Agreement 0719-2011 Regulation Articles 43 and 44 (Tourism Tax)

OBJECT: The purpose of this Regulation is to develop, regulate, and clearly define the services that are subject to the TOURISM SERVICES TAX of four percent (4%), established in Article 43 of the Law for the Promotion of Production, Competitiveness, and Support for Human Development, contained in Decree No. 131-98 of April 30, 1998.

SCOPE OF APPLICATION: Hotels, vehicle rental companies, and receptive tourism operating agencies shall be subject to the application of this Regulation.

DEFINITIONS: For purposes of this Regulation, the following definitions are adopted:

• a)

  Receptive Tourism Operators: Individual or corporate merchant whose exclusive activity or business consists of creating and marketing tourist trips or tourism packages, including trip preparation, reservations, and other intermediation and operation activities between travelers and tourism service providers that are specifically oriented toward attracting tourists to Honduras and within Honduras.

• b)

  Tourism Package: A set of services that includes accommodation and a combination of other elements, such as transfers, meals, local excursions, etc. It may or may not include transportation to the destination and is sold at a global price and is acquired in a single purchase transaction.

• c)

  Receptive Tourism: The tourism activity exercised from the point of view of the destination, where the tourism company is established and where it provides its services regardless of the tourist's place of origin. It is the activity that occurs in a country when visitors from other nations arrive there.

• d)

  Tourism Service: Service provided by companies, institutions, and organizations related to tourism and travel to clients, consumers, or users.

• e)

  Tourism Activity: A set of operations that directly or indirectly relate to tourism or can influence it, provided that they involve the provision of services to a tourist whether carried out at the tourist's place of origin or place of destination. By extension, tourism activity is understood not only as any action developed by tourism agents but also by the tourist themselves, with the objective of satisfying motivations or needs and carrying out the actions planned during leisure vacation time (adventure tourism, cultural tourism, river tourism, among others).

• f)

  Adventure Sports: Those sports in which the person practicing them runs more risk or danger than in traditional sports. Among these, the following stand out: hot air balloon rides, individual canoe descent (kayak), collective raft descent through river rapids (rafting), movement in water on a table similar to a surfboard, equipped with a sail (windsurfing), descent by rope used on vertical surfaces (rappel), skydiving, hiking, mountain walks and organized nature walks in stages (trekking), among others.

• g)

  Cultural Tourism: Tourism activity that consists of making trips, visits, and stays to geographic locations to learn about the historical, artistic, cultural, and anthropological facts that form part of humanity's cultural heritage, through historical artistic monuments, museums, cultural events and performances, historical-monumental routes and itineraries, among others.

• h)

  Hotels: Individual or corporate merchant whose exclusive activity or business consists of providing accommodation in a public and paid manner, in which complementary services may be provided, depending on the type of accommodation in question, on the basis of a daily, weekly, or monthly rate, having a minimum of five rooms.

• i)

  Pensions: A type of small establishment that is normally run in a family manner, with a minimum capacity of 3 rooms, and that offers food service on a full board or half board plan, at a single global rate.

• j)

  Guest Houses: Provide limited accommodation to visitors whose economic capacity is minimal. They offer a daily rate of US$10.00 or its equivalent in lempiras.

• k)

  Budget Hotels: Offer guests a rate of US$15.00 for daily accommodation in their facilities, or its equivalent in lempiras.

• l)

  Rental: A contract between two parties that mutually obligate themselves, one to grant the use of a thing, or to perform a work or provide a service, and the other to pay for this use, work, or service, a determined price.

• m)

  Public Passenger Service: A service on a route with suitable vehicles, with published schedules, itineraries, and fares.

• n)

  Land Transportation Contract Service: A restricted public service for the transportation of persons directly related to the activity of the hiring entity, with a schedule, itinerary, and other conditions established in the respective contract.

PAYMENT OF FOUR PERCENT (4%) TOURISM SERVICES TAX: This four percent (4%) Tourism Services Tax shall be paid:

• 1)

  On the price of daily accommodation in hotels;

• 2)

  On the price of vehicle rentals for tourism purposes; and, 3. On the price of services provided by receptive tourism operating agencies.

