Agreement 1775-2011 Regulation of the Law on Public Security

OBJECT. This Regulation develops the application of the norms contained in Decree No. 105-2011, Population Security Law published in the Official Gazette "La Gaceta" on July 8, 2011, amended by Decree No. 166-2011, published in the Official Gazette "La Gaceta" on September 14, 2011.

EFFECTIVENESS. Pursuant to the fact that the Population Security Law has a temporary effectiveness for a period of five (5) years, counted from July 8, 2011, this Regulation shall have effectiveness for the same period.

EXECUTION. The income from special contributions created by the Population Security Law shall be remitted to the Secretariat of State in the Office of Finance, through the General Treasury of the Republic.

SPECIAL CONTRIBUTIONS FOR POPULATION SECURITY. Special Contributions for Population Security constitute those contributions that in accordance with the Law shall be paid by taxable subjects for the purposes provided. The following are special contributions for population security: 1. Special Contributions of the Financial System. 2. Special Contribution of Mobile Telephony. 3. Special Contribution of the Mining Sector. 4. Special Contribution of the Food and Beverage Sector. 5. Special Contribution of Casinos and Slot Machines. 6. Special Contribution of the Cooperative Sector. TITLE II SPECIAL CONTRIBUTIONS OF THE FINANCIAL SYSTEM CHAPTER I TAX ON OPERATIONS IN FINANCIAL INSTITUTIONS

OBJECT. The special contribution of the Financial System taxes the operations described in this article carried out in national or foreign currency in the institutions of the national banking system, the National Agricultural Development Bank (BANADESA), Financial Societies, Representative Offices, provided that they are supervised by the National Commission of Banks and Insurance (CNBS), hereinafter identified for the purposes of the Law and this regulation as Financial Institutions. Taxable Financial Transactions:

• a)

  Debits (withdrawals) from demand deposits, in checking accounts, carried out by natural or legal persons in the aforementioned Financial Institutions. In the case that the balance of the checking account does not cover the value of the special contribution, the financial institution shall apply its internal policy in that regard, without in any case failing to collect the special contribution;

• b)

  Debits (withdrawals) from deposits, in savings accounts carried out by legal persons in the Financial Institutions;

• c)

  Loan operations granted by the Financial Institutions which shall be assumed by the lending Financial Entity. In the case of refinancing, restructuring and restructurings of loans, the contribution shall only be applied to the net amount disbursed and not for payments thereof received by the Financial Institution. The National Commission of Banks and Insurance (CNBS) must supervise that this Contribution is not transferred to the borrower, which shall be done through review of computer systems;

• d)

  Issuance of cashier's checks, certified checks, traveler's checks or other similar financial instruments existing or to be created, in the Financial Institutions without using the accounts indicated in subsections a) or b) above;

• e)

  Payments or transfers in favor of third parties on account of principals or clients charged against money collected or raised in their name, carried out by Financial Institutions, without using the accounts indicated in subsection a) or b) above, whatever the denomination given to these operations, the mechanisms used to carry them out, even through cash movements, and their legal documentation;

• f)

  Transfers or remittances of money, to the exterior or interior of the country, carried out through a Financial Institution, without using the accounts indicated in subsections a) or b) above; and, g. An annual charge shall be made to each principal credit card that is in active status in accordance with the tariff contained in numeral 3 of Article 10 amended of the Population Security Law (amendment contained in Decree 166-2011). When it comes to Financial Transactions in foreign currency, a purchase exchange rate fixed by the Central Bank of Honduras (BCH) at the date of the transaction shall be used.

