Law of Municipalities and Its General Regulations

(According to reform by Decree 48-91) This Law has as its purpose to develop the constitutional principles concerning the Departmental and Municipal System.

(According to amendment by Decree 48-91) The Municipality is a population or association of persons residing in a municipal district, governed by a municipal authority that exercises and extends its authority in its territory and is the basic territorial structure of the State and the immediate vehicle for citizen participation in public affairs.

Law of Municipalities Association of Municipalities of Honduras DIVISION OF NATIONAL TERRITORY CREATION OF DEPARTMENTS APPOINTMENT AND SUBSTITUTION OF THE GOVERNOR PROFILE OF THE GOVERNOR

The Honduran territory is divided into departments and these into autonomous municipalities, administered with no subjection other than to the Law, by Corporations elected directly by the people, in accordance with the Law. TITLE II OF THE DEPARTMENTS CHAPTER I CREATION

Departments are created by Law, their boundaries being established therein. The capital shall be the seat of departmental government. CHAPTER II OF THE DEPARTMENTAL GOVERNOR

The Departmental Governor shall be appointed and removed at the sole discretion of the Executive Power. In the event of an absence exceeding five days, he shall be replaced by the Mayor of the Departmental Seat.

The Departmental Governor is the representative of the Executive Power in his jurisdiction.

Law of Municipalities Association of Municipalities of Honduras POWERS OF THE GOVERNOR At the moment of being appointed, he must be living consecutively in the Department for more than five years and must meet the same requirements as those required to be Mayor.

The powers and duties of the Departmental Governor are the following:

• 1)

  To serve as liaison between the Executive Power and the national authorities that have delegation in the Department and in the Municipalities;

• 2)

  (According to Decree 48-91) To supervise the operation of penitentiaries and detention centers and to cooperate with the different Secretaries of State for the better fulfillment of the responsibilities of their dependencies that function in the Department;

• 3)

  To represent the Executive Power in official acts in his Department;

• 4)

  To hear and resolve appeals from private parties against the Municipalities, complaints against officials and conflicts arising between municipalities of his Department;

• 5)

  To attend sessions of the Municipal Corporations, at least once a year, participating with voice but without vote;

• 6)

  To respond to consultations raised by the Municipalities;

• 7)

  To hear excuses and resignations of members of the Municipal Corporations;

• 8)

  To attend meetings of associations of Municipalities of the department; and,

• 9)

  To exercise the powers that by special Laws are conferred upon him.

The Departmental Governor shall have a Secretary of his free appointment and removal, who shall be remunerated and must meet the same conditions as the Municipal Secretary.

Conflicts of jurisdiction between Governors shall be resolved by the Secretariat of State in the Office of Internal Affairs and Justice.

Those who cannot be municipal mayors shall not be able to be Governors.

The operating expenses of the Political Governorships shall be charged to the General Budget of Income and Expenditures of the Republic, under the Title corresponding to the Secretariat of Governance and Justice. TITLE III OF THE MUNICIPALITIES

Law of Municipalities Association of Municipalities of Honduras CONCEPT OF AUTONOMY POSTULATES OF AUTONOMY CHAPTER I OF MUNICIPAL AUTONOMY

(As amended by Decree 143-2009) Municipal autonomy is understood as the set of powers or faculties granted by the Constitution of the Republic and this Law to the municipality and to the municipal corporation as its governing body, which is organized and functions independently of the powers of the State, with capacity to govern and administer matters that affect its interests and exercise its competence to satisfy the needs and aspirations of its population within the municipal territory. Prior to the reform of this Law or issuance of norms that affect the patrimony or the framework of competencies of the municipalities, the opinion of the Association of Municipalities of Honduras (AMHON) must be obtained.

A.- (Added by Decree 143-2009) Municipal autonomy is founded upon the following postulates:

• 1)

  The free election of its authorities through direct and secret suffrage, in accordance with the law;

• 2)

  Free administration which implies the making of decisions within the legal framework, the general interests of the nation and municipal development programs, including investments of social impact that generate wealth and local employment, with the support of the community in open town hall and of the Citizen Commission for Transparency;

• 3)

  The power to collect its own resources and invest them for the benefit of the Municipality;

• 4)

  The protection, conservation, reforestation and preservation of the environment;

• 5)

  The preparation, approval, execution and administration of its budget;

• 6)

  The planning, organization and administration of municipal public services;

• 7)

  The power to create its own administrative structure and operating procedures, in accordance with municipal reality and needs; and,

• 8)

  Such other powers as may correspond to municipalities by law in the exercise of their attributes. The legitimacy of the rights set forth in the preceding provisions is supported by the principle of subsidiarity, whose purpose is to guarantee to the holders of municipal government offices the making of decisions as close as possible to the citizen, with full harmony between the actions and decisions of the municipal government with those of definition of policies, regulation and control of the Central Government.

(As amended by Decree 48-91 in numerals 1, 2, 4, 6, 8, 11, 13, 16, 17 and 18) Municipalities shall have the following powers and responsibilities:

• 1)

  Preparation and execution of municipal development plans;

• 2)

  Control and regulation of urban development, use and administration of municipal lands, expansion of city limits and improvement of populated areas in accordance with the provisions of the Law;

• 3)

  Municipal beautification, sanitation and hygiene;

• 4)

  Construction of potable water distribution networks, sewerage systems for wastewater and stormwater drainage, as well as their maintenance and administration;

• 5)

  Construction and maintenance of public roads by itself or in collaboration with other entities.

• 6)

  Construction and administration of municipal cemeteries, markets, slaughterhouses and meat processing facilities;

• 7)

  Protection of ecology, the environment and promotion of reforestation;

  Law of Municipalities Association of Municipalities of Honduras 8) Maintenance, cleaning and control of urban public roads, sidewalks, parks and beaches, which include their organization, use, urban traffic signage, urban and interurban transportation terminals. Access to these places is free, therefore any collection of fees is prohibited, except when it involves cost recovery through the system of special assessments legally established; 9) Promotion and regulation of commercial, industrial, service and other activities; 10) Control and regulation of entertainment events and public recreation establishments, including restaurants, bars, nightclubs, spirits retailers and similar establishments; 11) Execution of agreements with the Central Government and with other decentralized entities with which it shares in the exploitation of resources, which shall include areas of exploitation, reforestation systems, environmental protection and corresponding payments; Entities with which Municipalities reach said agreements shall grant permits or contracts, observing the provisions stipulated in the agreements; 12) Promotion of tourism, culture, recreation, education and sports;

  Law of Municipalities Association of Municipalities of Honduras 13) Creation and maintenance of fire departments; 14) Provision of local public services, and by means of agreement, services rendered by the State or autonomous institutions, when convenient to the municipality; 15) Execution of contracts for construction, maintenance or administration of public services or local works with other public or private entities, according to its convenience, in accordance with the law; When Municipalities award contracts for the construction of works or provision of municipal services to private companies using their own resources, they may authorize them to recover their costs and obtain reasonable profit, through the most appropriate system of collection. Without prejudice to the rights corresponding to the municipality; 16) Coordination and implementation of health measures and actions aimed at ensuring and preserving the health and general welfare of the population, in accordance with what is established by the Health Code; 17) Management, construction and maintenance, as applicable, of electrification systems in the municipality, in collaboration with the National Electric Power Company (ENEE); and, 18) Coordination of its development programs with national development plans.

