Law on Tourism Incentives

The primary objective of this Law is to promote the development of the country's tourism supply through the granting of fiscal incentives that make possible greater participation of national and international private investment in the process of developing tourism products and creating facilities to achieve job generation, investment, the inflow of foreign currency, and an increase in tax revenues to the State.

Tourism is considered an economic activity interrelated with the cultural and social development of Honduran society, of public utility and national priority. The Secretary of State in the Office of Tourism shall be the competent authority to hear all matters related to this Law.

Tourism shall be directed toward achieving sustainable development, with the purpose of attracting visitors that produce the least possible impact on its natural and cultural resources, and that benefit to the maximum the communities that host the same.

This Law seeks to establish in the country a plant of high-level and competitive tourism services in an effort to increase the supply of services and attractions, in order to enhance existing resources in favor of Honduran society.

The incentives granted by this Law shall be limited according to the beneficiary as follows: 1. Ten (10) years of exemption from payment of income tax from the beginning of operations. This incentive shall be granted exclusively to new projects. For the purposes of this Law, new projects shall be understood as those developed by natural or legal persons, national or foreign, in the modality of tourist establishment that are going to begin operations for the first time that do not imply an expansion, remodeling, change of ownership, or any other similar situation. 2. Exemption from payment of taxes and other tributes caused by the importation of goods, services, and new household items necessary for the construction and beginning of operations of the new projects. 3. Exemption from payment of taxes and other tributes caused by the importation of all printed material for promotion or publicity of the new projects or of the country as a tourism destination; and, 4. Exemption from payment of taxes, contributions, fees, and any other kind of tribute or pecuniary obligation on cultural shows and presentations.

Enterprises established or existing in the tourism sector stipulated in Article 8 may enjoy the benefits contained in Article 5 numerals 2), 3), and 4) of this Law, provided that they present the respective expansion or remodeling projects to be qualified by the Secretary of State in the Office of Tourism in accordance with Article 9.

By exception, exemption shall be granted from payment of Municipal real property tax for projects of patrimonial rescue and natural conservation, with prior favorable opinion of the corresponding Municipality and of the Honduran Institute of Anthropology and History or of the Secretary of State in the Offices of Natural Resources and Environment, as appropriate.

The beneficiaries of the incentives stipulated in Articles 5 and 7 of this Law shall be natural or legal persons engaged in:

• 1)

  Lodging;

• 2)

  Food and beverages;

• 3)

  Air transport, water and land transport;

• 4)

  Recreation centers;

• 5)

  Art and handicrafts;

• 6)

  Receptive Tourism Agencies;

• 7)

  Cultural projects and shows;

• 8)

  Congresses and Conventions;

• 9)

  Automobile leasing; and 10. Educational-cultural and Tourism institutions. The regulatory provisions that are necessary for the correct application of this Article shall determine the requirements that beneficiaries must meet for each type of activity mentioned above, this includes classification, registration, and control.

Without prejudice to what is established in the Administrative Procedure Law, persons interested in availing themselves of the incentives provided for in this Law shall present a petition before the Secretary of Tourism that includes the following:

• 1)

  A comprehensive description of the project to be carried out;

• 2)

  A general plan of the work to be carried out;

• 3)

  Economic proposal and feasibility of the project;

• 4)

  Investment schedule; and,

• 5)

  Evidence of financial availability to execute the project. To issue its opinion, the Secretary of State in the Office of Tourism shall require considerations regarding environmental impact in the presentation of the petition, and for its resolution an environmental license and an opinion of cultural impact shall be necessary, issued by the Secretary of State in the Offices of Natural Resources and Environment and the Secretary of State in the Offices of Culture, Arts, and Sports; respectively.

In the event that the project is carried out in the historic center of a city, the opinion of the Honduran Institute of Anthropology and History shall additionally be required, regarding the impact on the urban image of the zone. ARTICLE 11.- Once the corresponding petition is received and depending on the complexity of the project, within the terms indicated by the Administrative Procedure Law, the Secretary of State in the Office of Tourism shall request the legal and technical opinions and rulings that are necessary; at the end of fifteen (15) days, counted from the date of submission of the petition, said Secretary shall resolve it independently of whether the requested opinions have been received.

The Secretary of State in the Office of Finance shall issue the authorization to import the goods, services, and household items requested free from payment of taxes and other tributes, within fifteen (15) days after the favorable resolution has been issued by the Secretary of State in the Office of Tourism, on each occasion it is requested and in accordance with the approved original plan, exempting payment of the taxes mentioned in Article 5. The corresponding Municipal Corporation shall exempt from payment of the taxes referred to in Article 7.

All service providers, in accordance with what is established in Article 39 of the Law of the Honduran Institute of Tourism, regardless of whether they request the benefits of this Law, are obligated to request information to construct and operate a Tourism establishment in accordance with the norms and classification that it establishes, being subject to what is stipulated in Title III of this Law.

