

DETERMINATION OF THE TAX OR CUSTOMS OBLIGATION AND TIME OF PAYMENT.

• 1)

  Payment of tax or customs obligations must be made on the same date on which the respective self-assessment is filed, unless this Code or other laws provide otherwise;

• 2)

  Tariff duties must be paid before the authorization for merchandise to be removed from customs facilities is granted, except in cases permitted by Law. The amount to be paid is that determined by the tax obligor, directly or through an authorized customs agent, remaining subject to verification at the time or prior adjustment to removal or through subsequent verification by means of the respective verification process; and,

• 3)

  If the determination of the tax obligation has been made ex officio, the tax obligor must make payment effective within the terms and in the manner determined in each case.

ANTICIPATED PAYMENT.

• 1)

  Tax obligors may only comply in advance with their tax or customs obligations when expressly authorized by Law;

• 2)

  The Tax Administration or the Customs Administration, for their part, may require tax obligors to make total or partial anticipated payment of a tax when expressly empowered to do so by Law; and,

• 3)

  For the purposes of the foregoing provision, anticipated payments may be made through withholding at source, payments on account or other forms of withholding or collection authorized by Law that produce as an effect the total or partial payment of a tax.

APPLICATION OF PAYMENTS.

• 1)

  Tax obligors must determine, when making payment, to which debt it should be applied;

• 2)

  When they fail to do so or the application is defective or the special circumstances of the case do not allow for determining the applied debt, the Tax Administration or the Customs Administration, as applicable, must determine the obligation to which payment should be applied, for which purpose it must act in accordance with the following rules: a) When the debt is composed of taxes, fines, surcharges and interest, the amount paid must be applied to the payment of fines, surcharges and interest and, if there are excess amounts, credits must be made to the tax; and, b) When taxes and payments on account are owed jointly with fines, the amount paid must be applied to the payment of fines and if there are excess amounts, to the payment on account and to the tax in that order.

• 3)

  Among obligations of the same nature, payment must be applied to the oldest debt that has not prescribed and if they have the same age, to the most burdensome for the tax obligor; and,

• 4)

  Payment of a debt with later maturity does not extinguish the right of the Tax Administration or the Customs Administration to collect previous debts that have not been paid, provided that they have not prescribed.

PAYMENT FACILITIES.

• 1)

  The Tax Administration or the Customs Administration, as applicable, upon request of the interested party, must grant tax obligors facilities for payment of taxes and accruals owed, taking into account the circumstances and economic capacity of the applicant, when their economic-financial situation prevents them, in a temporary manner, from making payment within the established terms;

• 2)

  These payment facilities must consist of deferrals or installment payments. The adjusted amount, which includes taxes and accruals, accrues interest at a rate of two percent (2%) monthly, for the period agreed upon for the payment facility;

• 3)

  To guarantee deferrals and installment payments of the tax debt, the Tax Administration or the Customs Administration, as applicable, must require a maximum initial payment of:

  • a)

    Five percent (5%) of the amount owed when it is a small tax obligor;

  • b)

    Ten percent (10%) of the amount owed when it is a medium tax obligor; and, c) Twenty percent (20%) of the amount owed when it is a large tax obligor.

• 4)

  If the tax obligor presents an economic study authorized by a professional in economic sciences or related field, the maximum payment of the percentages contained in the foregoing provision may be waived. Professionals must be selected from a list published by the Tax Administration, which must be reviewed and updated annually;

• 5)

  The Tax Administration or the Customs Administration may grant facilities or tax payment and pecuniary sanctions payment plans for up to twenty-four (24) months; and,

• 6)

  Facilities may not be granted as referred to in this Article if the tax or customs obligation is due to withheld or collected taxes not paid over to the State.

PLACE OF PAYMENT. 1) Payment of taxes and their accruals must be made to the General Treasury of the Republic (TGR) or to financial system institutions with which the State Department in Charge of Finance (SEFIN) enters into collection agreements, establishing therein the form and collection mechanisms, the period for transfer of collected resources and payment of applicable commissions; and, 2) No employee or public servant may collect taxes or their accruals.

COMPENSATION AND ASSIGNMENT.

• 1)

  Tax or customs obligations may be compensated in whole or in part with credits for taxes, their accruals, liquid, enforceable and non-prescribed, provided that they are managed by the Tax Administration or the Customs Administration;

• 2)

  Compensation may be carried out by any of the following forms: a) At the request of the tax obligor; or, b) Ex officio by the Tax Administration or the Customs Administration.

• 3)

  The tax obligor may request compensation of their credit balances with debts for taxes, advances, payments on account, withholdings, collections, interest and pecuniary sanctions that they maintain with the Tax Administration or the Customs Administration. The tax obligor must notify them for purposes of updating the corresponding current account, an operation that must be performed without the need to issue a resolution; without prejudice to the obligation to make the corresponding corrections to ensure proper application of the credit through compensation;

• 4)

  Credit balances of the tax obligor that are liquid, without express request for compensation by the interested party, may be applied ex officio by the Tax Administration or the Customs Administration to debt payment starting with debts from older periods, relating to non-prescribed periods and in the order of precedence of the concepts established in this Code;

• 5)

  Liquid, enforceable and non-prescribed credits, for payment of any type of tax or customs obligations, contained in this Code or in general and special tax or customs laws of a tax obligor or responsible party, for payments made as taxes or accruals, may be assigned to other tax obligors or responsible parties so that they may be used by the assignee with the State;

• 6)

  Each assignment or transfer must be notified to the Tax Administration or the Customs Administration, as applicable, by either party, through a simple written or electronic communication; the institution must make adjustments to the current account of the assignor and assignee, automatically and without delay. The Tax Administration and the Customs Administration must implement a system that allows them to make these adjustments in an automated manner, in such a way that the transaction is recorded, but without delay in hours or days in its perfection or execution;

• 7)

  Assignments or transfers are effective with full legal effect from the moment of notification to the Tax Administration or the Customs Administration, as applicable and do not require authorization or approval through resolution; and,

• 8)

  The foregoing provisions are applicable without prejudice to the legal faculties of the Tax Administration or the Customs Administration.

CONDONATION. The obligation to pay taxes or the fulfillment of formal obligations may only be pardoned by Law.

PRESCRIPTION. 1) By prescription the rights and actions of the State Department in Charge of Finance (SEFIN), the Tax Administration, the Customs Administration and of the tax obligor are extinguished, when they do not exercise them within the legally established period and is effective when the period contained in this Code elapses; and, 2) The responsibility and action of the tax obligor to request the return or repetition for taxes and accruals, as well as the actions and faculties of the State to verify, confirm, audit, investigate, perform procedures and examinations, determine and demand payment of the obligations provided for in this Code, definitively prescribe by the lapse of:

• a)

  Four (4) years in the case of import, export obligations or any other relating to operations included within customs regimes;

• b)

  Five (5) years in the case of obligations relating to tax obligors registered in the National Tax Registry (RTN);

• c)

  Seven (7) years in other cases; and,

• d)

  In case of death of the tax obligor, the prescription of the action of petition to request return or repetition is suspended in favor of the heirs, for one time only for a period of three (3) years, counted from the date of death.

BEGINNING OF THE PRESCRIPTION PERIOD COMPUTATION.

• 1)

  The prescription of the actions and legal attributions of the State Department in Charge of Finance (SEFIN), the Tax Administration and the Customs Administration, as applicable, to determine the tax and its accruals, perform verifications or audits or to demand payment, must begin to be computed from the business day following the date on which the return is filed or should be filed or, when the resolution determining a tax or customs obligation issued by the Tax Administration or the Customs Administration becomes final;

• 2)

  The prescription of the action to demand and enforce a fine must begin to be computed from the business day following the date the infraction was committed or from the date on which the administrative resolution or court judgment became final; and,

• 3)

  The prescription of the action of the tax obligor to request return or repetition for taxes and accruals must begin to be computed from the business day following the date on which the excess payment or remittance was made.

DECLARATION OF PRESCRIPTION. 1) Prescription produces its legal effects once the periods established in this Code have elapsed; and, 2) When the formal or material tax or customs obligation has prescribed as of June 30 of each year, in accordance with the current account purging procedure established by the Tax Administration or Customs Administration, as applicable, ex officio discharge must be performed, insofar as it reviews and updates the current account of tax obligors. Notwithstanding the foregoing, the tax obligor has the right to request that their current account be cleaned of their prescribed obligations, and the Tax Administration or Customs Administration, as applicable, must execute the requested action within the period established in this Code.

EFFECTS OF PRESCRIPTION.

• 1)

  Prescription benefits equally all tax obligors in their formal and material obligations, unless the course of prescription has been interrupted to the benefit of any of them;

• 2)

  The Tax Administration or the Customs Administration may not request, obtain or use information about prescribed facts or situations; except that the tax obligor agrees to provide the information and documentation, and it is in their possession;

• 3)

  The only information about prescribed periods that may be required and obtained by the Tax Administration or the Customs Administration comprises cases in which it is necessary for the verification of expenses for depreciation or amortization and Sales Tax, affecting non-prescribed fiscal periods;

• 4)

  What has been paid to satisfy a prescribed tax obligation will not give the right to repetition, even if payment was made with or without knowledge of the prescription; and,

• 5)

  Prescription of the principal tax or customs obligation extinguishes all accessory obligations.