  Law of Municipalities Association of Municipalities of Honduras CREATION AND MERGER OF MUNICIPALITIES OBJECTIVES OF THE MUNICIPALITY

(As amended by Decree 143-2009) The municipality is the governing and administrative body of the municipality, endowed with legal personality of public law and whose purpose is to achieve the welfare of the inhabitants, promote their comprehensive development and the preservation of the environment, with the powers granted by the Constitution of the Republic and other laws; its objectives shall be the following:

• 1)

  To ensure that the Constitution of the Republic and the Laws are complied with;

• 2)

  To ensure the participation of the community in the solution of the problems of the municipality;

• 3)

  To achieve the social and material welfare of the Municipality, executing programs of public works and services;

• 4)

  To preserve the historical heritage and the civic-cultural traditions of the Municipality; to promote and disseminate them by itself or in collaboration with other public or private entities;

• 5)

  To promote regional integration;

• 6)

  To protect the municipal ecosystem and the environment;

• 7)

  To utilize planning to achieve the comprehensive development of the Municipality; and,

• 8)

  To rationalize the use and exploitation of municipal resources, in accordance with local priorities and national development programs.

(According to amendment by Decree 127-2000) The creation or merger of municipalities is the responsibility of the National Congress. In order to create and merge a municipality, it is necessary to comply with the following requirements:

• 1)

  To have a population not less than thirty thousand (30,000.00) inhabitants;

• 2)

  To guarantee an annual income equal to fifty percent (50%) of the budget of ordinary revenues of the municipality from which it is to be separated, except for those that are separated from cities with a population greater than one hundred fifty thousand (150,000) inhabitants, in which case only ten percent (10%) of annual income with respect to the ordinary revenues of the parent municipality shall be required;

• 3)

  When a separation occurs, public services existing shall not be fractioned nor isolated; however, for their administration and control, the corresponding agreements shall be executed, which shall have the force of law;

• 4)

  Continuous territory not less than forty (40) square kilometers, duly delimited by the Secretariat of State in the Offices of Interior and Justice, prior to a report from the National Geographic Institute with the participation of the parties and considering aspects of topographic survey, delimitation and demarcation of the territory; and,

• 5)

  Favorable plebiscite for the creation of the municipality with a result in which there has been participation of at least ten percent (10%) of the citizens of the geographic area that will comprise it, which shall be called by the Secretariat of State in the Offices of Interior and Justice, when requested in writing by at least one thousand citizens residing in the area proposed to be separated, said plebiscite to be supervised by the National Electoral Tribunal (T.N.E.). In all other matters, the Regulations of this Law shall govern this matter. The National Congress, prior to the approval of the creation of a municipality, shall hear the opinion of the Executive Power, through the Secretariat of State in the Offices of Interior and Justice, whose opinion shall be rendered within the peremptory period of ninety (90) days. CREATION OF MUNICIPALITIES BY EXCEPTION FUNDS FOR NEW MUNICIPALITIES In the application, it must also be proven that in the new proposed territory, the objectives established in this Law are not being equitably achieved due to lack of own government and that furthermore, the creation of the new municipality does not prevent that municipality, from which it is separated, from achieving said objectives, nor from complying with the requirements established in this Article.

In special cases of strategic importance or duly qualified national interest, primarily for reasons of sovereignty, the National Congress, at the proposal of the Executive Power, through the Secretariat of State in the Office of Governance and Justice, may create municipalities that do not meet the requirements indicated in the preceding article, provided that two-thirds of the votes of the National Congress are obtained.

A. (Added by Decree 127-2000) In the first year of management of every new municipality, the Central Government shall transfer, as an advance, an amount not less than five hundred thousand Lempiras (L.500,000.00). This advance shall be amortized with resources from the annual transfers that subsequently correspond to the new municipality in accordance with the Law. However, the amortizations shall not exceed twenty percent (20%) of said annual transfers.

B. (Added by Decree 127-2000) The Municipalities that fail to meet any of said requirements for more than two (2) consecutive years shall be obligatorily grouped together with another or other contiguous municipalities. Once the cause that gave rise to it disappears, the grouping may be dissolved. The grouping does not imply the extinction or merger of the municipalities, unless so agreed, in which latter case, it must be approved by the National Congress, prior to a plebiscite with a favorable result called by the respective Municipal Corporations. Furthermore, those contiguous municipalities that form conurbated areas shall be obligatorily grouped together. Every grouping agreement shall be registered in a special book to be kept by the Departmental Governorship, whose record shall be public. In said document shall be stated the modalities of organization, coordination, planning and reciprocal cooperation and the manner of sharing costs.

Law of Municipalities Association of Municipalities of Honduras DIVISION OF MUNICIPAL TERRITORY CADASTRE AND REGULATORY PLAN In the Grouping Council, the Mayors shall participate with voice and vote, and shall be presided over by the Mayor with the largest population, who shall be designated as Senior Mayor. The Council shall be assisted in an advisory capacity and solely with voice, by a representative of the respective Municipal Development Councils.

(According to amendment by Decree 48-91) Municipalities, for their better administration, may be divided, in addition to being municipal seats, into cities, villages, and hamlets; and cities into colonies and neighborhoods.

(According to amendment by Decree 48-91) Municipalities shall be obligated to conduct the cadastral survey of the urban and rural areas within their municipal jurisdiction and to prepare the Regulatory Plan for cities. The Regulatory Plan is understood to be the instrument of local planning that defines, in a set of plans, maps, regulations, and any other graphic document or document of another nature, the policy of development and the plans for the distribution of the population, land use, circulation routes, public services, communal facilities, sanitation and environmental protection, as well as the construction, conservation, and rehabilitation of urban areas.

The merger of adjacent Municipalities, in order to constitute a single one, may be carried out through the procedure established for their creation when the following circumstances concur:

• 1)

  Scarcity of sufficient resources to meet the minimum services required by this Law in each of the Municipalities;

• 2)

  Confusion of their urban centers as a consequence of urban development;

• 3)

  Existence of notorious reasons of necessity, or economic-administrative convenience, and;

• 4)

  Plebiscite with an affirmative result of seventy percent (70%) of the citizens of each one of the municipalities to be merged. CHAPTER II REGARDING MUNICIPAL COMMONWEALTHS OR VOLUNTARY ASSOCIATIONS OF MUNICIPALITIES

(According to amendment by Decree No. 143-2009) The municipalities, with the affirmative vote of two-thirds of the members of the Municipal Corporation, may associate or voluntarily unite under any form among themselves for the better fulfillment of their objectives and attributions.

CONCEPT OF ASSOCIATION MEMBERSHIP IN MORE THAN ONE ASSOCIATION

A.- (Added by Decree No. 143-2009) As associative modalities, the mancomunidad or association of municipalities is defined as a local territorial entity, auxiliary and subordinate to the member municipalities, subject to public law and exclusively a manager and executor by delegation of programs, projects and services of priority interest, which allow its members to jointly address problems that cannot be faced individually.