If after three (3) years from the issuance of the resolution authorizing construction or operation and after the corresponding incentives have been granted, the operation of the project has not commenced, the interested party may request a renewal of authorization for one (1) year, explaining the reasons that have prevented the commencement of the provision of services; if not done, the authorization and the benefits that derive from it shall be nullified.

If the misappropriation of goods or improper use of the same is found and any fraudulent act that constitutes tax fraud to the detriment of the State, the Executive Directorate of Income (DEI) shall apply to the responsible tourism service providers the sanctions established in the Tax Code, the customs regime, and other applicable laws.

Without prejudice to what is provided in the previous Article, the Secretary of State in the Office of Tourism, in the event that the benefits granted are not used for the purposes established in this Law, may apply the following sanctions: 1. The cancellation of the respective Resolution without liability for the State and the consequent loss of the beneficiary's right to avail himself again of the incentives granted by this Law; and, 2. Closure of the establishment in the event that violations to what is established by this Law are determined.

Grant to foreigners with legal residence in those countries with which Honduras has agreements for entry without visa, the same rights recognized to citizens of those countries. In cases not contemplated in the preceding paragraph, the Secretariats of State in the Offices of Foreign Relations, Internal Governance and Justice, and Security, are instructed to issue within a period not exceeding ninety (90) days following the effective date of this Law, the provisions that facilitate the entry of tourists into the country.

Without prejudice to what is established in this law and other laws, natural or juridical persons, national or foreign, domiciled or who domicile themselves in the country and who develop hotel projects with a minimum of one thousand (1000) rooms or expand existing ones by the same number, shall be exempted for a period of up to ten (10) years from the payment of sales tax and the payment of the corresponding tourist service fees: provided that such projects are completely constructed and in full operation within a period not exceeding three (3) years, counted from the Resolution that must be issued to that effect by the Secretariat of State in the Office of Tourism. Likewise, it is permitted that taxpayers who do not benefit from the incentives referred to in Articles 5 and 7 of this Law may deduct up to fifteen percent (15%) of the corresponding taxable net income for the purpose of reinvestment of their profits, without prejudice to what is established in other currently existing laws that may be issued in the future, and related to hotel projects, establishments for congresses and conventions, new or for the remodeling or expansion of existing related physical facilities developed by the persons referred to in Article 8 of this law. The Secretariat of State in the Office of Tourism jointly with the Secretariat of State in the Office of Finance shall issue the regulatory provisions necessary for the correct application of this Article, which shall have a validity of five (5) years, counted from the effective date of this Decree.

Reform subsection ch) of Article 5 of the Law of the Honduran Institute of Tourism, contained in Decree No. 103-93 of May 27, 1993, which shall read as follows:

It shall be the competence of the Honduran Institute of Tourism to apply the following laws, insofar as they relate to its powers in the area of tourism. a)…; b)…; c)…; ch) Law of Tourism Incentives; d)…; e)…;

Persons who at the effective date of this Law enjoy the benefits granted by the Constitutive Law of the Industrial Processing Zones for Exports (ZIP) and Free Tourist Zones (ZOLT) and the Regulations to Chapter IV-A thereof, shall continue to enjoy the benefits until their expiration.

Repeal Decree No. 84-92 dated May 29, 1992 and Decree No. 98-93 dated May 27, 1993 relating to the Constitutive Law of Industrial Processing Zones for Exports (ZIP) and Free Tourist Zones (ZOLT), as well as Agreement No. 188-96 dated October 17, 1996, which contains the Regulations to Chapter IV-A of the Constitutive Law of Industrial Processing Zones for Exports (ZIP) and Free Tourist Zones (ZOLT). Applications that at the effective date of this Law are in process under the legislation being repealed shall be resolved in accordance with the same until the completion of the process.

The Executive Power through the Secretariats of State in the Offices of Tourism and Finance shall issue the Regulations related to this Law, within a period of ninety (90) days counted from the date of effectiveness of this law.

This Decree shall enter into force as of the date of its publication in the Official Gazette La Gaceta. Done in the city of Tegucigalpa, Municipality of the Central District, in the Session Hall of the National Congress, on the eighteenth day of the month of December of nineteen hundred ninety-eight. RAFAEL PINEDA PONCE PRESIDENT JOSE ALFONSO HERNANDEZ CORDOVA Secretary JOSE ANGEL SAAVEDRA POSADAS Secretary To the Executive Power Therefore: Let it be executed. Tegucigalpa, M.D.C., December 29, 1998. CARLOS ROBERTO FLORES FACUSSE CONSTITUTIONAL PRESIDENT OF THE REPUBLIC OF HONDURAS The Secretary of State in the Office of Tourism. NORMAN GARCIA PAZ