INTERRUPTION OF PRESCRIPTION.

• 1)

  The course of prescription is interrupted by the following causes:

  • a)

    From the business day following the date of notification of the beginning of the procedure aimed at determining or liquidating the tax or establishing the infraction giving rise to the sanction or the existence thereof. It is understood that interruption of the course of prescription has not occurred if the actions are not initiated within a maximum period of thirty (30) days, counted from the date of notification or if, once initiated, they are suspended for more than sixty (60) days;

  • b)

    From the business day following the filing of the appropriate legal remedy;

  • c)

    From the business day following any action by the tax obligor directed at regularizing their situation;

  • d)

    From the business day following notification of the resolution confirming the adjustments of the tax or sanctions and containing the liquid amount enforceable; and, e) From the business day following the filing of the corresponding judicial collection action.

• 2)

  The prescription of the action for return to the tax obligor is interrupted: a) By the filing of the corresponding remedy; and, b) By the filing of the lawsuit before the competent judicial authority, except for withdrawal or dismissal of the instance.

• 3)

  Once interruption occurs, the computation of the prescription period must begin anew.

CONCEPT AND CLASSIFICATION OF INFRACTIONS.

• 1)

  By infraction is understood any action or omission that contravenes the tax or customs legal order, provided that it is classified as such in this Tax Code or in other applicable and effective tax or customs laws;

• 2)

  The infraction must always be determined objectively and sanctioned administratively, following due process and guaranteeing the right to defense;

• 3)

  Infractions are classified into offenses and crimes: a) An offense constitutes any breach of tax or customs norms, by commission or by omission, that is classified and sanctioned in this Code or in applicable and effective tax or customs laws; and, b) Tax crimes are contained in the Penal Code and their sanction is the exclusive responsibility of the Courts and Tribunals of Justice.

TYPES OF OFFENSES. Tax or customs offenses are the breach of formal and material obligations of tax obligors.

APPLICABLE PRINCIPLES AND STANDARDS.

• 1)

  The provisions of this Title apply to all tax and customs infractions and violations;

• 2)

  In accordance with Article 95 of the Constitution of the Republic, no tax obligor may be sanctioned for infractions and violations not previously established by Law. Violations, their characteristics and circumstances must be classified in this Code and the Law;

• 3)

  In the absence of express standards regarding violations, supplementary, extensive or analogous standards may not be applied;

• 4)

  The regulatory standards issued by the organs of Public Administration may not create violations or infractions and are limited solely to specifically developing the procedures associated with the application thereof, respecting due process and the right to defense; and,

• 5)

  The regulatory standards or administrative acts of any nature that contravene what is previously stated are null and void and inapplicable to tax obligors. The authorizing official of such standards or those who apply them is responsible in accordance with what is provided in the Penal Code.

PRINCIPLE OF NON-CONCURRENCE.

• 1)

  The Principle of Non-Concurrence implies avoiding double prosecution when there is identity of subject, fact and basis, both in the relationship between administrative infractions and offenses, as well as within administrative infractions themselves;

• 2)

  In objectively classified conduct that could be constitutive of tax offenses, the Ministry of Finance (SEFIN), the Tax Administration or the Customs Administration must transfer the file to the knowledge of the Public Prosecutor's Office (MP) and refrain from concluding the administrative procedure, while the judicial authority does not issue a sentence and this acquires the character of final, or the dismissal or closure of proceedings takes place or the return or closure by the Public Prosecutor's Office occurs. For these purposes, the sanction by the judicial authority as a result of a conviction excludes the imposition of the administrative sanction established by Law;

• 3)

  If the existence of the commission of a possible offense has not been determined, the Ministry of Finance, the Tax Administration and the Customs Administration, in accordance with the scope of their competence, must continue the sanctioning file if appropriate, based on the facts that the Courts have considered proven and must resume the computation of the statute of limitations prescription at the procedural moment when it was suspended. The administrative proceedings carried out during the suspension period are deemed non-existent;

• 4)

  In cases constitutive of offense, in addition to the monetary sanctions that correspond to be applied in the criminal proceedings, the payment of omitted taxes must be required, in accordance with the previous numeral, without this affecting the criminal proceeding;

• 5)

  One same action or omission that must be applied as a criterion for the graduation of a violation may not be sanctioned as an independent violation. The fine or principal sanction does not cause interest;

• 6)

  The performance of several actions or omissions constituting various violations supposes the imposition of the sanctions that correspond for all of them. In this sense, reoffenses of formal non-compliance preceded by distinct administrative requests are considered separate violations. However, if the actions or omissions that make up the type of an infraction or violation can be considered as preparatory to or included in another type of infraction or violation, only the sanction corresponding to the latter applies, except that if the sanction for the subsumed violation is greater, in which case this is the applicable one; and,

• 7)

  In case the same infraction fact violates more than one type of administrative infraction or violation, without the application of one excluding the application of the other, the most serious sanction must be applied.

APPLICATION OF SANCTIONS FOR TAX OR CUSTOMS VIOLATIONS.

• 1)

  The investigation, determination and sanctioning of violations corresponds to the Tax Administration, Customs Administration or to the Ministry of Finance (SEFIN), within the scope of their competencies;

• 2)

  Each violation must be sanctioned independently of any other in a single administrative act, provided it is classified in this Code or other tax or customs laws; and,

• 3)

  The application of these sanctions and their compliance do not free the infractor from the responsibility of the tax or customs obligation, including interest. THIRD SECTION OF RESPONSIBILITY

INFRACTOR SUBJECTS. 1) Infractor subjects are natural or legal persons and others related in the present Code, who carry out actions or omissions classified as violations in the laws; and, 2) For the concurrence of several infractor subjects in the commission of a tax or customs violation, these are jointly and severally liable before the Tax Administration, Customs Administration or the Ministry of Finance (SEFIN), for the payment of the sanction, when this is monetary. For such responsibility to be enforceable, the responsible subjects to whom it is intended to impose the sanction must be notified, so that they may make use of the resources contained in the present Code.

INSTIGATORS OR ACCOMPLICES.

• 1)

  Instigators or accomplices of a violation are all persons not included in the previous Article that are directly related to a violation, in particular:

  • a)

    Accomplices and instigators, considering as such those who with knowledge instigate or aid in any manner the perpetrator, as the case may be;

  • b)

    One who, for personal benefit or that of a third party, acquires or possesses, conceals, sells or collaborates in the sale or negotiation of merchandise, products or objects regarding which they know or should know, in accordance with the circumstances, that a violation has been committed; and, c) Third parties who, even though they did not have tax or customs obligations in their charge, facilitate a violation through intent or negligence, whether or not they obtain personal benefit.

• 2)

  Instigators or accomplices are jointly and severally liable for the sanction together with the infractor subjects, in accordance with what is provided in this Code, once the court ruling that declares the degree of participation as instigator or accomplice in the criminal proceeding acquires the character of final; and,

• 3)

  The conduct and persons referred to in the previous numerals may only be sanctioned in accordance with the criminal types and procedures contained in the Penal Code and Criminal Procedural Code. The responsibility for investigating criminal liability corresponds to the Public Prosecutor's Office and trying it to the competent Courts.

SUBJECTIVE RESPONSIBILITY. 1) In the case of legal persons, subjective responsibility is configured insofar as it is verified that, within their internal organization, there has been a breach of the duty of care that would have prevented the violation, without needing to determine the concrete responsibility of their administrators, directors, custodians, trustees and other natural persons involved; and, 2) Legal persons and employers in general are responsible for the monetary sanctions applicable to violations committed by their dependents in their capacity as such, insofar as it is verified that their breach of the duty of supervision over these would have prevented the violation.

EXEMPTIONS FROM RESPONSIBILITY. The actions or omissions classified in the laws do not give rise to responsibility for tax or customs violation, in the following cases:

• 1)

  When they are carried out by those lacking capacity to act in the exercise of tax or customs matters;

• 2)

  When fortuitous case or force majeure occurs;

• 3)

  When they derive from a collective decision, for those who would have dissented or did not attend the meeting in which the same was adopted;

• 4)

  When one has acted under hierarchical subordination, provided that the order does not have the character of an evident violation;

• 5)

  When one has acted with the necessary diligence in the compliance of tax or customs obligations. Among other cases, it is understood that the necessary diligence has been applied when the tax obligor has acted under a reasonable interpretation of the standard. It is also understood that the necessary diligence has been applied when elements of the fact generating or of the tax base have been determined or valued with sufficient technical basis, even if later it is considered that error has occurred; and,

• 6)

  When they are attributable to a technical deficiency of the computer assistance programs provided by the competent authority for the compliance of tax or customs obligations. FOURTH SECTION SANCTIONS

TYPES OF SANCTIONS. The applicable administrative sanctions are: 1) Principal: a) Fine: Is applicable to the non-compliance of formal obligations and does not cause interest; and, b) Interest: Are applicable for the non-compliance of substantive obligations, as is regulated in this Code. 2) Accessory, applicable additionally to the fine that corresponds:

• a)

  The loss of the right to enjoy tax or customs benefits, privileges, prerogatives or incentives, when they fail to comply with their obligations for two (2) consecutive or alternate years;

• b)

  Confiscation in customs matters;

• c)

  The closure of the establishment;

• d)

  The suspension of the National Tax Registry (RTN); and,

• e)

  The loss of the right to obtain public subsidies or the disqualification from participating in public bidding, when they have been perpetrator or collaborator in a substantive violation.