B.- (Added by Decree No. 143-2009) Municipalities may belong to more than one municipal association or organization, provided that common objectives, interests and benefits prevail for the populations they represent and that they have the capacity to fulfill the financial obligations of the contributions for their organization and operation, and any other obligations related to the management of the municipal association or organization.

Law of Municipalities Association of Municipalities of Honduras MUNICIPAL ASSOCIATION AGREEMENT MUNICIPAL ASSOCIATION STATUTE TRANSBOUNDARY MUNICIPAL ASSOCIATION FORCE OF THE MUNICIPAL ASSOCIATION AGREEMENT STATUTE OF THE MUNICIPAL ASSOCIATION REGISTRATION OF THE MUNICIPAL ASSOCIATION AGREEMENT

C.- (Added by Decree No. 143-2009) Municipal Agreements that approve the creation of a municipal association or consortium are norms with the force of law in the corresponding territory, therefore they possess the nature of municipal legal instruments.

D.- (Added by Decree No. 143-2009) Each association or intermunicipal entity shall issue its General Statute of Organization, Operation and Attributions as the principal normative instrument and may, furthermore, formulate complementary rules to regulate its formal and material activity with equal binding force for its compliance. The Agreement of the Municipal Corporation that orders and approves the creation of the association or intermunicipal entity and its integration as member municipality, as well as the Constitutive Act signed by the member Mayors and the General Statute of Organization, Operation and Attributions, shall be registered in a special registry that the State Secretariat in the Offices of Interior and Justice shall create for that purpose. The General Statute of Organization, Operation and Attributions shall contain, at minimum, the following:

• 1)

  Constitution, denomination and domicile;

• 2)

  Objectives and areas of action;

• 3)

  Duties and rights of the members;

• 4)

  Organizational structure;

• 5)

  Economic regime;

• 6)

  Disciplinary regime; and,

• 7)

  Dissolution and liquidation of the intermunicipal entity or association.

E.- (Added by Decree No. 143-2009) Every municipal association or consortium shall have a Board of Directors as the supreme governing body, composed of the Member Mayors and presided over by the Mayor designated by them by simple majority, all with the right to voice and vote. Likewise, it shall have an Intermunicipal Technical Unit, responsible for attending to the tasks of planning, coordination, control and evaluation of activities, programs and projects and shall be composed of a specific working group, and directed by a general coordination.

F.- (Added by Decree No. 143-2009) To guarantee the financial sustainability of the municipal associations or consortiums, the percentage of contribution of the member municipalities shall be defined by the Board of Directors of the Municipal Association or Consortium and approved by a two-thirds vote of each member Municipal Corporation, taking into account financial capacity, to be deducted directly from the percentage allocated for investment from the transfer that the Government makes to municipal governments, from the tax revenues of the General Budget of Revenue and Expenditures of the Republic, independently of the external and internal funds that are negotiated and allocated to these.

G.- (Added by Decree No. 143-2009) Cases of border municipalities that intend to associate with municipalities of other countries shall require prior consultation with the Executive Power through the State Secretariats in the Offices of Governance and Justice and Foreign Relations, channeled through the Association of Municipalities of Honduras (AMHON). TITLE IV TERRITORY, POPULATION AND ORGANIZATION CHAPTER I OF NATIONAL TERRITORY

The municipal term is the geographic space to which the jurisdiction and competence of a municipality extends.

Law of Municipalities Association of Municipalities of Honduras MUNICIPALITY IN THE DEPARTMENT TYPES OF INHABITANTS NEIGHBORING RIGHTS AND OBLIGATIONS

Every municipal district forms part of a Department, subject to departmental jurisdiction. The departmental extension shall not be modified by effect of changes in municipal territories. No Municipality may extend into another department. CHAPTER II OF THE POPULATION

The inhabitants of the municipal territory are classified as residents and transients. Residents are persons who habitually reside in the municipality; Transients are persons who temporarily find themselves in the municipality.

The residents of a municipality have rights and obligations. Their rights are as follows:

• 1)

  To hold municipal positions through election or appointment;

• 2)

  To reside in the municipal territory peacefully and not be disturbed in their lawful activities;

• 3)

  To make petitions for reasons of particular or general interest and to obtain a prompt response, as well as to lodge complaints against the acts, agreements or resolutions of the municipality and to pursue liability claims, if applicable;

• 4)

  To receive the benefit of municipal public services;

• 5)

  To participate in investment programs and projects and to be informed of municipal finances;

• 6)

  To participate in the management and development of local affairs;

• 7)

  To request an accounting from the Municipal Corporation regarding municipal management, both in open town meetings through their representatives and directly, and;

• 8)

  The other rights provided for in the Constitution of the Republic and the Laws. Their obligations are as follows:

  • 1)

    To exercise the positions for which they are elected in the Municipality;

  • 2)

    To pay taxes in accordance with the Tax Schedule and this Law;

  • 3)

    To participate in the safeguarding of the patrimonial assets and civic, moral and cultural values of the municipality and to preserve the environment, and;

  • 4)

    The other obligations contained in the Constitution of the Republic and the Laws. POWERS OF THE MUNICIPAL CORPORATION CHAPTER III OF THE MUNICIPAL CORPORATION AND ITS FUNCTIONING

(According to Decree 48-91, which modified the first paragraph, repealed numeral 17, and added the final paragraph) The Municipal Corporation is the deliberative body of the Municipality, elected by the people and the highest authority within the municipal jurisdiction; consequently, it is empowered to exercise the following powers:

• 1)

  To create, reform, and repeal local normative instruments in accordance with this Law;

• 2)

  To create, suppress, modify, and relocate administrative units. Likewise, it may create and suppress enterprises, foundations, or associations, in accordance with the Law, in mixed form, for the provision of municipal services;

• 3)

  To approve the annual budget no later than the thirtieth (30) of November of the preceding year, as well as its modifications. To itemize global line items and to previously approve expenditures made against the same;

• 4)

  To issue the regulations and manuals for the proper functioning of the Municipality;

• 5)

  To appoint the officials designated in this Law;

• 6)

  To enact all measures of urban planning;

• 7)

  To approve annually the Plan of Fees, in accordance with the Law;

• 8)

  To grant, in accordance with the Law, the powers that may be required;

• 9)

  To hold assemblies of a consultive character in open council with representatives of local organizations, legally constituted, such as: communal, social, trade, labor union, ecological, and other organizations that by their nature merit it, in the judgment of the Corporation, to resolve all types of situations affecting the community;

• 10)

  To convoke a plebiscite to all citizen residents of the municipal jurisdiction to make decisions on matters of paramount importance, in the judgment of the Corporation. The result of the plebiscite shall be binding and must be published;

• 11)

  To receive, approve, or disapprove all types of applications, reports, studies, and other matters that according to the Law must be submitted for its consideration and to resolve motions for reconsideration;

• 12)

  To create awards and to regulate their bestowal;

• 13)

  To approve the contracting of loans and to receive donations, in accordance with the Law;

• 14)

  To know in appeal of the resolutions of immediately subordinate offices;

• 15)

  To declare a state of emergency or public calamity in its jurisdiction, when necessary, and to order appropriate measures;

• 16)

  To designate Municipal Counselors;

• 17)

  Repealed. 18) To plan urban development by determining, among others, residential, civic, historic, commercial, industrial, and recreational sectors, as well as oxygenating zones, contemplating necessary ornamental afforestation; 19) To provide for the necessary measures regarding the layout, opening, widening, and improvement of streets in towns and hamlets; and to grant permission to occupy them with underground conduits and posts for electrical wires and cables, railroad rails, towers and other apparatus for aerial cables and in general, with accessories of enterprises of municipal interest; 20) To sanction infractions of the agreements that regulate urbanism and city planning, with the suspension of works, demolition of constructed structures, and pecuniary sanctions; and, 21) To exercise in accordance with its autonomy all action within the Law. To attend to these powers, the Municipal Corporation shall appoint the working commissions COMPOSITION OF THE MUNICIPAL CORPORATION that are necessary, which shall be presided over by the Alderman appointed for such purpose.