TAXABLE EVENT. For these purposes it shall be understood as the actual act that gives rise to the birth of the tax obligation, that is, the realization of financial transactions, which occurs in the following cases:

• a)

  At the moment of debit or withdrawal from the accounts indicated in subsections a) and b) of the preceding Article;

• b)

  At the moment of making the payment for the instruments referred to in subsection d) of the preceding Article;

• c)

  When disbursements of loans granted by Financial Institutions are made, except for billing of charges to credit cards, including extra financing charges;

• d)

  At the moment of payment or transfer referred to in subsection e) of the preceding Article;

• e)

  At the moment of ordering the transfer or remittance of money referred to in subsection f) of the preceding Article;

• f)

  At the moment of renewal of principal membership of the credit cards referred to in subsection g) of the preceding Article.

TAX BASE. It is composed of the value of the transaction carried out in the Financial Institution.

TAXABLE SUBJECTS.

• a)

  Natural and legal persons who are owners of demand deposits or checking accounts, which are constituted individually, jointly or in solidarity;

• b)

  Legal persons, holders or owners of savings deposits, whether constituted individually, jointly or in solidarity;

• c)

  Natural or legal persons who acquire cashier's checks, certified checks, traveler's checks or other similar financial instruments existing or to be created; and that are not originated through a debit to a checking or savings account of a legal person;

• d)

  Natural or legal persons who order payments or transfers in favor of third parties charged against money collected or raised in their name by Financial Institutions;

• e)

  Natural or legal persons who carry out transfers or remittances of money to the interior or exterior of the country;

• f)

  Natural or legal persons who are holders of credit cards at the time of renewal of their annual membership;

• g)

  Financial Institutions that grant loans.

EXEMPTIONS. The following are exempt from this Contribution:

• 1)

  Accounts maintained by all dependencies and Institutions of the Public Sector in Financial Institutions;

• 2)

  Trust accounts created by the Public Administration;

• 3)

  Loan operations granted by the National Agricultural Development Bank (BANADESA) to the agricultural sector for amounts equal to or less than Six Hundred Thousand Lempiras (L.600,000.00), being prohibited under the responsibility of the lending entity, the fractionation of loans, in order to evade the contribution;

• 4)

  On the condition of reciprocity duly accredited by the Secretariat of State in the Office of Foreign Relations, debits (withdrawals) from accounts in Financial Institutions and renewal of credit cards, corresponding to diplomatic missions, consular, international organizations and foreign diplomatic personnel accredited to the State of Honduras, as well as personnel of international organizations that assimilate diplomatic ranks in accordance with International Treaties or Conventions of which Honduras is a party;

• 5)

  Debits (withdrawals) in accounts enabled in Financial Institutions by Cooperation Agencies and Executing Institutions dependent on Foreign Governments that are exempt by virtue of International Agreements accredited by the Secretariat of State in the Office of Foreign Relations;

• 6)

  Accounts used by the State for the payment of legal benefits and/or bonuses created by legal norm;

• 7)

  Debits (withdrawals) for banking service charges from accounts established in subsections a) and b) of Article 5 of the Law;

• 8)

  Debits (withdrawals) corresponding to reversals prior to cancellation of documents previously credited or debited to account;

• 9)

  Debits (withdrawals) in accounts that Institutions governed by the Law of Institutions of the Financial System and the Securities Market Law maintain between themselves and with the Central Bank of Honduras, for purposes of clearing or monetary, credit and exchange policy;

• 10)

  Debits (withdrawals) in accounts used, exclusively, by companies that manage ATM networks originated in fund movements carried out through such networks as well as transfers that have origin or destination in the mentioned accounts intended for this sole purpose;

• 11)

  Debits (withdrawals) in accounts used, exclusively, by operators of debit and/or credit cards;

• 12)

  Remittances from abroad and the companies that manage them with respect to remittances received;

• 13)

  Transfers to the exterior and interior of the country carried out by natural persons up to an amount equal to or less than Twenty Thousand Lempiras (L.20,000.00);

• 14)

  Accounts of Boards or Water Councils with legal personality duly accredited by the Secretariat of State in the Office of Interior and Population;

• 15)