INDEPENDENT SANCTION FOR SUBSTANTIVE AND FORMAL VIOLATIONS. Formal violations must always be sanctioned independently of substantive violations, without prejudice to what is provided for the exceptional cases prescribed in this Code. CHAPTER II SANCTIONS APPLICABLE TO FORMAL TAX OR CUSTOMS VIOLATIONS

CALCULATION OF SANCTION FOR FORMAL VIOLATIONS.

• 1)

  The sanctions for the infraction of formal obligations contained in the present Code must be calculated in accordance with the following table:

• 2)

  When it is the Income Tax, the failure to file or the filing outside of time must be sanctioned in a non-cumulative manner as follows:

  • a)

    With a fine proportional to the days elapsed, equivalent to five percent (5%) of the tax accrued, if the delay occurs within the first month;

  • b)

    With a fine proportional to the days elapsed, equivalent to ten percent (10%) of the tax accrued, if the delay occurs within the second month;

  • c)

    With a fine proportional to the days elapsed, equivalent to fifteen percent (15%) of the tax accrued, if the delay occurs within the third month;

  • d)

    With a fine proportional to the days elapsed, equivalent to twenty percent (20%) of the tax accrued, if the delay occurs within the fourth month; and, e) With a fine proportional to the days elapsed, equivalent to twenty-five percent (25%) of the tax accrued, if the delay occurs within the fifth month and onwards.

• 3)

  In the case of any other tax connected or schedular to Income Tax, what is provided in special laws applies and, in their absence, to the gradualism of the previous numeral;

• 4)

  When it is the Sales Tax, the fine equals one percent (1%) of the respective tax, if the declaration is filed within five (5) days following the date of filing and payment; after this period the fine is two percent (2%) per month or fraction of delay, up to a maximum of twenty-four percent (24%);

• 5)

  When it concerns the infractions provided for in the Customs Law and other legal provisions in customs matters, they are sanctioned with a fine of twenty-five percent (25%) on the value of taxes not collected, excepting violations for customs classification, which must generate a fine of ten percent (10%) on the value of taxes not collected;

• 6)

  When there is no annual gross income, a fine equivalent to two (2) average minimum wages in effect must be applied;

• 7)

  When for any reason attributable goods or merchandise are destroyed or damaged that are found in a fiscal precinct, a fine equal to the value that the State must reimburse to the owner for damages and losses must be imposed on the responsible party, independently of the criminal responsibility in which they incur;

• 8)

  For the purposes of this Chapter, the gross income declared or determined by the Tax Administration in the last fiscal year closed as of the date of the commission of the infraction must be considered. When the tax obligor had initiated activity less than twelve (12) months before the commission of the violation, a twenty-five percent (25%) of an average minimum wage in effect must be applied as sanction and the table of numeral 1) of this Article must not be taken into account;

• 9)

  Recidivism exists whenever the sanctioned party by final sentence or ruling commits a new infraction of the same type within the period of twenty-four (24) months counted from the commission of that one. Recidivism must be punished with the sanction provided for the infraction plus an increase of twenty-five percent (25%) of the same; and,

• 10)

  The sanction for infraction of formal obligations contained in articles 69, 70 and 71 of the present Code is three (3) average minimum wages in effect and removal from office by their superior, without any liability of any kind for the State.

SANCTION OF TEMPORARY CLOSURE OF AN ESTABLISHMENT.

• 1)

  The sanction of closure of an establishment, office or the place where commercial, professional or trade activity is conducted must be applied:

  • a)

    When it does not issue a fiscal document, being obligated to do so or issuing it without complying with the requirements established in the current applicable legal framework;

  • b)

    When a fiscal document issued by it is not found registered in the accounting;

  • c)

    When it does not present the sales, purchases, costing and withholding records required by the Tax Administration or the Customs Administration; and, d) When the tax obligor keeps double accounting or uses double invoicing, without prejudice to the other sanctions stipulated in the present Code and other applicable laws.

• 2)

  The closure is temporary when any of the circumstances described in the numerals of the previous section is evident, except numeral d);

• 3)

  The application of the sanction of closure of an establishment, office or the place where commercial, professional or trade activity is conducted must be carried out in accordance with the following procedure:

  • a)

    For non-compliance with the numerals of numeral 1) of the present Article, except numeral d), a fine must be imposed according to the range of annual gross income of the infractor tax obligor, in accordance with what is established in the present Code. Six (6) business days after having applied said sanction, the competent authority must verify and verify that the tax obligor has regularized their situation;

  • b)

    For the first reoffense of the same violation, excepting what is established in said numeral d) of numeral 1) of the present Article, a fine must be imposed according to the range of annual gross income of the infractor tax obligor, in accordance with what is established in the present Code, increased by fifty percent (50%) of the value of the fine that corresponds. Six (6) business days after having applied said sanction, the competent authority must verify and verify that the tax obligor has regularized their situation;

  • c)

    For reoffense of the same tax violation, the procedure must proceed to temporary closure, for an indefinite period, without prejudice to the payment of the fines already imposed. The indefinite closure must last until the tax obligor regularizes their situation; and, d) For reoffense, it must be understood to incur for the second or subsequent time, in non-compliance with the same tax or customs obligation within the same annual fiscal period.

• 4)

  The official of the Tax Administration or the Customs Administration who identifies the infraction must record it in an act of fact-finding and notify it to the tax obligor within twenty-four (24) business hours;

• 5)

  To effect the application of the closure of an establishment, office or the place where commercial, professional or trade activity is conducted, the Tax Administration or the Customs Administration, as appropriate, must use strips or tapes, properly sealed, as a sign of closure or closure. In case of rupture of the same the criminal complaint must be filed against the infractor tax obligor;

• 6)

  The imposition of the sanctions contained in this Article corresponds without prejudice to the obligation of the tax obligor to pay or remit the taxes that they have failed to collect or that they have not remitted to the State;

• 7)

  The resolutions imposing the sanction contained in literal c) of numeral 3) of this Article are not susceptible to further recourse in the administrative route and have exhausted the same, which may be challenged "per saltum", for the sole purpose of its suspension, without requiring any publication, before the competent Judge of Letters in Administrative Litigation, within a period of three (3) business days counted from the day following the notification thereof. In those places where there is no Court of Administrative Litigation, a Judge of Letters must hear the suspension request or, in the event there is none, a Peace Judge, and it must be processed in accordance with what is provided in articles 120 to 124 of the Law of Administrative Litigation Jurisdiction.

• 8)

  The suspension is appropriate when the execution causes damages or losses of impossible or difficult repair. In the processing of the suspension, the sued administration must be notified for a period of three (3) business days so that it may pronounce and attach the corresponding file without any additional fact to those expressed in the administrative resolution, and the competent judge must issue their resolution verbally, within the unextendable period of ten (10) business days counted from the day following the admission of the corresponding challenge, except that ex officio they issue measures for better resolution or that the challenger requests the offering of evidence.

• 9)

  The judge who does not issue the resolution within the period established in the previous numeral is personally liable to the State and the tax obligor for the damages and losses that may be caused;

• 10)

  The contentious procedure in numerals 7) and 8) above must be applied without prejudice to the ordinary procedure to challenge the other sanctions contained in literals a) and b) of numeral 3) of the present Article; and,

• 11)

  The plaintiff may claim damages and losses within the period and procedure contained in Article 124 of the Law of Administrative Litigation Jurisdiction or, at their discretion, by the ordinary route contained in the same Law.

REDUCTION OF SANCTIONS FOR FORMAL INFRACTIONS. 1) When the infractor corrects or remedies the non-compliance of the formal obligation, a reduction of the amount corresponding to fines, interest and surcharges must be granted in accordance with the following percentages:

• a)

  Fifty percent (50%), if the infractor regularizes their situation with the State, before any action by the competent authority regarding the infraction committed;

• b)

  Thirty percent (30%) if, with the action of the competent authority, they regularize their situation without the filing of remedies, before the authority determines and notifies them of the payment of the fine or initiates collection proceedings;

• c)

  Ten percent (10%) if they regularize their situation before the collection request of the fine made by the judicial authority; and,

• d)

  If the tax obligor is categorized as a small taxpayer, they have an additional reduction of twenty percent (20%) to the percentages established in the previous literals, as appropriate. 2) For the purposes of the present Article, it is understood as action of the competent authority any collection action carried out and notified to the tax obligor. CHAPTER III SANCTION APPLICABLE TO SUBSTANTIVE VIOLATIONS

INTEREST FOR NON-PAYMENT.