(According to amendment by Decree 127-2000) The Municipal Corporation shall be composed of a Mayor, a Vice Mayor, and a number of Aldermen, as follows: 1) Municipalities with fewer than 5,000 inhabitants 4 Aldermen 2) Municipalities with 5,001 to 10,000 inhabitants 6 Aldermen 3) Municipalities with 10,001 to 80,000 inhabitants 8 Aldermen 4) Municipalities with more than 80,000 inhabitants 10 Aldermen 1 The political party that wins the Mayoralty shall have the right to the Vice Mayor position. The Vice Mayor shall enjoy the same rights as the Aldermen, with voice and without vote, and the absence of the Aldermen shall be covered in accordance with the Law, except in the case of exercising the principal office which shall enjoy all privileges. 1 According to numeral 4), article 219 of the Electoral Law, in the departmental capitals, 10 Aldermen are also elected.

Law of Municipalities Association of Municipalities of Honduras REQUIREMENTS FOR INTEGRATION OF THE CORPORATION COMPENSATION AND PREROGATIVES OF THE MEMBERS OF THE CORPORATION

(According to amendment by Decree 48-91) To be a member of the Municipal Corporation the following requirements are necessary:

• 1)

  To be Honduran born in the municipality or to be domiciled therein for more than five consecutive years;

• 2)

  To be over eighteen years of age and to be in the enjoyment of one's political rights, and;

• 3)

  To be able to read and write.

(As amended by Decree 127-2000) The members of the Municipal Corporations, depending on the economic capacity of the respective municipalities, shall receive per diem allowances for their attendance at sessions, or shall receive the corresponding salary according to whether they serve on part-time or full-time work commissions. The members of the Municipal Corporations shall be entitled to travel allowances and travel expenses when they must be absent from their municipalities to fulfill temporary missions assigned to them by the Municipal Corporation itself, or in its absence, by the Mayor. In any case, the operating expenses of the municipalities, including the payment of per diem allowances, may not exceed the limits established in Article 98, numeral 6) of this Law, under penalty of incurring liability.

Law of Municipalities Association of Municipalities of Honduras DUTIES OF THE MEMBERS OF THE CORPORATION The Mayor, Vice Mayor and the Aldermen shall enjoy the following prerogatives:

• 1)

  Not to be called upon to render military service in time of war;

• 2)

  Not to be held responsible for their proposals within the law, nor for their opinions expressed in relation to their functions. In these cases, if a crime is imputed to them, the special procedure of preliminary investigation shall be applied in the same manner as to judges;

• 3)

  Right to be issued an official passport for the fulfillment of functions;

• 4)

  To present all kinds of proposals, petitions and remedies;

• 5)

  To request information from the Mayor's Office in the different departments, as well as to obtain timely response; and,

• 6)

  Not to be removed or suspended without being previously subject to the corresponding preliminary investigation, in accordance with the procedure established by Law.

The duties of the members of the Municipal Corporation are:

• 1)

  To attend sessions of the Corporation punctually and to fulfill their functions with diligence;

• 2)

  To cast their vote on matters submitted to decision of the Corporation. In no case may they abstain from voting, except in the event that they have a personal interest;

• 3)

  To comply with the commissions that are assigned to them;

• 4)

  To justify requests for leave to not attend sessions;

• 5)

  To respond jointly and severally for the acts of the Municipal Corporation, unless they save their vote; and,

• 6)

  Such other duties as the Law may provide.

It is prohibited for members of Municipal Corporations:

• 1)

  To intervene directly or through an intermediary person in the discussion and resolution of municipal matters in which they are interested, or in which their partners, relatives within the fourth degree of consanguinity or second degree of affinity are interested, as well as in the contracting or operation of any matter in which they were involved;

• 2)

  To acquire or receive under any title, directly or indirectly, municipal property; and,

• 3)

  To hold paid administrative positions within the Municipality. The violation of the foregoing shall give rise to the nullity of the act incurred, without prejudice to the legal actions that may proceed in accordance with law.

(According to amendment by Decree 48-91) The following shall not be eligible for positions as members of the Municipal Corporation:

• 1)

  Those in arrears with the State or with any Municipality;

• 2)

  Those who hold positions in the public administration by Agreement or by Contract of the Executive Power and military personnel on active duty. Teaching positions in the area of public health and social assistance are excepted, when there is no incompatibility for the simultaneous exercise of both functions;

• 3)

  Those who, having been elected in other terms, have not attended the sessions of the Municipal Corporation in more than sixty percent (60%) without justification;

• 4)

  Those who are contractors or concessionaires of the Municipality;

• 5)

  Ministers of any religious denomination; and,

• 6)

  State concessionaires, their agents or representatives for the exploitation of natural resources or contractors of services and public works financed with municipal funds and those who for such reasons have pending accounts with the Municipality.

  Law of Municipalities Association of Municipalities of Honduras OFFICIALS APPOINTED BY THE CORPORATION SECRETARY, AUDITOR, TREASURER AND COMMISSIONER CORPORATE SESSIONS

A.- (Added by Decree 127-2000) The Corporation shall appoint a Secretary, an Auditor, where applicable, a Treasurer and a Municipal Commissioner who shall exercise the functions of Social Comptroller, the latter positions being held by persons external to the Corporation. The Mayor, or in his absence the Vice Mayor, shall convene and preside over the sessions of the Corporation.

B.- (Repealed According to article 5 of Decree 143-2009)

C.- (Added by Decree 127-2000) The Secretary, the Auditor, the Treasurer, and the Municipal Commissioner shall comply with the functions established in this Law.

(According to amendment by Decree 127-2000) Municipal Corporations shall meet in ordinary session twice per month, once every fifteen days on the dates established in the session calendar that they approve in the first annual session. Extraordinarily when convoked by the Secretary of the Municipal Corporation by order of the Mayor, acting ex officio or at the request of at least one-half of the Aldermen. If the Mayor does not convoke ordinary sessions on the dates established in the calendar, he shall be sanctioned for the infraction, in accordance with this Law. The Corporation may convene without the need for prior convocation, when the Mayor, Vice Mayor, and the proprietary Aldermen are all present and so decide, as well as regarding the agenda.