  Electronic transfers or by check between accounts of the same natural or legal person, within the country; whether in the same financial institution or another institution. When it is by check, it shall be applied and recognized in accordance with the policies and procedures applied by the financial institution for that purpose; policies and procedures that may be reviewed and adjusted by the Executive Department of Income;

• 16)

  Religious institutions accredited by the Secretariat of State in the Office of Interior and Population;

• 17)

  Humanitarian and Development Organizations approved by the Secretariat of State in the Office of Interior and Population, prior qualification by the Secretariat of State in the Office of Finance through the General Department of Exemptions and Customs Privileges;

• 18)

  Withdrawals and transfers for the purchase and sale of foreign currency;

• 19)

  Loan restructurings that do not imply payments or fund disbursements;

• 20)

  Financial transactions carried out by Private Financial Development Organizations (OPDF) supervised by the National Commission of Banks and Insurance (CNBS);

• 21)

  Financial transactions carried out by Social Security Institutes duly accredited by the National Commission of Banks and Insurance (CNBS);

• 22)

  Savings and checking accounts of legal persons whose average monthly balance of the previous month is less than one hundred twenty thousand lempiras (L.120,000.00); and the same basis of one hundred twenty thousand lempiras (L.120,000.00) applies to checking accounts of natural persons;

• 23)

  Rediscount operations that financial institutions carry out through RAP and BANHPROVI even when these are temporarily disbursed with their own funds, which shall be subject to the corresponding verification by the National Commission of Banks and Insurance (CNBS) and the Executive Department of Income (DEI);

• 24)

  Financial operations that are generated as a result of the sale or marketing of products regulated by the State, for example fuels;

• 25)

  Any payment, transfer, withdrawal or deposit for purposes of taxes or fees, carried out in the same banking institution where the payment, transfer, withdrawal or deposit originates and is made. To enjoy the benefit contemplated in numerals 12, 23 and other applicable numerals, a special bank account shall be opened for this purpose, which must be registered in the Executive Department of Income (DEI), the agency that shall issue the respective certificate.

TARIFF. The tariff applied to the Special Contribution for Financial Transactions established in Article 5 of the Law shall be as follows: 1. For subsections a), b), d) and f) of Article 5 the tariff is Two Lempiras (L.2.00) per thousand; or for a fraction of a thousand; and, 2. For subsection c) the tariff is one lempira with fifty cents (L.1.50) per thousand or a fraction thereof; and, 3. For subsection g) the tariff is applied based on the credit line brackets according to the following table: Credit Line From Lempiras | Credit Line To Lempiras | Tariff Lempiras 40,000.01 | 50,000.00 | 500 50,000.01 | 100,000.00 | 600 100,000.01 | 200,000.00 | 700 200,000.01 | 500,000.00 | 800 500,000.01 | 1,000,000.00 | 900 1,000,000.01 | And above | 1,000

WITHHOLDING OR COLLECTION AGENTS. Financial Institutions shall be the collection agents for the Special Contribution for each taxable transaction, and must report the details of withholdings and collections made in the means, forms and periods that the Executive Revenue Directorate (DEI) determines.

DECLARATION AND LIQUIDATION. The Declaration and Liquidation must be made in the forms and conditions established by the Executive Revenue Directorate (DEI). Authorized financial institutions must remit the contribution to the General Treasury of the Republic.

PAYMENT. The amounts withheld or collected through Financial Institutions must be remitted to the Treasury according to the following details: a) Amount withheld or collected between day one (01) and day fifteen (15) of each month must be credited no later than day twenty (20) of the same month; and, b) Amount withheld or collected between day sixteen (16) and the last day of each month must be credited no later than day five (05) of the following month. If the expiration of the credits falls on a non-business day, it shall be extended to the first following business day. The Executive Revenue Directorate (DEI) must send a monthly report of revenues on this account to the State Secretariat of Finance, which in turn shall send it to the Legislative Branch.

SYSTEMS ADAPTATION. A period of sixty (60) business days from the date of publication of this Regulation is granted to Financial Institutions to adapt their computer systems and collect or withhold this Special Contribution.