• 1)

  For failure to pay taxes and advance payments within the established period, the tax obligor must pay to the State: a) The tax or customs debt or its balance; and, b) Moratory interest of three percent (3%) monthly or fraction of a month calculated on the tax to be paid, accumulating monthly until payment occurs, up to a maximum of thirty-six percent (36%).

• 2)

  The failure to remit within the established periods of taxes withheld or collected by withholding or collection agents and of withholdings for payments in kind, obligates such persons to pay the State: a) The amounts owed; and, b) Moratory interest of five percent (5%) monthly or fraction of a month calculated on the tax to be paid, accumulating monthly until payment occurs, up to a maximum of sixty percent (60%).

• 3)

  For payments made from declarations filed outside the legal period, a reduction of the amount corresponding to interest must be granted, in accordance with the following percentages: a) Fifty percent (50%), if the tax obligor regularizes their situation with the State, before any action by the competent authority; and, b) Thirty percent (30%) if they regularize their situation before the collection request made by the judicial authority.

• 4)

  For the purposes of literal a) of numeral 3) above, it is understood as action of the competent authority any collection action carried out and notified to the tax obligor.

SUSPENSION OF THE NATIONAL TAX REGISTRY. The sanction of suspension of the National Tax Registry (RTN) must be applied when a tax obligor is not solvent in the compliance of substantive obligations, whether as a result of self-assessment or official assessment, provided that all remedies in the administrative route have been exhausted and the obligation has acquired the character of final, liquid and enforceable. Meeting these conditions, the following procedure must be followed:

• 1)

  A first collection notice must be notified to the tax obligor to proceed with the payment of principal and accessories that correspond within a period of five (5) business days counted from the day following receipt of the notification;

• 2)

  A second collection notice must be notified to the tax obligor to proceed with the payment of principal and accessories that correspond within a period of three (3) business days counted from the day following receipt of the notification;

• 3)

  If the calls made in accordance with the previous numerals are not complied with, the competent authority must issue the resolution by which it orders the suspension of the National Tax Registry (RTN) of the tax obligor; and,

• 4)

  At the moment when they regularize their situation with the State, immediately and without any procedure, ex officio or at the request of the same tax obligor, this administrative measure must be terminated. SEVENTH TITLE TAX OFFENSES

CONCEPT OF TAX OFFENSES. Tax offenses are those classified in the Penal Code.

ACCUSATION. In order to proceed criminally for the tax offenses provided for in the Penal Code, it is necessary that the Secretary of State in the Office of Finance (SEFIN), the Tax Administration or the Customs Administration, as applicable, file a complaint before the Public Ministry (MP) or the Office of the Attorney General of the Republic (PGR), without prejudice to their powers to act ex officio. In cases of flagrancy, such complaint is not necessary. The provision in the preceding paragraph does not prevent private individuals or public servants from filing a complaint before the Public Ministry (MP) or the Office of the Attorney General of the Republic (PGR), for the commission of any of the offenses provided for in the Law.

LIABILITY FOR VOLUNTARY COMPLIANCE. Charges must be filed against whoever has omitted payment of the tax or obtained improper benefit, except when the tax is paid together with its fines and legal interest, before the Public Ministry presents a fiscal requirement, whether through payment made in the fiscal office, before the Tax Authority or before the corresponding Customs Authority. The fiscal, tax, or customs authority may not refuse to receive payment in accordance with the provisions of this paragraph, and must proceed to administrative closure or, as applicable, apply discretionary prosecution criteria as appropriate, with the consequent administrative filing of the case. Under the same circumstances, criminal prosecution must cease when the taxpayer pays the principal and accessory tax obligations, as well as the fine established in the Penal Code, provided that payment is made before the holding of the preliminary hearing, applying the figure of judicial reconciliation, which must be applied in all cases at the request of the accused and in which no other type of compensation different from those referred to in this Article can be required. When the requirements of this paragraph and those of the Criminal Procedural Code are met, the corresponding authority must not deny in any case the application of judicial reconciliation. Notwithstanding the foregoing, if payment is made at any time during the process, the judge must impose measures substitutive to preventive imprisonment, pending the holding of the respective judicial reconciliation hearing. The following crimes are excluded from the benefit: articles of the Penal Code: Articles 392 A, 392-B in numerals 1, 2, 5, 13, 14, 16, 17, 18, 19, and 21, as well as those contained in Article 392-D in its numerals 2, 12, 14, and 15. EIGHTH TITLE THE PROCEDURES FOR REVISION OF TAX OR CUSTOMS ACTS CHAPTER I PROCEDURES FOR EX OFFICIO REVISION

GENERAL PROVISION. The resolutions that determine taxes and their accessories, those that impose sanctions, or those that deny the reintegration or refund of taxes may be reviewed through: 1) Ex officio revision procedures; and, 2) Procedures through administrative remedies. CHAPTER II ADMINISTRATIVE REMEDIES FIRST SECTION GENERAL PROVISIONS

CLASSES OF REMEDIES.

• 1)

  The taxpayers, the parties in a process, as well as third parties to whom an act or resolution causes direct harm, have the right to challenge it under the terms established in this Code. Whoever challenges an administrative resolution may withdraw the remedy at any time prior to its resolution;

• 2)

  The resolutions referred to in the preceding numeral may be challenged through:

  • a)

    The Remedy of Reconsideration;

  • b)

    The Remedy of Appeal; and, c) The Extraordinary Remedy of Review.

• 3)

  Only administrative resolutions referred to in numeral 1) may be reviewed when they recognize rights or establish obligations, as well as procedural acts that resolve the matter directly or indirectly;

• 4)

  Administrative remedies must be exercised only once in each administrative procedure and never simultaneously; and,

• 5)

  Error in the classification of the remedy by the party filing it is not an obstacle to its processing provided that the written submission reveals its true nature.

RESOLUTIONS.

• 1)

  The organs or bodies responsible for deciding cannot abstain from issuing a resolution due to deficiency in the Law;

• 2)

  The resolutions of the remedies must be properly reasoned and grounded in Law by the organ or body that resolves the controversy and must rule on all issues raised by the party filing the remedy and those that arise in the file, as well as the evidence produced or elements considered;

• 3)

  The resolutions of the remedies must grant in whole or in part or must reject the claims formulated in them; and,

• 4)

  The resolution by which a remedy is decided cannot worsen the situation of the party filing it with respect to what was obtained in the challenged resolution, except in cases of arithmetical error which may be corrected by the Secretary of State in the Office of Finance (SEFIN), Tax and Customs Superintendency, the Tax Administration, or the Customs Administration on its own motion or at the request of the taxpayer.

COMMON PROVISIONS REGARDING EVIDENCE. 1) If the party filing the remedy requests the opening of evidence or if the body responsible for deciding does not consider the facts alleged by the interested party to be true, the opening of evidence may be granted for a term of not less than one (1) month; and, 2) The Secretary of State in the Office of Finance (SEFIN), Tax and Customs Superintendency, the Tax Administration, or the Customs Administration, in the processing of the remedy, must take the actions necessary to establish the truth of the facts, therefore they may request additional evidence to that proposed or conduct investigations or studies that serve that purpose, which must be presented or addressed within a period of no more than twenty (20) business days. SECOND SECTION REMEDY OF RECONSIDERATION

REMEDY OF RECONSIDERATION. OBJECT AND NATURE. 1) Against the resolutions issued by the Tax Administration, the Customs Administration or by the Secretary of State in the Office of Finance (SEFIN), as applicable, the remedy of reconsideration must be available, so that the same institution that issued them may proceed to reconsider them; which must be filed at the time of notification or within fifteen (15) business days following the date thereof; and, 2) In customs matters, this remedy shall be filed before the superior authority of the customs service, within ten (10) days following notification of the resolution being challenged.

CHARACTERISTICS OF THE REMEDY.

• 1)

  Against the resolutions issued by the Tax Administration, the Customs Administration, or those issued by the Secretary of State in the Office of Finance (SEFIN) in single instance, the Remedy of Reconsideration is available;

• 2)

  Against the resolution issued by the Tax Administration or Customs Administration that resolves the Remedy of Reconsideration, the Remedy of Appeal is available before the Tax and Customs Superintendency. The Remedy of Appeal may not be filed until the Remedy of Reconsideration has been resolved, except if the legal period for its issuance has elapsed; and,

• 3)

  The resolution issued by the Secretary of State in the Office of Finance in single instance, which resolves the Remedy of Reconsideration exhausts the administrative remedies.

SUSPENSION OF EXECUTION. 1) Once the Remedy of Reconsideration is filed, the execution of the challenged administrative act is suspended until the resolution of said remedy acquires the character of final; and, 2) If the remedy does not affect the totality of the tax or customs debt, the suspension applies to the challenged portion.

RESOLUTION OF THE REMEDY OF RECONSIDERATION.

• 1)

  The resolution of the Remedy of Reconsideration corresponds to the body that issued the challenged administrative act.

• 2)

  The resolution must be issued within twenty (20) business days, counted from the business day following the closing of the evidentiary period or, if no evidentiary period has been granted, from the order admitting the remedy. During the period between the filing of the Remedy of Reconsideration and until the debt acquires the character of final, the accrual of interest must be suspended.