INTERMEDIATION CASES: For the purpose of defining services subject to the FOUR PERCENT (4%) TOURISM SERVICES TAX for services provided by receptive tourism operating agencies, intermediation is considered in the following cases: a) Entrance to museums b) Entrance to archaeological parks c) Diving and snorkeling activities d) Tourist recreational, adventure, and other activities; and, e) Any other activity related to the definition of receptive tourism.

EXCLUDED VALUES FOR DETERMINING THE TAX BASE: The following are excluded from the tax base for receptive tourism operators:

• 1)

  The values of daily hotel accommodation services;

• 2)

  Vehicle rental for tourism purposes that has provided the service and the four percent (4%) TOURISM SERVICES TAX has already been paid.

EXCLUDED CASES: The following are also excluded:

• 1)

  Motor vehicles authorized for the provision of public passenger service;

• 2)

  Motor vehicles authorized for the provision of contracted service.

RESPONSIBLE PARTIES FOR WITHHOLDING AND DEPOSITING: Hotel companies, vehicle rental companies for tourism purposes, and receptive tourism operating agencies shall be responsible for withholding and depositing this tax in authorized banking institutions for such purpose. The obligation to withhold and deposit what corresponds to the FOUR PERCENT (4%) TOURISM SERVICES TAX is independent of whether the provision of the service is provided by an operator duly registered or not in the National Tourism Chamber (CANATURH) or in the Association of Receptive Tourism Operators of Honduras (OPTURH) or in any other similar association.

PAYMENT OF THE FOUR PERCENT (4%) TOURISM SERVICES TAX: The Tax shall be paid to:

• 1)

  The General Treasury of the Republic or;

• 2)

  Authorized Banking Institutions.

PAYMENT DEADLINE FOR TOURISM SERVICES TAX: The obligation to pay this tax shall be within ten (10) days of the following month in which the tax became due.

EXCEPTIONS TO THE PAYMENT OF TOURISM SERVICES TAX: The following establishments are exempt from the payment of this Tax: Pensions, guest houses, and budget hotels for low-income individuals, as classified by the Honduran Tourism Institute.

ADMINISTRATION AND CONTROL: The administration and control of the four percent (4%) TOURISM SERVICES TAX shall be exercised by the State Secretary in the Ministry of Finance through the Executive Directorate of Income (DEI).

AMOUNTS COLLECTED: The amounts collected by virtue of the four percent (4%) TOURISM SERVICES TAX, once paid into the General Treasury of the Republic, must be incorporated into the budget of the Honduran Tourism Institute, following verification of the deposit by the General Directorate of Budget.

PENALTIES: The responsible parties described in this Regulation who fail to pay the withheld tax referred to in Articles 4 and 5 of this Regulation shall be subject to the provisions of Article 121 of the Tax Code.

PROVISION: Matters not provided for in this Regulation shall be governed by the legal tax powers of the Executive Directorate of Income according to Article 12 of this Regulation and Article 44 of the Law for the Promotion of Production, Competitiveness, and Support for Human Development.