SUPERVISION. The National Banking and Insurance Commission (CNBS) must supervise that the special contribution of the Financial System is not transferred to account holders and that such operations are properly detailed in the accounting records of Financial Institutions, in application of paragraph e) of Article five (5) of this Regulation, which shall be done through review of computer systems.

Revenue from the Special Contribution on Financial Transactions shall be recorded as other taxes administered by the Executive Revenue Directorate (DEI), and revenue collection thereof through the National Financial System does not result in the payment of collection commissions to such institutions acting as withholding or collection agents; non-compliance with this provision by the responsible Financial Institution shall subject it to administrative sanctions imposed by the Executive Revenue Directorate (DEI) or the National Banking and Insurance Commission (CNBS) without prejudice to corresponding legal actions. For accounting purposes, other special contributions are considered as other taxes administered by the Executive Revenue Directorate (DEI). TITLE II SPECIAL CONTRIBUTION ON MOBILE TELEPHONY

SPECIAL CONTRIBUTION ON MOBILE TELEPHONY. A Special Contribution of a transitory nature is created that taxes mobile voice activities and services (airtime).

TAXABLE BASE. It is the total monthly gross income from mobile telephone calls (airtime) received by companies engaged in this sector.

PASSIVE SUBJECTS. Passive subjects are legal entities that carry out mobile telephony activities and services established in the country and are regulated by the Telecommunications Framework Law, and those authorized in the future.

RATE. The rate is One Percent (1%) on monthly gross income.

DECLARATION, LIQUIDATION AND PAYMENT. The Declaration and Liquidation must be carried out monthly in the forms and conditions established by the Executive Revenue Directorate (DEI). The contribution must be paid to the General Treasury of the Republic or through authorized Financial Institutions, within the first ten (10) days of the month following the generation of the operator's income. Financial Institutions shall remit to the General Treasury of the Republic the special contributions collected, within the timelines and procedures established by the Executive Revenue Directorate (DEI). CHAPTER III SPECIAL CONTRIBUTION OF THE MINING SECTOR

SPECIAL CONTRIBUTION OF THE MINING SECTOR. A Special Contribution with a temporary character of the Mining Sector is created until such time as the National Congress approves the new mining law that taxes the exploitation and commercialization of minerals in the country carried out by natural and legal persons.

TAXABLE BASE. It is the FOB (Free On Board) value of the export recorded in the Merchandise Declaration.

PASSIVE SUBJECTS. The passive subjects of the Special Contribution of the Mining Sector are natural and legal persons who carry out the activities of export and commercialization of minerals.

RATE. The special rate with a temporary character of the Mining Sector is two percent (2%).

DECLARATION, LIQUIDATION AND PAYMENT. The Declaration, Liquidation and Payment must be carried out in the Single Customs Declaration (DUA) or equivalent document. Financial Institutions shall remit to the General Treasury of the Republic the special contributions collected, within the timelines and procedures established by the Executive Revenue Directorate (DEI). CHAPTER IV SPECIAL CONTRIBUTION OF THE FOOD AND BEVERAGE SECTOR

SPECIAL CONTRIBUTION OF THE FOOD AND BEVERAGE SECTOR. A Special Contribution with a temporary character arising from the commercialization of food and beverages that are under any special regime is created.

TAXABLE BASE. The taxable base is the total of monthly gross income received by commercial companies that engage in the commercialization of food and beverages that operate in the country, under international franchises that are under any special regime.

PASSIVE SUBJECTS. The passive subjects are legal persons who carry out the activities and services of commercialization of food and beverages that operate in the country, under any special regime.

RATE. The rate is zero point five percent (0.5%) of monthly gross income.

