Constitutive Law of the ZIP

Export Processing Industrial Zones (ZIP), of private ownership and administration, are geographic areas of the national territory approved and delimited by the Executive Power, through the State Secretariat in the Offices of Economy and Commerce; subject to fiscal surveillance by the State and without resident population, created with the purpose of promoting, through the use of local labor, the manufacturing and service industry oriented exclusively to exportation, promoting the establishment and operation in the zone of industrial enterprises basically for exportation and commercial enterprises in support of industrial activity and whose purpose is to supply goods or services within the Zone, under the regime established in this Law.

Goods and merchandise that are imported and/or exported under the protection of this Law shall enjoy total exemption from the payment of tariff rights, consular rights, charges and surcharges, internal taxes on consumption, production, sale and other taxes, levies, fees and over-fees. In the same manner, sales and production generated within the Export Processing Industrial Zone and the real property and industrial and commercial establishments thereof shall be exempt from the payment of state and municipal taxes. The profits obtained in their operations by user enterprises established in the Export Processing Industrial Zones (ZIP) shall be exempt from the payment of Income Tax. This benefit shall not apply to foreign natural or legal persons when the legislation of their respective countries permits them to deduct or credit the Income Tax paid in Honduras from the taxes to be paid in their country of origin. Income from salaries and other similar personal income of persons employed in the Export Processing Industrial Zones (ZIP) shall pay Income Tax and Municipal taxes in accordance with the Law regulating the matter. CHAPTER II OF THE OPERATING COMPANY, REQUIREMENTS, AUTHORIZATION AND POWERS

To operate an Export Processing Industrial Zone the following is required:

• a)

  To be constituted as a Limited Company with fixed capital, subscribed and paid in an amount not less than TWO MILLION LEMPIRAS (2,000,000.00);

• b)

  To have as exclusive purpose the exploitation of Export Processing Industrial Zones (ZIP);

• c)

  To prove the availability of the real property required for the purposes of the Export Processing Industrial Zone; and d) To prove the availability of technical and financial resources for promotion, to provide the services and develop the infrastructure required to generate a minimum of five thousand new jobs within a period of five years.

Authorization to constitute the operating company of the Export Processing Industrial Zone and the approval and delimitation thereof shall be requested from the Executive Power through the State Secretariat in the Offices of Economy and Commerce, by its promoters and organizers.

With the request referred to in the preceding Article, which must contain the name, nationality, and address of each of the organizers or promoters, the following shall be attached:

• a)

  The project of public deed of constitution and the bylaws;

• b)

  The financial and administrative structure and the projections of the company's development for TEN (10) years;

• c)

  A study that justifies the establishment of the proposed Export Processing Industrial Zone; and d) The plans of the Zone and the projected installations, indicating the capacity and pertinent specifications.

The Executive Power through the State Secretariat in the Offices of Economy and Commerce and the Secretariat of Finance and Public Credit, insofar as pertinent, shall ensure through such investigations as it deems appropriate:

• a)

  That public interest and general and local circumstances justify the authorization;

• b)

  That the basis of financing, organization, direction and administration guarantee rationally the security of the fiscal interests of the State;

• c)

  That there is available capacity to provide users of the Export Processing Industrial Zone with the services required by the industrial process of transformation for exportation, including those of promotion and contracting of labor; and d) That the projected installations offer sufficient guarantees of fiscal control. If authorization is warranted, the Executive Power through the State Secretariat in the Offices of Economy and Commerce shall grant it for the issuance or formalization of the Deed in accordance with the Project presented and shall delimit the Zone.

The Executive Power through the State Secretariat in the Offices of Economy and Commerce, upon presentation of the Deed of constitution duly qualified and registered, shall authorize the Export Processing Industrial Zone by granting to the constituted Operating Company the rights of exploitation, development and management in the delimited area.

The rights conferred upon the company are transferable only with authorization of the State, in which case the acquirer shall meet the same requirements as the holder, established in Article 4 and following articles of this Decree.

The authorized Operating Company is directly responsible for the direction, administration and management of the Export Processing Industrial Zone and may:

• a)

  Construct all types of industrial and service installations and the infrastructure required;

• b)

  Enter into all kinds of contracts of lawful commerce, such as purchase-sale, rental, barter, deposit, as well as establish any obligation on its property;

• c)

  Provide all classes of services required in the Export Processing Industrial Zone, installing, controlling, administering and allocating them to the natural or legal persons who operate in the area as users and workers, in accordance with the respective laws; and d) Promote the Export Processing Industrial Zone.

The Company authorized to operate the Export Processing Industrial Zone shall enjoy the following fiscal benefits: a) Importation free of levies, tariff rights, charges, surcharges, consular rights, internal taxes on consumption and sale and other taxes, fees and levies that have a direct or indirect relationship with the customs operations of importation of all goods it imports and that are applied or incorporated exclusively to the development and exploitation of the Export Processing Industrial Zone, including construction materials, equipment, spare parts, machinery and office equipment, provided that these goods are not produced in the country and with prior authorization of the State Secretariat in the Offices of Economy and Commerce; and b) Exemption from Income Tax for 20 years and Municipal Taxes for 10 years.

The same company may be authorized to operate more than one Export Processing Industrial Zone. When a Company authorized to operate an Export Processing Industrial Zone requests authorization to exploit new zones, it shall be exempt from complying with the requirements related to corporate constitution, remaining obligated to the remaining requirements established in this Law, including the investment of two million lempiras of its own capital for each industrial zone.

Any natural or legal person, whether Honduran or foreign, may, prior to a contract with the Operating Company, acquire or rent under any title or contractual form the goods or services available in the Export Processing Industrial Zone for the purposes of industrial processing for exportation or for the provision of complementary services in the Zone.