• 3)

  The official responsible for failing to issue the resolution within the established period is directly responsible for compensating the State for the damages caused; and,

• 4)

  Once the period referred to in the preceding numeral has elapsed, the interested party must consider the remedy rejected for purposes of exercising the remedies that correspond, with the suspension of the accrual of interest continuing.

REMEDY OF APPEAL. OBJECT AND NATURE. 1) Its purpose is the review of both the facts found as proven in the challenged resolution and the assessment of the evidence; and, 2) It is presented before the Tax Administration within the period of fifteen (15) business days and, before the Customs Administration within the period of ten (10) business days, counted from the business day following notification of the resolution, and these must forward it to the Secretary of State in the Office of Finance, through the Tax and Customs Superintendency, for its decision, together with the case file, within the period of ten (10) business days, counted from the date the remedy is admitted.

SUSPENSION OF EXECUTION. The execution of the challenged administrative act is suspended until the resolution of the remedy and this acquires the character of final.

RESOLUTION OF THE REMEDY OF APPEAL.

• 1)

  The resolution issued by the Secretary of State in the Office of Finance through the Tax and Customs Superintendency exhausts the administrative remedies. No remedy may be filed against it in the administrative channel, with the exception of the request for correction of material or numerical errors, broadening of the resolution on omitted points, clarification of any doubtful concept of the resolution, or the filing of the Extraordinary Remedy of Review. The Tax and Customs Superintendency may proceed ex officio in such cases;

• 2)

  During the period between the filing of the Remedy of Appeal and until the debt acquires the character of final, the accrual of interest is suspended;

• 3)

  The official responsible for failing to issue the resolution within the established period is directly responsible for compensating the State for the damages caused; and,

• 4)

  Once the period referred to in the preceding numeral has elapsed, the interested party must consider the remedy rejected for purposes of exercising the remedies that correspond, with the suspension of the accrual of interest continuing.

EXTRAORDINARY REMEDY OF REVIEW. Against final resolutions, the extraordinary remedy of review may be filed when any of the following circumstances concur:

• 1)

  That the act was issued with evident and manifest error of fact that affects the substantive issue, provided that said error is fully demonstrated by the documents incorporated in the file, without prejudice to the provisions of Chapter I of this Title;

• 2)

  That after the resolution was adopted, decisive documents appear that were ignored by force majeure at the time the resolution was issued or whose presentation was then impossible to add to the file;

• 3)

  That the resolution was issued by virtue of a document which, at the time that resolution was issued, any of the interested parties did not know had been recognized and declared false in a final judicial sentence or whose falsity was recognized or declared afterward;

• 4)

  That, the resolution having been adopted by virtue of testimonial evidence, the witnesses were condemned in a final judicial sentence for perjury committed in the declarations that served as the foundation for that resolution; and,

• 5)

  That the resolution was issued with prevarication, bribery, violence or other fraudulent machination and this was declared so by a final judicial sentence.

PROCESSING OF THE EXTRAORDINARY REMEDY OF REVIEW.

• 1)

  The Remedy of Review against the final resolutions of the Tax Administration or the Customs Administration must be filed before the Secretary of State in the Office of Finance through the Tax and Customs Superintendency, within two (2) years following the date of notification of the challenged resolution, in the cases referred to in the first cause of the preceding Article;

• 2)

  The Remedy of Review against the final resolutions of the Secretary of State in the Office of Finance (SEFIN) in single instance must be filed before said Secretary of State, within two (2) years following the date of notification of the challenged resolution, in the cases referred to in the first cause of the preceding Article; and,

• 3)

  In other cases, the period is two (2) months, counted from the day on which the ignored documents were discovered or from the date on which the judicial sentence became final.

EFFECTS OF THE EXTRAORDINARY REMEDIAL APPEAL FOR REVIEW. If the appeal is deemed admissible, the total or partial nullity of the challenged resolution must be declared, ordering that the corresponding actions be carried out ex officio.

RESOLUTION DEADLINES. The resolution of the appeal must be rendered within thirty (30) business days following its filing. CHAPTER III OF THE TAX AND CUSTOMS SUPERINTENDENCY

CREATION AND ORGANIZATION OF THE TAX AND CUSTOMS SUPERINTENDENCY.

• 1)

  The Tax and Customs Superintendency is created as a specialized entity functionally deconcentrated from the State Secretariat of Finance (SEFIN), with authority and competence at the national level, which is exercised with technical, administrative and financial autonomy;

• 2)

  The Tax and Customs Superintendency corresponds to the functions regulated in the Central American Unified Customs Code (CAUCA) and its Regulations (RECAUCA) for the Customs Court;

• 3)

  This administrative entity, highly specialized in tax and customs matters, in the performance of its functions has technical and functional independence, both from the Tax Administration and the Customs Administration as well as from the State Secretariat of Finance (SEFIN), with the purpose of providing effective attention and efficient processing of administrative appeals under its charge.

• 4)

  The personnel of the Tax and Customs Superintendency must be technical and highly qualified, selected by merit, through competitive process and must approve a selection process that includes the application of psychometric, capability and trustworthiness tests. For purposes of determining its compensation policy, the Tax and Customs Superintendency is not subject to the ordinary civil service regime, nor to the limitations established for employees of the Executive Branch;

• 5)

  The Tax and Customs Superintendency corresponds to resolve Appeals and Review Appeals against resolutions issued by the Tax Administration and the Customs Administration and against administrative resolutions issued through the ex officio review procedure, if the interested party filed them, provided they have been issued by said administrations;

• 6)

  The resolutions of the Tax and Customs Superintendency exhaust the administrative remedy;

• 7)

  The Tax and Customs Superintendency has no competence to know and resolve appeals filed against the State Secretariat of Finance (SEFIN) in sole instance. The appeals it resolves exhaust the administrative remedy;

• 8)

  The Tax and Customs Superintendency is a unit highly specialized in tax and customs matters;

• 9)

  The Tax and Customs Superintendency is composed of five (5) members with a bachelor's degree, preferably specialized with a postgraduate degree in tax, customs, financial or foreign trade matters or with verifiable minimum experience of five (5) years in tax, customs or foreign trade matters. At least three (3) of its members must be lawyers; among these three (3) the full membership must elect its President, annually and rotationally, exclusively for purposes of legal representation thereof. Similarly, at least three (3) alternate members must be appointed;

• 10)

  The appointment of the principal and alternate members is the prerogative of the President of the Republic, prior to a public competitive process that must be carried out by the State Secretariat of Finance (SEFIN), who serve in their positions for a period of four (4) years.

• 11)

  To be a principal and alternate member of the Tax and Customs Superintendency, in addition to the aforementioned requirements and experience, the following are required:

  • a)

    Being Honduran by birth;

  • b)

    Being in full enjoyment of civil rights;

  • c)

    Not having been convicted by final judgment for tax, customs or common crimes;

  • d)

    Not being a spouse or having a kinship relationship within the fourth degree of consanguinity or second degree of affinity with the senior authorities, officials, executives and management personnel of the Tax Administration or Customs Administration or the State Secretariat of Finance (SEFIN); and, e) Having exercised the corresponding profession for not less than fifteen (15) years.

• 12)

  The principal and alternate members of the Tax and Customs Superintendency must perform their functions full-time and exclusively and cannot be advisors or consultants to third parties; being able to perform solely and exclusively teaching and academic research duties;

• 13)

  The State Secretariat of Economic Development (SEDE) and the Central Bank of Honduras (BCH), must designate one (1) permanent member per institution to the Tax and Customs Superintendency, who have voice but no vote in its decisions, acting as permanent referents in foreign trade and monetary matters;

• 14)

  The Tax and Customs Superintendency may have the benefit of technical assistance from independent professionals, as well as permanent technical, legal and fiscal assistance from other State institutions such as the State Secretariat of Economic Development (SEDE) and the Central Bank of Honduras (BCH); and,

• 15)

  The President of the Republic, through the State Secretariat of Finance (SEFIN), and following socialization with representative business associations of the private sector, the social sector of the economy and professional guilds of the country, shall issue the regulations and reforms as appropriate, that develop everything related to the functions, composition, powers and other competencies of the Tax and Customs Superintendency.

APPEALS. 1) The filing of appeals before the Tax and Customs Superintendency does not require more formalities than those indicated in this Code and may be done both through physical request and in digital format. For this purpose, the Superintendency must create an electronic portal that contains the requirements, forms, formats and other necessary tools to facilitate the actions of the taxpayer and to monitor online the processes submitted to its knowledge; and, 2) In addition to what is prescribed in this Code, appeals presented must contain:

• a)

  General information of the person requesting it, including their Tax Registry Number (RTN) and their address. In the case of a legal entity, the information of its legal representative;

• b)

  Information, general data and contact information of the legal representative or procedural representative;

• c)

  The designation of the official or officials who carried out the act subject to appeal;

• d)

  The relation of prior facts and all actions carried out both by the taxpayer and by the Tax Administration or the Customs Administration;

• e)

  The considerations and legal reasoning on which the appeal is based; and,

• f)

  The corresponding request.