EFFECTIVE DATE: This Regulation shall take effect as of its publication in the Official Gazette "LA GACETA". SECOND: This Agreement shall be published in the Official Gazette "La Gaceta". PORFIRIO LOBO SOSA President WILLIAM CHONG WONG Secretary of State in the Office of Finance NELLY JEREZ CABALLERO Secretary of State in the Office of Tourism Secretariat of Finance AGREEMENT No. 0811 Tegucigalpa, M. D. C. May 16, 2011. THE CONSTITUTIONAL PRESIDENT OF THE REPUBLIC CONSIDERING: That the National Congress through Legislative Decree No. 264-2010 dated December 2, 2010, approved the General Budget of Income and Expenditures of the Republic and of the Decentralized Institutions for the Fiscal Year 2011, as well as its General Provisions. CONSIDERING: That in the General Budget of Income and Expenditures of the Republic for Fiscal Year 2011 in Institution 120 Secretariat of Public Works, Transportation and Housing, and specifically in Program 11: Study, Design and Construction of Roads, a budgetary allocation is allocated in the amount of L.25,000,000.00 (TWENTY-FIVE MILLION LEMPIRAS EXACTLY) for the Reconstruction and Paving of the Road of the Mancommunity South of the Department of Lempira. CONSIDERING: That the National Congress through Official Letter S/N dated May 12, 2011, authorizes the Secretariat of Finance to use the resources of Decree 264-2010 in favor of the General Directorate of Roads in Administrative Management 005, Executing Unit 031, Project 011 Reconstruction and Paving of the Road of the Mancommunity of Lempira in the amount of L.35,000,000.00 (THIRTY-FIVE MILLION LEMPIRAS EXACTLY), financing it from the resources allocated through Article 117 of the General Provisions of the General Budget of Income and Expenditures of the Republic, Fiscal Year 2011 and which are budgeted in the Secretariat of Finance. CONSIDERING: That Article 37 Numeral 2 of the Organic Law of the Budget establishes that it is the responsibility of the President of the Republic to authorize the transfers of budgetary funds between Secretariats of State, Decentralized Institutions and between both. THEREFORE: In application of what is established in Articles 119 and 245 Numerals 1) and 11) of the Constitution of the Republic; 11, 116 of the General Law of Public Administration; 37 numeral 2) of the Organic Law of the Budget and 23 of the Technical Norms of the Budget Subsystem. IT IS AGREED:

Expand in the General Budget of Income and Expenditures of the Republic, Fiscal Year 2011, the following budgetary structure: INSTITUTION 120 SECRETARIAT OF PUBLIC WORKS, TRANSPORTATION AND HOUSING PROGRAM 11 STUDY, DESIGN AND CONSTRUCTION OF ROADS SUB-PROGRAM 00 PROJECT 44 RECONSTRUCTION AND PAVING OF THE ROAD OF THE MANCOMMUNITY SOUTH OF THE DEPARTMENT OF LEMPIRA ACTIVITY/WORK 001 RECONSTRUCTION AND PAVING OF THE ROAD OF THE MANCOMMUNITY SOUTH OF THE DEPARTMENT OF LEMPIRA ADMINISTRATIVE MANAGEMENT: 05 UAP of Various Financial Organisms-SOPTRAVI EXECUTING UNIT: 031 Management Center with Other Financing Sources D.G.C. 40000 CAPITALIZABLE GOODS 47000 CONSTRUCTIONS 47210 11 001 Constructions and Improvements of Goods in Public Domain L.35,000,000.00 TOTAL EXPANSION L.35,000,000.00

The aforementioned expansion shall be financed from the following budgetary structure: INSTITUTION 100 SECRETARIAT OF FINANCE PROGRAM 99 TRANSFERS TO THE PUBLIC, PRIVATE AND EXTERNAL SECTOR SUB-PROGRAM 00 ACTIVITY/WORK 001 FINANCIAL SUPPORT TO THE PUBLIC, PRIVATE AND EXTERNAL SECTOR ADMINISTRATIVE MANAGEMENT: 001 Central Management EXECUTING UNIT: 001 Secretariat of State 50000 TRANSFERS AND DONATIONS 51000 TRANSFERS AND DONATIONS 51230 11 001 Other Expenditures 4811 Social Programs and Projects L.35,000,000.00 TOTAL FINANCING L.35,000,000.00

This Executive Agreement shall take effect as of the date of its approval and shall be published in the Official Gazette "La Gaceta". Given in Presidential House, Tegucigalpa, municipality of the Central District, on the sixteenth day of the month of May of two thousand eleven. COMMUNICATE: PORFIRIO LOBO SOSA PRESIDENT OF THE REPUBLIC WILLIAM CHONG WONG SECRETARY OF STATE IN THE OFFICE OF FINANCE