Natural or legal persons, national or foreign, who have contracted with the Operating Company of the Export Processing Industrial Zone for their establishment in the Zone may carry out the following operations: a) Introduce, withdraw, store, handle, pack, display, wrap, unwrap, buy, sell, barter, manufacture, mix, transform, refine, distill, assemble, cut, benefit, and in general operate all types of merchandise, products or raw materials, containers, and other commercial effects and any other similar, related or identical activity, with the sole exception of articles whose importation, exportation, commerce and manufacturing are prohibited in accordance with the laws in effect; and b) All classes of operations, transactions, negotiations and permanent or incidental activities related to the establishment and functioning within the Export Processing Industrial Zone provided that they are not prohibited by Law. The operations referred to in this Article are subject to the supervision and surveillance of the competent customs authority in accordance with the provisions of this Decree.

Merchandise that has been introduced to the Export Processing Industrial Zone and that has not been subjected within it to any industrial process of transformation or manufacture may be re-exported preserving its certificate of origin with which it entered the Export Processing Industrial Zone, free of all taxes, rights, levies and other fiscal contributions, municipal or district taxes of any kind, provided that they are not conducted with the purpose of unfair competition.

Foreign merchandise that has been introduced to the Export Processing Industrial Zone and that has not been subjected within it to any industrial process of transformation or manufacture may not be imported for use or definitive consumption in the country.

All merchandise of national origin to be introduced into the Industrial Zone for Processing and Exports must comply with all requirements and formalities established in customs legislation and other laws and regulations of the country, including monetary and foreign exchange provisions.

Merchandise that in the Industrial Zone for Processing and Exports has been subjected to any process of transformation or manufacture may be imported for definitive use or consumption in the country, provided there is no national production thereof, with prior authorization from the Ministry of State for Economic and Commercial Affairs, paying the corresponding tariff duties and other levies in compliance with customs legislation and other applicable Laws and Regulations.

Merchandise of Honduran origin introduced directly from Honduras into the Industrial Zone for Processing and Exports, and that has been subjected therein to a process of transformation or manufacture, may be exported free of all taxes, duties, levies, and other municipal or district fiscal contributions that have a direct or indirect relationship with customs operations of exportation, except limitations contained in agreements subscribed by Honduras that establish restrictions or export quotas.

Users of an Industrial Zone for Processing and Exports may grant manufacturing contracts to other natural or legal persons, national or foreign, located in other parts of the national territory. In these cases, these persons may temporarily intern goods in the national territory from the Zones for use in the manufacturing process subject to these contracts, subject to the provisions of the Temporary Import Regime that is in effect.

Every user of an Industrial Zone for Processing and Exports may transfer, in any form, goods and services to another user located in a Zone, with the approval of the corresponding customs authority.

All merchandise arriving at an Industrial Zone for Processing and Exports must be listed in a manifest and consigned to a natural or legal person established within said Industrial Zone for Processing and Exports or to persons who have obtained special and temporary prior authorization from the Operating Company to receive and dispatch merchandise. Merchandise may also be consigned to the Operating Company, which shall serve as agent of the shipper for the purposes of receipt and dispatch of such merchandise. In this case the merchandise shall be stored and handled at the order of the respective owner, unless the owner designates another person to represent him and who is accepted by the Operating Company. For the pertinent legal effects, the owner and his representative shall respond jointly and severally as if they were consignees of the merchandise before the said Operating Company. The storage operations referred to in this Article shall not be considered as private fiscal warehouses as defined in the Customs Law.

Activities carried out within an Industrial Zone for Processing and Exports shall be considered as public service, and the natural or legal persons operating therein shall not be subject to the Law of Representatives, Distributors and Agents of National and Foreign Companies, nor shall they be subject to licenses, permits, registries or prior authorizations for import or export, nor shall they require importer-exporter credentials in their operations. Companies operating in the Zone shall grant their workers all benefits established in the current Labor Legislation. Any labor conflict must be resolved in accordance with the procedures established in the Labor Code with respect to public services, to prevent any interruption in the production of companies that would interfere with their export commitments for their products.

The Executive Power through the Ministry of State for Economic and Commercial Affairs and for Finance and Public Credit shall establish the necessary controls and mechanisms to protect fiscal interests without obstructing or impeding the processes of import, production, or export, taking into account the nature of the Zones and the purposes sought in this Law. State officials or employees delegated to the Industrial Zone for Processing and Exports shall have decision-making authority in the resolution of matters within their competence and shall resolve them expeditiously in accordance with this Law and its Regulations. Likewise, the Ministry of State for Interior and Justice shall authorize by special permits the entry and permanence in the country of technical and management personnel of user companies.

Without prejudice to criminal actions, the Ministry of State for Economic and Commercial Affairs shall impose Administrative fines in the amounts and by means of the procedure determined in the Regulation of this Law to beneficiary persons who incur in any of the following infractions:

• a)

  Non-compliance with any of the obligations established in the present Law and its Regulation;

• b)

  Non-compliance with the obligations and requirements contained in the Authorization Agreement of the Industrial Zones for Processing and Exports (ZIP); and,

• c)

  Non-compliance with the instructions and other provisions emanating from the Ministry of State for Economic and Commercial Affairs.

The Executive Power through the Ministry of State for Economic and Commercial Affairs, and Finance and Public Credit, shall issue the Regulation of the present Law within sixty (60) days following its entry into force.

The present Law shall enter into force twenty (20) days after its publication in the Official Journal "La Gaceta". Done in the city of Tegucigalpa, Municipality of the Central District, in the Assembly Hall of the National Congress, on the seventh day of the month of April of nineteen hundred and eighty-seven. To the Executive Power For Such Purpose: Let It Be Executed Tegucigalpa, M.D.C. JOSE SIMON AZCONA HOYO President