MEANS OF PROOF.

• 1)

  All means of proof that accredit the extremes alleged in the appeal must be attached to the appeal, except for the exceptions provided for in this Code or, if any of them are not available or are located in the file lodged in the Tax Administration or the Customs Administration, the designation of its location;

• 2)

  When the means of proof are not attached to the appeal, the applicant must be required to provide them within a maximum period of five (5) business days, after which, if the evidence has not been provided, the appeal must be deemed dismissed by operation of law and the file archived without further action;

• 3)

  Among the means of proof, simple copies on paper or digital format of documents that support the request of the taxpayer may be presented. Authentication certificates are only required when it is justified that the copies cannot be compared with an original document in the possession of the State or the taxpayer. Unauthenticated copies must be compared with the originals before being admitted;

• 4)

  Documentary evidence is considered submitted at the time of its presentation;

• 5)

  The taxpayer may attach as means of proof, opinions of experts in the matter, both national and foreign, who must accredit their capabilities in the matter. These opinions must be evaluated at the time the respective resolution is issued;

• 6)

  Sworn statements rendered before a Notary by witnesses related to the facts on which the appeal is based also constitute means of proof. Said witnesses may be examined in oral hearing. The examination is subject to the rules established in the Civil Procedure Code and must be recorded on video for filing purposes, with a copy thereof being able to be delivered to the interested party when requested, at their cost. In such case, the Tax and Customs Superintendency must set the place and date for the celebration of said hearing, and it may be suspended only once;

• 7)

  The deadline for the submission of other evidence is twenty (20) business days, which may be extended only once for ten (10) business days; and 8) After evidence has been submitted and the aforementioned procedures have been complied with, the Tax and Customs Superintendency must issue the respective resolution within a period not exceeding sixty (60) business days. The expiration of this deadline without the resolution having been issued automatically enables the applicant to file the corresponding judicial actions.

RESOLUTION OF THE APPEAL. 1) In addition to the formal and internal requirements of resolutions prescribed in this Code, the resolution must contain:

• a)

  A summary of the background of the case;

• b)

  A summary of the facts and allegations of the parties;

• c)

  The analysis of each of the means of proof provided and their respective evaluation;

• d)

  The legal reasoning on which the resolution is based;

• e)

  The measures that must be taken to correct the act when appropriate; and,

• f)

  The final decision. 2) The resolutions of the Tax and Customs Superintendency can only be revoked or modified by a competent judicial body and once they become final in judicial proceedings, they constitute mandatory precedent when issued by a competent judicial body in three (3) judgments in the same sense and must be considered by the Tax Administration, the Customs Administration, the Superintendency itself and by taxpayers for all their future actions; 3) Final resolutions must be published and indexed in a database that is easily accessible to be consulted by any person, and the necessary measures must always be taken to maintain the confidentiality of private information of taxpayers, as well as their confidential personal data. CHAPTER IV ACTIONS BEFORE JUDICIAL COURTS

ADMINISTRATIVE LITIGATION. Against the resolutions issued by the Tax and Customs Superintendency and the State Secretariat of Finance (SEFIN) in sole instance, the corresponding action may be filed before the Administrative Litigation Courts.

FORMS OF MUTUAL ADMINISTRATIVE ASSISTANCE IN TAX AND CUSTOMS MATTERS. 1) The Tax Administration or the Customs Administration, within the scope of its competencies and within the framework of International Tax and Customs Law Agreements, approved and ratified in accordance with what is provided in the Constitution of the Republic, may request from other Tax or Customs Administrations:

• a)

  Actions of information exchange by request of either party;

• b)

  Mutual assistance in the performance of its verification, verification, compliance with tax and customs obligations tasks, as well as prevention, control, investigation and sanctions for tax and customs violations;

• c)

  Information or evidence to avoid double taxation;

• d)

  Training or training programs in any matter related to this Code; and,

• e)

  Service of documents. 2) The actions and procedures carried out for purposes of mutual administrative assistance are governed by the provisions of the respective Agreement and, in a supplementary manner, in what does not conflict with the Agreement, in what is provided in this Code; and, 3) The Tax Administration and the Customs Administration, within their respective areas of competency, may enter into Interinstitutional Implementation Agreements of International Agreements in tax or customs matters subscribed by the State of Honduras, within the terms and scope allowed by them, in accordance with the Law and according to international practices in such matters.

NATIONAL INTERINSTITUTIONAL AGREEMENTS. The forms of assistance listed in the preceding Article are also applicable for the execution of National Interinstitutional Agreements between the Tax Administration, Customs Administration and other state entities.

CONFIDENTIAL NATURE OF INFORMATION. 1) The information provided to the Tax Administration or the Customs Administration by foreign Tax or Customs Administrations and other state entities has a confidential character in the terms of this Code; and, 2) The data, reports or background information obtained by the Tax Administration or the Customs Administration in the performance of its functions may be transferred or communicated to foreign Tax or Customs Administrations or to other state entities of the country, if the transfer is intended for collaboration with them for purposes of achieving compliance with tax or customs obligations within the scope of its competencies and within the framework of International Tax or Customs Law Agreements or National Interinstitutional Agreements.

ABSENCE OF DOMESTIC INTEREST IN THE EXCHANGE OF INFORMATION. When a foreign Tax or Customs Administration requests the Tax Administration or the Customs Administration of Honduras for information that it does not possess, the corresponding actions must be carried out to obtain it, even when the information requested is not necessary for the determination of the taxes under its competence. The same must occur when, within the framework of domestic administrative cooperation provided for in a National Interinstitutional Agreement, the requesting entity is another state entity of the country.

VALIDITY OF INFORMATION PROVIDED BY FOREIGN TAX OR CUSTOMS ADMINISTRATIONS. The evidence or information provided by other States or international or supranational entities within the framework of mutual administrative assistance in tax or customs matters may be incorporated with the probative value that applies in accordance with the rules on evidence of the Civil Procedure Code.

INTERNATIONAL ASSISTANCE IN SERVICE OF DOCUMENTS MATTERS.

• 1)

  The Tax Administration or the Customs Administration, by virtue of what is provided in an International Tax or Customs Law Agreement, may request from the competent authority of another State the service of notifications of any act of application of taxes or imposition of sanctions related thereto;

• 2)

  Notifications made in a State under the provisions of the preceding paragraph must be evidenced by the communication of the notification made in accordance with the regulations of the State of the authority that carries it out and produce the same effects as if they had been made in accordance with what is provided in this Code;

• 3)

  When the Tax Administration or the Customs Administration receives a request for service of documents from the competent authority of another State within the framework of mutual administrative assistance in tax or customs matters, the notification regime regulated in this Code is applicable; and,

• 4)

  Documents must be served in the Spanish language.

ASSISTANCE IN COLLECTION MATTERS.

• 1)

  The Tax Administration or the Customs Administration, by virtue of what is provided in the International Tax or Customs Law Agreements ratified by the State of Honduras, must provide, on a basis of reciprocity, assistance in the collection of tax or customs debts of interest to foreign Tax or Customs Administrations, following the persuasive or compulsory collection mechanisms provided for in this Code and to the extent that the respective Agreements do not provide otherwise;

• 2)

  The respective Agreement must determine the instrument of the requesting State that enables the exercise of collection actions by the Tax Administration or the Customs Administration. From then on, these administrations must assist in the collection in accordance with the legislation applicable to the execution and collection of their own taxes;

• 3)

  The Tax Administration or the Customs Administration must also provide assistance in the collection of tax debts of interest to the municipalities of the country, by virtue of what is provided in National Interinstitutional Agreements that provide for domestic administrative cooperation. The Tax Administration and the Customs Administration are also empowered to request assistance in collection matters from the municipalities of the country. FINAL TITLE GENERAL, TRANSITORY AND FINAL PROVISIONS CHAPTER I GENERAL PROVISIONS TAX ADMINISTRATION AND CUSTOMS ADMINISTRATION

CREATION OF THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION. DOMICILE, FUNCTION AND MISSION.

• 1)

  The Tax Administration and the Customs Administration are created as deconcentrated entities of the Presidency of the Republic, with functional, technical, administrative and national security autonomy, with their own legal personality, responsible for the control, verification, inspection and collection of taxes, with authority and competence at the national level and with domicile in the Capital of the Republic;

• 2)

  The primary function of the Tax Administration and the Customs Administration is to administer the tax and customs system of the Republic of Honduras; and their designations are agreed upon by the Executive Branch; and,

• 3)

  The mission of the Tax Administration and the Customs Administration must be oriented to optimize collection, through the administration, application, inspection, supervision, review, efficient and effective control, execution of collection of internal and customs taxes, the guidance and facilitation of voluntary compliance, promoting truthful and timely compliance with tax and customs obligations, exercising collection and sanctions against those who fail to comply in accordance with what this Code establishes, existing tax and customs laws and regulations, with the exception of taxes that Municipal Corporations and other State entities administer, collect and inspect by Law, except in those cases in which the Tax Administration or the Customs Administration enters into cooperation agreements in accordance with what is established in this Code.