DECLARATION, LIQUIDATION AND PAYMENT. The Declaration and Liquidation must be carried out monthly in the forms and conditions established by the Executive Revenue Directorate (DEI). Payment must be made in authorized Financial Institutions within the first ten (10) days of the month following the generation of income from casino operations, games of chance or hazard and slot machines. CHAPTER V SPECIAL CONTRIBUTION FROM CASINOS AND SLOT MACHINES

SPECIAL CONTRIBUTION FROM CASINOS AND SLOT MACHINES. The Special Contribution arising from the operation of casinos, games of chance or hazard and slot machines is established. Games of chance or hazard are understood to be roulette, dice, cards, punto y banca, baccarat or baccarat, slot machines and similar games.

TAXABLE BASE. The monthly gross income from the proper activity of casinos and slot machines.

PASSIVE SUBJECTS. Any natural or legal person who has obtained a license to operate casinos, games of chance or hazard and slot machines.

RATE. The rate is one percent (1%) on the taxable base.

DECLARATION, LIQUIDATION AND PAYMENT. The Declaration and Liquidation must be carried out monthly in the forms and conditions established by the Executive Revenue Directorate (DEI). Payment must be made in authorized Financial Institutions within the first ten (10) days of the month following the generation of income from casino operations, games of chance or hazard and slot machines. Financial Institutions must remit to the General Treasury of the Republic the special contributions collected, within the terms and procedures established by the Executive Revenue Directorate (DEI). CHAPTER VI SPECIAL CONTRIBUTION FROM THE COOPERATIVE SECTOR

OBJECTIVE. A Special Contribution of a temporary nature is established for Cooperatives.

TAXABLE BASE. Net surpluses equivalent to income minus expenses from their cooperative activity.

PASSIVE SUBJECTS. Cooperatives are passive subjects.

RATE. The rate is three point six percent (3.6%) on annual net surpluses.

DECLARATION, LIQUIDATION AND PAYMENT. The Declaration and Liquidation must be carried out annually in the forms and conditions established by the Executive Revenue Department (DEI). TITLE III OF GENERAL PROVISIONS

SUSPENSION. The collection of security fees or their equivalents made by the municipalities is temporarily suspended as long as this Law remains in force.

CONTROL AND COLLECTION. It shall be the responsibility of the Executive Revenue Department to control, monitor and collect the Special Contributions established in the Population Security Law carried out through Financial Institutions, in accordance with the law and this regulation.

SANCTIONING SYSTEM. Non-compliance with the obligations established in the Population Security Law shall be sanctioned in accordance with the provisions established by the Tax Code, National Telecommunications Commission (CONATEL), Mining Law and other applicable Laws in the case.

NON-DEDUCTIBILITY. The Special Contributions for Population Security shall not be deductible from income nor for the purposes of calculating the Income Tax of any other national or municipal origin.

INCORPORATION OF RESOURCES INTO THE BUDGET. During the validity of the Population Security Law, the total of the estimated income from this Decree shall be incorporated annually into the General Budget of Income and Expenses of the Republic, which must be assigned in its entirety for population security programs and social prevention.

CONSTITUTION AND ADMINISTRATION OF THE TRUST. The matters relating to the constitution and administration of the Trust shall be in accordance with the Trust Law and Population Security contained in Decree No. 199-2011 dated November 11, 2011.

EFFECTIVE DATE. This Regulation shall enter into force on the day of its publication in the Official Gazette "La Gaceta". PORFIRIO LOBO SOSA PRESIDENT OF THE REPUBLIC WILLIAM CHONG WONG SECRETARY OF STATE IN THE MINISTRY OF FINANCE National Institute for Forest Conservation and Development, Protected Areas and Wildlife ICF AGREEMENT NUMBER 051-2011 THE EXECUTIVE DIRECTOR OF THE NATIONAL INSTITUTE FOR FOREST CONSERVATION AND DEVELOPMENT, PROTECTED AREAS AND WILDLIFE WHEREAS: It corresponds to the State through the National Institute for Forest Conservation and Development, Protected Areas and Wildlife (ICF) the protection, restoration, exploitation, conservation, management, administration, regulation, respect and