A.- (Added by Decree 127-2000) Notices for sessions of the Corporation shall be made in writing, indicating the place, day and time, detailing the matters to be discussed and shall be signed by the Mayor or Vice Mayor, as applicable. Notices shall be delivered together with copies of the documents that are the subject thereof, personally to the Council Members or, failing that, to a citizen residing at their residence, with three (3) days' notice in advance, except in a qualified case of urgency.

B.- 2 (Added by Decree 127-2000) Open town council sessions shall be convened by the Mayor, subject to a resolution approved by the majority of the members of the Municipal Corporation; no fewer than five (5) open town council sessions shall be held per year. Open town council sessions may be held with one or more communities 2 Decree 127-2000 added article 32-B but drafted it as 33-B

Law of Municipalities Association of Municipalities of Honduras QUORUM FOR SESSIONS PUBLICITY OF SESSIONS MINUTES AND VOTES OF SESSIONS when the nature of the matter is limited to their exclusive interest or the demographic density so requires. Violation of this provision shall result in the imposition of sanctions as established by this Law.

A quorum for sessions shall be established with the attendance of more than half of the members. Resolutions shall be approved by the vote of the majority of the members.

Sessions shall be public; notwithstanding, in exceptional cases, the Municipal Corporation may determine that they be conducted otherwise.

(As amended by Decree 127-2000) Minutes shall be drawn up for every session, in which a brief account of all proceedings shall be recorded and must be signed mandatorily by the members present and the Secretary who shall certify them. In each resolution, the votes in favor, votes against, and abstentions shall be recorded. No member of the Corporation may excuse himself from casting his vote, except in the case where he has a conflict of interest, in which case he must refrain from participating with voice and vote. The minutes must be duly signed by all members who participate in the session and shall serve as the basis for the Treasury for the payment of the respective dietas, as appropriate. Non-compliance with these obligations shall be sanctioned in accordance with the provisions established in this Law. Municipal minutes have the character of public documents, consequently, any citizen may request certification of the resolutions and agreements, once they have become final. In order that the entire population or all inhabitants have full knowledge of the content of the sessions held by the Municipal Corporation, the Municipal Secretary shall send within the following three (3) days, a certification of the resolutions and agreements to the Municipal Public Library or, failing that, shall display said certification in a visible and accessible place for the public. Non-compliance with the provisions of this Article shall give rise to the sanctions established by this Law, without prejudice to compliance therewith which any citizen resident of the municipality may demand.

VIGENCY OF RESOLUTIONS COMPETENCE TO SESSION BUDGET FOR THE CORPORATION JUDICIAL RESPONSIBILITY OF THE CORPORATION

(According to amendment by Decree 127-2000) The resolutions of the Corporation shall become final in the same or in the following session and shall enter into force once approved, except for those of general scope, in which case they must be previously published.

It is within the competence of the Municipal Corporation to meet for sessions. No other authority shall have the power to order, suspend, or prevent the sessions of the Municipal Corporation.

A.- (Added by Decree 127-2000) In the annual budget, budgetary provisions shall be made for the operation of the Corporation. CHAPTER IV OF THE RESPONSIBILITIES, REMOVAL AND SUSPENSION OF THE MEMBERS OF THE MUNICIPAL CORPORATION

Municipalities, as well as their members, incur judicial responsibility as follows:

Law of Municipalities Association of Municipalities of Honduras CAUSES OF SUSPENSION AND REMOVAL 1) For any action or omission willfully committed in the exercise of their functions and punished by Law; 2) Arrest warrant decreed for a crime that merits a penalty that produces civil liability, in accordance with the Law; and, 3) For damages caused by reckless imprudence or culpable negligence or by acts permitted or obligatory, which are executed without express agreement.

(According to amendment by Decree 48-91) The following are grounds for suspension or removal, as applicable, of members of the Municipal Corporation:

• 1)

  Having been finally convicted of the commission of a crime;

• 2)

  Having been issued a warrant of imprisonment for a crime that carries a sentence of imprisonment;

• 3)

  Immoral conduct;

• 4)

  Actions that imply abandonment, and any conduct harmful to the interests of the community in the performance of their duties, duly proven;

• 5)

  Being included in the grounds established by Article 31 of this Law;

• 6)

  Taking advantage of their position for personal benefit, or to favor business enterprises of their ownership in which they are a partner, or of relatives within the fourth degree of consanguinity or second degree of affinity, duly proven by competent authority; without prejudice to the criminal and civil actions that may apply; and,

• 7)

  Misappropriation of Municipal Funds, proven through an audit conducted by the Office of the Comptroller General of the Republic.

The removal shall be determined by the Secretary of State in the Offices of Governance and Justice, after previously hearing the implicated official, and the illustrative opinion of the Political Governor and the competent Municipal Corporation. 3

(According to reform by Decree 127-2000) In the event of a vacancy of the Mayor, the Vice Mayor shall substitute him. In the case of the Aldermen, their substitution shall be made in accordance with what is established by the Electoral Law and Political Organizations. If both the Mayor and the Vice Mayor become vacant, it shall be the responsibility of the Political Organization that proposed them to effectuate the respective substitution, through the Central Board.

When the irregular action derives from the handling or custody of administered assets, the Secretary of State in the Offices of Internal Affairs and Justice may proceed to suspend the implicated party, in which case he shall issue the final resolution within the term of thirty (30) business days, counted from the date of his suspension. 4 CHAPTER V OF THE MUNICIPAL MAYOR

The powers of general administration and legal representation of the Municipality correspond to the Municipal Mayor.

The Municipal Mayor shall preside over all sessions, assemblies, meetings, and other acts performed by the Corporation. The Municipal Mayor is the highest executive authority within the municipal jurisdiction and shall sanction the agreements, ordinances, and resolutions issued by the Municipal Corporation, converting them into mandatory compliance norms for the inhabitants and other authorities. Consequently, all other authorities, whether civil or police, shall comply with, cooperate in, and assist in the fulfillment of said provisions. 4 See articles 122-B and 122-C

Law of Municipalities Association of Municipalities of Honduras ABSENCES OF THE MAYOR AND MUNICIPAL VICE MAYOR FUNCTIONS AND COMPENSATION OF THE VICE MAYOR REPORTS OF THE MAYOR

(According to amendment by Decree 127-2000) The Mayor shall not be absent from his duties for more than ten (10) days without authorization from the Municipal Corporation, under penalty of incurring liability. In the absence or incapacity of the Mayor, he shall be substituted by the Vice Mayor. When the Mayor and Vice Mayor permanently vacate their offices, both shall be replaced in accordance with the procedure established by Law. If the absence is temporary, the position shall be filled by the Alderman designated by the Mayor. The Vice Mayor shall receive the salary assigned to him by the Municipal Corporation and shall perform the functions delegated to him by the Municipal Mayor. The salary assigned to the Vice Mayor shall not be less than that earned by full-time Aldermen.

The Mayor shall present to the Municipal Corporation a quarterly report on his management and a semi-annual report to the Central Government through the Office of the Secretary of State for the Departments of Governance and Justice.