CREATION OF THE ADVISORY COUNCIL OF THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION.

• 1)

  An Advisory Council of the Tax Administration and the Customs Administration is hereby created. Said Council has the function of providing advisory services to both administrations;

• 2)

  The Advisory Council is composed of:

  • a)

    The Secretary of State in the Ministry of Finance (SEFIN), who presides over it and has a casting vote;

  • b)

    The Secretary of State in the Ministry of Economic Development (SEDE);

  • c)

    The President of the Central Bank of Honduras (BCH); and, d) The President of the National Commission of Banks and Insurance (CNBS).

• 3)

  The Tax Administration and the Customs Administration must participate in the Advisory Council with voice but without vote and annually shall serve as Secretary of the Council on a rotating basis by designation thereof. The respective alternate shall be the person designated by the Tax Administration or the Customs Administration within its organizational structure;

• 4)

  The members of the Advisory Council perform their functions under their exclusive responsibility in accordance with this Code and the Law and act with absolute independence of judgment, as well as free from any interest other than that of the Tax Administration and the Customs Administration;

• 5)

  The monthly ordinary sessions and extraordinary sessions of the Council shall be convened by its President. The Council meets validly with the attendance of at least three (3) of its members, among whom must be the President or his designee and with the mandatory presence of the Tax Administration and the Customs Administration or their representative. Its recommendations shall be adopted by majority of those present. No more than one session may be held on the same day; and,

• 6)

  The Advisory Council may, when it deems necessary, invite occasional advisors to its sessions to participate with voice but without vote in the discussion of specific matters, without prejudice to submitting their opinions in writing.

DEFINITION OF THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION.

• 1)

  The Tax Administration and the Customs Administration are under the charge of an Executive Director, appointed by the President of the Republic, through the Secretary of State in the Ministry of Finance (SEFIN), with Ministerial rank. The Director of each of them is the highest authority and the legal representative of the institution, responsible for defining and executing policies, strategies, plans and administrative and operational programs, goals and results, in accordance with the economic, fiscal and tax policy of the State. Both administrations must have their respective Executive Subdirector who substitutes for him/her in his/her absence;

• 2)

  The relationships between the Tax Administration and the Customs Administration and their respective personnel are governed by the labor regime that is approved for that purpose by the highest authority of each institution. Said regime must contain as minimum standards the subsystems for adequate administration of human talent; and,

• 3)

  The remuneration of the personnel of both administrations must correspond to the responsibility of the positions and the positional structure within each institution, without being subject to any type of restrictions. The personnel must be technical and highly qualified, subject to trust certification tests.

POWERS OF THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION.

• 1)

  To comply with and enforce the provisions of the Constitution of the Republic, International Agreements in tax or customs matters, the Tax Code, the Laws and other norms of a tax or customs character, as applicable;

• 2)

  To supervise compliance with tax and customs obligations, in order to combat infractions and tax crimes;

• 3)

  To create plans and programs of administrative management in accordance with the guidelines of economic policy and annual collection goals agreed upon;

• 4)

  To promote tax and customs culture in the population through assistance, guidance and educational programs in their field;

• 5)

  To establish and maintain relationships with institutions, national and international organizations and cooperation agencies linked to the Tax Administration and the Customs Administration, in accordance with what is established in this Code;

• 6)

  To administer the tax system and the customs system, exercising all the powers and faculties established in the Tax Code, Central American Uniform Customs Code (CAUCA) and its regulations, laws and regulations related to tax and customs matters, as applicable;

• 7)

  To manage the collection of taxes and levies established in tax and customs laws;

• 8)

  To recover tax and customs debts;

• 9)

  To require from third parties, whether public or private, the information necessary for the performance of investigative, control and supervision functions in accordance with this Tax Code, Central American Uniform Customs Code (CAUCA) and the Law;

• 10)

  To designate collection or withholding agents for any tax in accordance with this Code;

• 11)

  To impose sanctions as provided in the Tax Code and in the laws in force;

• 12)

  To approve Agreements for the efficient application of provisions in tax and customs matters, in accordance with this Code, Central American Uniform Customs Code (CAUCA) and the Law;

• 13)

  To resolve proceedings initiated ex officio or at the request of a party within the scope of its competencies;

• 14)

  To establish and operate agile and simplified procedures to facilitate voluntary compliance with tax and customs obligations; as well as to implement and operate expedited processing of tax or customs operations, formal or substantive; and,

• 15)

  Any other power or authority established by Law, within their respective competencies.

POWERS OF THE EXECUTIVE DIRECTORATES OF THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION. The Executive Directorates of the Tax Administration and the Customs Administration, within their respective scope of competencies, have the following powers:

• 1)

  To exercise legal representation and general administration, direction and management of the institution;

• 2)

  To approve institutional policies;

• 3)

  To approve the Institutional Strategic Plan;

• 4)

  To approve the Annual and Multi-Year Operational Plan, financial statements and institutional report for presentation to the corresponding instances and to supervise their execution;

• 5)

  To delegate functions to competent officials;

• 6)

  To approve agreements containing the internal norms of the institution, including those instruments, norms and manuals that regulate organizational and functional structure, labor regime, remuneration and contracting; as well as those related to the implementation of regulations in tax and customs matters, as applicable;

• 7)

  To select, appoint, hire, evaluate, promote and remove personnel in accordance with applicable legal norms;

• 8)

  To prepare the annual budget within the budget ceiling assigned and to submit it to the Secretary of State in the Ministry of Finance (SEFIN) for its incorporation in the General Budget of Revenue and Expenditure of the Republic;

• 9)

  To resolve Remedies of Reconsideration, according to the Tax Code or the Central American Uniform Customs Code (CAUCA), as applicable;

• 10)

  To execute acts and contracts that are within its competence;

• 11)

  To verify compliance with tax or customs obligations, in order to prevent fraud and smuggling;

• 12)

  To prepare plans and programs of administrative management in accordance with the guidelines of economic policy and annual collection goals agreed upon; and,

• 13)

  The other functions conferred upon it by this Code and the applicable laws.

REQUIREMENTS FOR HOLDING THE EXECUTIVE DIRECTORATES OF THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION.

• 1)

  To be Honduran by birth, over thirty (30) years old;

• 2)

  To be in the enjoyment and exercise of their civil and political rights;

• 3)

  To be a university professional of recognized capacity and fitness;

• 4)

  Not to have debts or accounts pending with the State;

• 5)

  Not to have kinship within the fourth degree of consanguinity or second degree of affinity nor to be spouse of the President of the Republic, Magistrates of the Supreme Court of Justice, Magistrates of the Superior Court of Accounts, Attorney General, Deputy Attorney General, Director of Prosecutors and Special Prosecutors of the Public Ministry, Attorney General and Deputy Attorney General of the Republic; National Commissioner of Human Rights; Secretaries or Undersecretaries of State; President and Directors of the Central Bank of Honduras; and Commissioners of the National Commission of Banks and Insurance; and,

• 6)

  Not to be holding another paid public office, with the exception of university teaching, research and health. The performance of the office of Executive Directorate is of an exclusive character and has inherent jurisdiction.

PATRIMONY OF THE TAX ADMINISTRATION AND THE CUSTOMS ADMINISTRATION.

• 1)

  Budget allocations approved by the National Congress, up to two point five percent (2.5%) of the total collection of internal taxes for the tax administration and up to two point five percent (2.5%) of the total collection of customs taxes for the customs administration, both from the immediately preceding fiscal period;

• 2)

  Own revenues, such as those from the provision of services of any kind. As well as resources from auctions or sales, from data transport services and others, in the case of the Customs Administration;

• 3)

  Inheritances, legacies and donations from other public or private sources, national or foreign and those from international cooperation programs; and,

• 4)

  Transfers and assets transferred to them agreed upon by the Secretary of State in the Ministry of Finance (SEFIN).

TAX AND CUSTOMS SCHOOLS.

• 1)

  The Tax School and the Customs School are hereby created, as departments of the Tax Administration and the Customs Administration respectively, with functional and technical specialization, which are responsible for designing, implementing, socializing and executing tax and customs training and education plans and programs, at the national level, at all levels of formal, informal and non-formal education, with coverage to all persons and social and economic sectors of the Republic;

• 2)

  The Secretary of State in the Ministry of Education and the Council of Higher Education, in coordination with the Secretary of State in the Ministry of Finance (SEFIN), the Tax Administration and the Customs Administration, must include in the national curriculum the content of tax and customs matters in study plans and programs; and,

• 3)

  The Tax Administration and the Customs Administration are empowered to provide for everything related to the structure, budget, methodologies and other functions of the Tax School and the Customs School, respectively, as well as any other requirement that may in the future contribute to the development of these schools.

PENDING FILES. Files related to taxes that are being processed through administrative or judicial channels, as of the date this Code enters into force, shall be concluded in accordance with the laws on the basis of which they were initiated.

TRANSITION TO THE TAX-CUSTOMS SUPERINTENDENCY. Until the Tax-Customs Superintendency referred to in this Code comes into operation, the Secretary of State in the Ministry of Finance (SEFIN) is responsible for resolving Appeals and Review Remedies.