(According to reform by Decree 127-

Law of Municipalities Association of Municipalities of Honduras INITIATIVES OF THE MUNICIPAL MAYOR BEFORE THE MUNICIPAL CORPORATION MUNICIPAL DEVELOPMENT COUNCIL 2000) The Mayor shall submit to the consideration and approval of the Municipal Corporation the following matters:

• 1)

  Budget by programs of the annual operational plan;

• 2)

  Plan of Municipal Taxes;

• 3)

  Municipal Ordinances;

• 4)

  Recognition awards granted to persons and institutions for relevant services rendered to the community;

• 5)

  Manual of Classification of Positions and Salaries;

• 6)

  Special Regulations; and,

• 7)

  Such other matters as in accordance with this Law are within the competence of the Corporation. CHAPTER VI OF THE MUNICIPAL DEVELOPMENT COUNCIL

(According to amendment by Decree 143-2009) Each Municipality shall have a Municipal Development Council appointed by the Municipal Corporation from among representatives of the various sectors of the community or outstanding citizens, which shall be presided over by the Municipal Mayor. Its members shall serve on an ad-honorem basis. Said council shall be composed of a number of members equal to that of the Aldermen that the municipality has.

Law of Municipalities Association of Municipalities of Honduras SECRETARY OF THE MUNICIPAL CORPORATION REQUIREMENTS OF THE SECRETARY The members of the Council may attend sessions of the Corporation when invited, with the right to speak but without vote. It shall be the responsibility of the Council to advise the Municipality on matters it deems appropriate or on those indicated to it; said Council being able to temporarily incorporate any citizen it deems convenient for the analysis of special aspects. CHAPTER VII OF THE SECRETARY OF THE MUNICIPAL CORPORATION

Every Municipal Corporation shall have a Secretary of its free appointment. His appointment and removal shall require the vote of the majority of the members of the Municipal Corporation.

To be Municipal Secretary, the following requirements are necessary:

• 1)

  To be Honduran;

• 2)

  To be of legal age of eighteen years and to be in full exercise of one's civil and political rights; and,

• 3)

  To know how to read and write, and preferably

  Law of Municipalities Association of Municipalities of Honduras DUTIES OF THE MUNICIPAL SECRETARY to hold a professional degree.

The duties of the Municipal Secretary are:

• 1)

  To attend sessions of the Municipal Corporation and prepare the corresponding minutes;

• 2)

  To certify the agreements, ordinances and resolutions of the Municipal Corporation;

• 3)

  To communicate to the members of the Municipal Corporation the notices convening sessions including the agenda;

• 4)

  To file, preserve and safeguard the minute books, case files and other documents;

• 5)

  To annually remit copies of minutes to the Departmental Government and to the National Archives;

• 6)

  To transcribe and notify the interested parties of the agreements, ordinances and resolutions of the Municipal Corporation;

• 7)

  To assist the commissions appointed by the Municipal Corporation;

• 8)

  To coordinate the publication of the Municipal Gazette, when there are sufficient economic resources for its edition;

• 9)

  To authorize with his signature the acts and resolutions of the Mayor and of the Municipal Corporation; and 10) Such other duties pertaining to the office of Secretary. CHAPTER VII

  Law of Municipalities Association of Municipalities of Honduras APPOINTMENT AND REMOVAL OF THE AUDITOR REQUIREMENTS OF THE AUDITOR DEPENDENCY OF THE AUDITOR OBLIGATIONS OF THE AUDITOR OF THE MUNICIPAL AUDITOR

Municipalities that have annual current revenue exceeding one million Lempiras shall have an Auditor appointed by the Municipal Corporation, and removal of such Auditor shall require the votes of two-thirds of the members thereof.

To be a Municipal Auditor, the following requirements are necessary:

• 1)

  To be Honduran;

• 2)

  To be a citizen in the full enjoyment of his or her civil and political rights; and,

• 3)

  To possess a degree as a Licensed Public Accountant or Mercantile Expert and Public Accountant with experience in Auditing and to be duly registered with the professional college.

The Municipal Auditor shall report directly to the Municipal Corporation to which he shall submit monthly reports on his audit activities and on such matters as it may order.

The Municipal Auditor is obligated to comply with the provisions of this Law and its Regulations.

Law on Municipalities Association of Municipalities of Honduras APPOINTMENT OF THE TREASURER REQUIREMENTS OF THE TREASURER OBLIGATIONS OF THE TREASURER CHAPTER IX OF THE MUNICIPAL TREASURER

Every Municipality shall have a Treasurer appointed by the Municipal Corporation at the proposal of the Mayor, who shall be responsible for the collection and custody of municipal funds and the execution of the respective payments.

(According to reform by Decree 48-91) The Treasurer shall preferably be an accounting professional; in order to take possession of his office, he shall provide to the Municipal Treasury a qualified guarantee evaluated by the General Comptroller's Office of the Republic 5, to answer for his management.

(According to amendment by Decree 48-91) The obligations of the Municipal Treasurer are the following:

• 1)

  To effect payments contemplated in the Budget and that meet the corresponding legal requirements;

• 2)

  To register the municipal accounts in books authorized for such purpose; 5 According to article 97 of the Law of the Superior Court of Accounts, each municipality must establish and qualify the bonds, in accordance with the Regulations of that same Law.

  Law of Municipalities Association of Municipalities of Honduras MUNICIPAL COMMISSIONER FUNCTIONS OF THE COMMISSIONER 3) To deposit daily in a local Bank, preferably of the State, the collections received by the Municipal Corporation. Should there be no local Bank, the Municipalities shall establish the appropriate measures for the custody and handling of the funds; 4) To report monthly to the Corporation of the Movement of Income and Expenditures; 5) To report at any time to the Municipal Corporation of the irregularities that may damage the interests of the Municipal Treasury; and, 6) The other duties inherent to his office. CHAPTER X OF THE MUNICIPAL COMMISSIONER AND THE CITIZEN COMMISSIONS FOR MUNICIPAL TRANSPARENCY

(According to reform by Decree 143-2009) Every Municipality shall have a Municipal Commissioner appointed by the Municipal Corporation, from a list of four (4) persons proposed by civil society organizations in open town hall and shall serve for two (2) years in the exercise of his office. The Municipal Commissioner must be of legal age, be in full enjoyment of his civil rights, be of recognized leadership, moral solvency and have continuous residence in the municipality for the last five (5) years at the time of his nomination. The functions and powers of the Municipal Commissioner are:

• 1)

  To ensure compliance with this Law and its Regulations, safeguarding the defense of human rights, with special attention to vulnerable groups;

• 2)

  To ensure that the administration of public services is based on better service to the citizenry;

• 3)

  To monitor that the legal deadlines are met in the preparation of the budget and the proper distribution of resources;

• 4)

  To present all kinds of petitions to municipal authorities with the right to obtain timely response;

• 5)

  To request that the Municipal Corporation hold plebiscites or open town halls on matters of transcendental importance to the life of the municipality;

• 6)

  To monitor prompt response to requests, reports and other matters submitted for consideration of the Municipal Corporation, by the citizenry or other entity, within the deadlines of the administrative procedure; BUDGET FOR THE MUNICIPAL COMMISSIONER THE COMMISSIONER AS SOCIAL COMPTROLLER 7) To verify that loans and donations comply with the purpose for which they were negotiated and granted; 8) To supervise the execution of subsidies granted to patronatos and civil organizations; 9) To supervise the management of funds received by Water Boards, protection of resources and their components; and, 10) To require a technical composition, gender approach and operability of the Municipal Development Council. The plans, programs and projects executed by the Commissioner must be in accordance with the Municipal Development Plan, assigning a budget line within the General Budget of Income and Expenses of the Republic, through the National Commissioner of Human Rights, for office expenses and mobilization in accordance with the corresponding budget line.

A.- (Added by Decree 143-2009) For the exercise of the responsibilities of social oversight established in Article 31-A of this Law, the Municipal Commissioner shall monitor the transparency of the acts of officials holding elective positions, as well as of permanent or temporary servants appointed by municipal agreement or by contract, both in the municipalities and in the intermunicipal associations or associations of municipalities. The efforts to guarantee the transparency of Municipal Government shall be guided by a Municipal Transparency Program that the Municipal Commissioner shall prepare with the support of the Transparency Commission, with the participation of the Municipal Corporation and the community organizations operating within the municipal jurisdiction, which shall be approved in an Open Town Meeting convened in accordance with the law.

B.- (Added by Decree 143-2009) In each municipality, Citizens' Transparency Commissions (CCT) shall be created, having as their principal objective the performance of social audits within the municipal jurisdiction, understood as the process of citizen participation, both men and women, aimed at monitoring public management processes that ensure transparent execution of programs and projects, as well as the provision of public services in an effective and efficient manner. The Commission may establish coordination with the Municipal Commissioner in those activities related to its work.

Law of Municipalities Association of Municipalities of Honduras For the formation of this Commission, the Municipal Corporation shall provide all necessary support to civil society so that in assemblies of representatives of community organizations, trade associations, business organizations and all those of a social nature existing within the municipal jurisdiction, they shall elect the Citizens' Transparency Commission, which shall exercise its functions during a period of three (3) years, and may be reelected for one additional period. The Citizens' Transparency Commission (CCT) shall be composed of a minimum of five (5) members and shall have the support of community social auditors who shall be appointed by each community. To be a member of the Citizens' Transparency Commission (CCT) it shall be required to be in full enjoyment of citizen rights and to be of recognized moral integrity. From the citizen assembly in which the Citizens' Transparency Commission (CCT) is elected, minutes shall be drawn up recording all details of the election and the names of its members, which shall be presented for registration in the registry that the Municipality shall maintain for this purpose and shall be sworn in by the Municipal Mayor or his representative.

Law of Municipalities Association of Municipalities of Honduras POWERS OF THE TRANSPARENCY COMMISSION The procedures for operation of the Citizens' Transparency Commission (CCT) shall be regulated by its respective regulations, which shall be prepared by the Commission and agreed upon with the Municipal Corporation for its approval.

C.- (Added by Decree 143-2009) The following are the powers and duties of the Citizens' Commission for Transparency:

• 1)

  To supervise citizen participation in the socialization of the municipal budget;

• 2)

  To ensure that the appointment and removal of municipal public servants comply with the manuals and laws of the State;

• 3)

  To verify that open town halls and other citizen participation procedures respond to the interests of the citizenry, comply with the requirements stipulated by law, and to monitor compliance with the agreements reached;

• 4)

  To guarantee the transparency of scrutiny in elections of boards of patrons, plebiscites, or open town halls;

• 5)

  To verify that responses to citizen petitions for intervention by the Municipal Corporation are answered impartially;

• 6)

  To verify and monitor the environmental impact assessment in all public works and private works when they adversely affect municipal interests;

• 7)

  To support municipal government in the creation of strategic alliances with the various public and private organizations and local groups operating within the municipal sphere, enhancing municipal autonomy;

• 8)

  To participate in joint actions to evaluate the public services provided by the municipality and other public entities present in the territory and to submit the corresponding recommendations;

• 9)

  To verify and report on the execution of community projects under any financing modality, granted to boards of patrons or any other form of public community organization and civil society present in the municipality;

• 10)

  To support the Municipal Corporation in citizen co-responsibility for paying municipal taxes;

• 11)

  To ensure compliance with the Law of Transparency and Access to Public Information;

• 12)

  To contribute to the identification and prevention of acts of corruption by public officials present in the territory;

• 13)

  Other matters related to its jurisdiction that the Commission deems appropriate;

• 14)

  To provide reports to the Municipal Corporation of the social audits conducted; and,

• 15)

  To exercise control and monitoring over the budgetary execution of the Municipal Corporation.

D.- (Added by Decree 143-2009) The Day of Municipal Accountability in open cabildo is hereby established to hear, discuss, and annually reach agreements regarding the results of the Municipal Transparency Program and to promote measures that consolidate transparency in the acts of municipal authorities and civil servants. The Day of Municipal Accountability shall be held during the second half of the month of January of each year and shall present the budget executed in the previous year and the budget projected for the new year.

E.- (Added by Decree 143-2009) In each municipality, local public policies shall be formulated and executed, oriented to address the needs of women 6, youth, children, the elderly, persons with disabilities, ethnic groups and other priority groups, which may be implemented through the creation of units, departments or social development management offices for which purpose the Municipal Corporation shall allocate financial resources from its annual budget of revenues and expenditures for the implementation of specific programs and projects, in accordance with its financial capacity and the needs of each municipality. Those municipalities that at the time of entry into force of these provisions have organized specific offices may continue to function in accordance with these provisions.

6 According to Decree 143-2009, the following was established: Article 4.- The municipal corporations shall establish offices and support programs for women, in order to channel their initiatives and protect their rights. The Municipal Mayoralties that already have these departments must strengthen them and incorporate organized or unorganized women's groups from their respective communities. The Municipalities that do not have the economic capacity for the establishment of these programs shall transfer resources from the Poverty Reduction Strategy, with their own funds and with funds from the transfer of the Central Government and shall incorporate voluntary resources from the community.

Law of Municipalities Association of Municipalities of Honduras STATE COLLABORATE WITH LOCAL POLICIES FUNCTIONS OF MUNICIPAL SOCIAL OFFICES

F.- (Added by Decree 143-2009) For compliance with the provisions of the preceding Article, the public entities of the central government and the decentralized or deconcentrated institutions of the State shall contribute according to their competencies with technical assistance and allocation of financial resources through specific transfers to the municipalities.

G.- (Added by Decree 143-2009) The functions of the unit, department or management are the following:

Municipal Law Association of Municipalities of Honduras 1) To establish a municipal agenda of local public policies relating to women, children, youth, elderly adults, persons with disabilities, ethnic groups and other priority groups so that they are actively incorporated in all development processes of the municipality in accordance with the pertinent national public policies; 2) To establish strategic alliances with public and private institutions for the implementation of local public policies; 3) To ensure compliance with current national and international legislation in favor of the aforementioned groups; 4) To provide technical support to the Municipal Corporation in the holding of open town meetings to discuss the issues of the groups referred to in numeral 1) of this Article and to incorporate their demands in the Strategic Plan for Municipal Development and the respective annual operational plan; 5) To formulate programs and projects in support of the management of the Municipal Mayor's Office before national and international cooperation agencies, non-governmental organizations and other entities of a public and private nature; and, 6) Other functions related to its competence.