READJUSTMENTS AND RESTRUCTURING. 1) The Tax Administration, the Customs Administration and the Secretary of State in the Ministry of Finance (SEFIN) are authorized to make adjustments to their procedures, systems, records and other applications, so that they comply with the provisions of this Code. The President of the Republic, in Council of Secretaries of State, may allocate the budget items and resources necessary to meet this objective; and, 2) The Executive Branch through the Secretary of State in the Ministry of Finance (SEFIN) with the support of the Tax Administration and the Customs Administration, through all existing and available means, must inform, communicate, instruct and train on the content and scope of this Code, and must be assisted by business associations, professional and business organizations, the Social Sector of the Economy, Chambers of Commerce and professional colleges, for such purposes.

COURTS IN TAX AND CUSTOMS MATTERS.

• 1)

  The Judicial Branch must adopt the necessary measures for the technical, specialized and budgetary strengthening of the Courts of the Administrative Contentious Jurisdiction, in tax and customs matters;

• 2)

  For a non-renewable period of five (5) years, counted from the entry into force of this Code, for the admission of a complaint before the courts of the Administrative Contentious Jurisdiction in tax and customs matters, it shall be required that the plaintiff provide sufficient guaranty before the Judge in favor of the State in accordance with the following table:

  • a)

    Small taxpayers: five percent (5%) of the amount of the complaint;

  • b)

    Medium taxpayers: ten percent (10%) of the amount of the complaint; and, c) Large taxpayers: twenty percent (20%) of the amount of the complaint.

• 3)

  After the five (5) year period established in this Article has elapsed, judges of the Courts of the Administrative Contentious Jurisdiction may not require any guaranty to admit complaints in tax or customs matters.

CONSOLIDATED TEXTS OF TAX OR CUSTOMS LAWS. The Executive Branch, through the Secretary of State in the Ministry of Finance (SEFIN), with the assistance of the Tax Administration and the Customs Administration, within a period of one (1) year counted from the entry into force of this Code, must present to the National Congress new draft Laws of the Income Tax, Sales Tax Law and a bill that consolidates the laws of the other taxes in force, as well as the corresponding anti-evasion measures, which must be consistent with the objectives and principles contained in this Code.

MONOTAX OR SINGLE TAX. The Executive Branch, through the Secretary of State in the Ministry of Finance (SEFIN), with the assistance of the Tax Administration and the Customs Administration and in consultation with the sectors involved, within a period of one (1) year counted from the entry into force of this Code, must present to the National Congress a bill that develops the Monotax or Single Tax, created in this Code.

AGREEMENTS TO AVOID DOUBLE TAXATION. The Executive Branch is empowered, through the Secretary of State in the Ministry of Finance (SEFIN), with the assistance of the Tax Administration and the Customs Administration, to subscribe to Agreements with the State or other States to Avoid Double Taxation in the Matter of Income Tax and Patrimony, following the procedure regulated in the Constitution of the Republic.

REGULATION OF ELECTRONIC MAILBOX. The Secretary of State in the Ministry of Finance (SEFIN) with the assistance of the Tax Administration and the Customs Administration, and based on Article 22 numeral 11) of the General Law of Public Administration, shall propose for approval the draft Regulation that will govern everything concerning the electronic mailbox, for approval by the President of the Republic in Council of Secretaries of State.

TRANSITIONAL PROVISIONS. 1) The Ministry of Finance (SEFIN) is authorized to issue resolutions from years prior to the publication date of this Decree when the beneficiaries of the resolutions have complied with the requirements established in the applicable legal framework, including the provisions in the preceding paragraph; likewise, the Ministry of Finance (SEFIN) is authorized to issue the necessary instructions for the application of Article 28 of Decree No. 113-2011 dated June 24, 2011 published in the Official Gazette "La Gaceta" on July 8, 2011, and the provisions contained in the preceding paragraphs. 2) The Ministry of Finance (SEFIN) is ordered to issue the pertinent regulatory provisions to Article 57 of Decree No. 17-2010, reformed by this Decree, within a period of three (3) months counted from the effective date of this Decree, which must include the purchase receipt.

TAX REGULARIZATION.- The benefit of amnesty and tax and customs regularization is granted, which begins with the effectiveness of this Decree and expires on June 30, 2017, in accordance with the conditions contained in the following paragraphs: 1) To file the determinative, informative, and customs declarations that have been omitted and that the taxpayer has been obligated to file and pay, as applicable, as of October 31, 2016, concerning tax or customs obligations related to non-prescribed tax periods; to make corrections to the tax or customs declarations that the taxpayer had filed with error and that it has been obligated to file; and, to pay when applicable the taxes related to the declarations to which the scenarios in this paragraph refer, without fines, surcharges, and interest. In the case of Official Assessments or Additional Tax determined ex officio to the declarations filed by taxpayers as of October 31, 2016, and that have not become final, they may pay the taxes corresponding to the total or the part that has been accepted by the taxpayers, without fines, interest, or surcharges. The taxpayer must pay the tax and customs debt, free of interest, fines, and surcharges, that has become final and is pending payment as of October 31, 2016, whether or not covered by payment plans. This amnesty benefit also applies to taxpayers who have filed their determinative or informative declarations, up to October 31, 2016, regardless of the period, in an untimely manner and whose tax or customs debt is constituted by fines, surcharges, and interest as accessory penalty and who do not owe the tax assessed in the declaration that originated it. The benefit described in numeral 1) above does not apply to obligations arising from the Sales Tax. 2) Taxpayers who are not in default and who have no omissions in the determinative or informative declarations to the Tax Authority, in the tax periods comprised between the years 2012 and up to October 31, 2016, regardless of whether or not they have been subject to tax or customs audits, notified or not notified, as well as the status of the audit process; who maintain administrative or judicial resources regarding obligations not voluntarily accepted and that are not final, liquid, and enforceable; during any of the non-prescribed tax periods corresponding to the years 2012, 2013, 2014, 2015, and up to October 31, 2016, may avail themselves of the benefit of Tax and Customs Update for final settlement or definitive seal for the tax periods described above, making a single payment of one point five percent (1.5%) on the year that obtained the highest gross revenues at the close of its annual tax period, according to the Sworn Declarations of Income Tax for said years. Said petition must be filed before the corresponding Authority, who must resolve it within a maximum period of fifteen (15) business days, admitting or denying the petition; in case the authority does not resolve the petition within the fifteen (15) business days mentioned above, the same shall be deemed admitted and the petitioner must proceed to pay the one point five percent (1.5%) as indicated in the preceding paragraph. In case the amnesty petition is denied by the corresponding authority, the petitioner may use the remedy of appeal as established in Articles 176 and 177 of this Tax Code. Those who avail themselves of the benefit contained in this Article by making the single payment of one point five percent (1.5%) shall not be subject to subsequent audit in the tax periods mentioned above, for which the Tax and Customs Administration must issue, without further procedure, the final settlement or definitive seal. The Tax Amnesty contained in this Article applies equally to payment agreements or arrangements subscribed and paid by June 30, 2017, between the Tax Administration and the Customs Administration, with the taxpayers. This amnesty is applicable to natural and legal persons.

REPEALS. The Following Legal Provisions are Repealed:

• 1)

  Decree No. 22-97 dated April 8, 1997 containing the TAX CODE, published in the Official Gazette "La Gaceta" on May 30, 1997, and its reforms;

• 2)

  Subparagraph d) of Article 61; and Article 132 of the LAW OF ADMINISTRATIVE PROCEDURE, contained in Decree No. 152-87, dated September 28, 1987;

• 3)

  Subparagraph d) of Article 47; and Article 104, of the LAW OF ADMINISTRATIVE CONTENTIOUS JURISDICTION, contained in Decree No. 189-87, dated November 20, 1987;

• 4)

  Article 35 of the LAW OF FINANCIAL EQUILIBRIUM AND SOCIAL PROTECTION, contained in Decree No. 194-2002 dated May 15, 2002;

• 5)

  Article 20 of Decree 113-2011 containing the LAW OF EFFICIENCY IN PUBLIC REVENUES AND SPENDING of June 24, 2011; and,

• 6)

  Any other Decrees, Laws, and Regulations that oppose the provisions of this Code.

EFFECTIVE DATE. This Code must be published in the Official Gazette "La Gaceta" and must become effective on January 1, Two Thousand Seventeen (2017). Given in the city of Tegucigalpa, Municipality of the Central District, in the Session Hall of the National Congress, on the Fifteenth day of the month of December of Two Thousand Sixteen. ANTONIO CÉSAR RIVERA CALLEJAS PRESIDENT MARIO ALONSO PÉREZ LÓPEZ SECRETARY JOSÉ TOMÁS ZAMBRANO MOLINA SECRETARY To the Executive Branch Therefore: Let it be executed. Tegucigalpa, M.D.C., December 28, 2016. JUAN ORLANDO HERNÁNDEZ ALVARADO PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE MINISTRY OF FINANCE. ROCÍO IZABEL TÁBORA