Municipal Law Association of Municipalities of Honduras AUXILIARY MAYORS APPOINTMENT AND REMUNERATION

(According to amendment by Decree 127-2000) There shall be Assistant Mayors in neighborhoods, residential areas and villages proposed in each of them by the respective popular assembly and they shall be accredited by the corresponding Mayor, this position is incompatible with members of the Municipal Corporation. The appointment of Assistant Mayors shall fall upon persons of recognized respectability who know how to read and write. They shall serve in their position for one (1) year and may be reelected. They shall be remunerated economically in accordance with the meetings which they attend and whose amount shall be subject to the financial availability of the municipality, said meetings may not exceed two (2) per month. All authorities of the central administration and of the municipality itself who are to have intervention in its jurisdiction are under the obligation to cooperate with the Assistant Mayor for the efficient performance of their functions, including the provision of materials required for such purpose and the corresponding training. Assistant Mayors may only be removed for manifest negligence, physical or mental incapacity, as well as for acts contrary to Law or morality.

Law of Municipalities Association of Municipalities of Honduras RIGHTS AND OBLIGATIONS OF ASSISTANT MAYORS ORGANIZATION OF PATRONAGES, BYLAWS AND MUNICIPAL REGULATION

(According to reform by Decree 127-2000) Deputy Mayors shall have the right to attend sessions of the Municipal Corporation with voice, only to address matters of direct interest with respect to the area they represent, when they are summoned for such purpose or have matters to raise, in these cases the respective municipality shall reimburse them for expenses incurred in the proceedings. The Municipal Corporation shall regulate the other rights and obligations of Deputy Mayors. CHAPTER XI OF DEPUTY MAYORS AND OTHER FORMS OF COMMUNITY ORGANIZATION

(According to reform by Decree 143-2009) In each municipality, neighborhood, district or village, residents shall have the right to organize themselves democratically in civic associations or in other modalities of community organization accepted and recognized both by local authorities and by the community itself and which also serve as auxiliaries in the management of the interests of the municipality and its inhabitants and which have as their objective the improvement of their respective communities.

Law of Municipalities Association of Municipalities of Honduras The Civic Association and other modalities of community organization are considered natural structures of organization, linked by bonds of coexistence in a determined community, constituted as basic auxiliary units of local public administration, to which the State recognizes their legal personality. These modalities of community organization shall be composed of a Board of Directors which shall be elected annually by direct and secret vote of the male and female citizens of their community, and must register their candidate slates one month in advance with the municipal mayor's office; once elected, they shall proceed to their registration by the Municipal Corporation. Once these organizations and their boards of directors are registered, their nullity or non-existence may only be decreed by judicial sentence. The bylaws shall contain the following:

• 1)

  Name of the community organization;

• 2)

  Description of its territory;

• 3)

  Purpose;

• 4)

  Duration or statement of constitution for an indefinite period;

• 5)

  Domicile;

  Law of Municipalities Association of Municipalities of Honduras OTHER ORGANS OF THE MUNICIPALITY APPOINTMENT AND REMOVAL OF EMPLOYEES 6) Organizational structure of its organs, with specification of the periodicity of meetings and functions; 7) Assets; 8) Dissolution; and, 9) Liquidation, in which case the provisions contained in the bylaws shall apply and in their absence what is established in the Civil Code for civil associations. The respective Municipality shall ensure the proper functioning of the civic associations or community organizations and the correct exercise of their internal democracy, for which purposes it shall enact the corresponding ordinances and provisions and shall supervise the electoral process of their organs. CHAPTER XI OF THE OTHER ORGANS OF MUNICIPAL ADMINISTRATION

When economic conditions permit and the work merits it, the Mayor is empowered to appoint the heads of other administrative bodies such as the Office of the Mayor, the General Procuracy, and others that the Municipal Corporation may create.

Municipal employees must be suitable Hondurans and shall enjoy notorious and good conduct and shall be of free appointment and removal by the Mayor. CHAPTER XII OF MUNICIPAL LEGAL INSTRUMENTS

The following shall have the category of municipal legal instruments:

• 1)

  Municipal ordinances or agreements that are norms of general application within the municipal jurisdiction, concerning matters of exclusive competence of the Municipality;

• 2)

  Resolutions, which are the provisions issued by the Municipal Corporation that terminate the municipal administrative procedure in order to decide all matters raised by the interested parties that result from files opened ex officio or at the request of a party;

• 3)

  The regulations that are issued in accordance with this Law;

• 4)

  The orders or decrees that are the procedural steps that allow the municipal procedure to proceed and shall be headed with the name of the Municipality that issues it, the department that prepares it, and the date; and,

• 5)

  The minutes of the sessions of the Municipal Corporation.

  Law of Municipalities Association of Municipalities of Honduras HIERARCHY OF MUNICIPAL ACTS AUTHORITIES SUPPORTING THE MUNICIPALITY MUNICIPAL TRANSITION AND TRANSFER

The acts of municipal administration shall conform to the following normative hierarchy:

• 1)

  The Constitution of the Republic;

• 2)

  International Treaties ratified by Honduras;

• 3)

  This Law;

• 4)

  Special administrative laws;

• 5)

  Special and general laws in force in the Republic;

• 6)

  Regulations issued for the implementation of this Law;

• 7)

  Other general or special Regulations;

• 8)

  The Police Law insofar as it does not conflict with this Law;

• 9)

  The general principles of Public Law.

Within the municipal territory, the civil and military authorities are obliged to comply with, and to ensure compliance with, the ordinances and administrative provisions issued by the Municipality. CHAPTER XIII OF THE TRANSITION PERIOD AND TRANSFER OF MUNICIPAL GOVERNMENT

A.- (Added by Decree 143-2009) The period of transition and transfer of Municipal Government is hereby established and regulated, which comprises the conclusion of the term of office of the municipal government in office and the beginning of the term of office of the elected municipal government. For such purposes, the regulations governing transition processes shall be applicable to all municipalities whose authorities conclude the exercise of their offices in accordance with the provisions established by this Law.

B.- (Added by Decree 143-2009) The period of transition and transfer of municipal government shall span from October 25th of the year in which municipal authority elections are held until January 25th of the year in which the newly elected authorities begin their term. The aforementioned transition period shall be organized in three (3) stages, which are as follows: 1) FIRST STAGE. Preparation of the Municipal Management Report for the period corresponding to the outgoing authority, in accordance with the manual prepared by the Association of Municipalities of Honduras (AMHON); the report shall be prepared between October 25th and November 25th of the year in which municipal authority elections are held;

Law of Municipalities Association of Municipalities of Honduras CEREMONY OF TRANSFER AND OATH-TAKING 2) SECOND STAGE. Presentation, analysis, verification and formal delivery of information, including the management report; the verification of information shall be conducted between the date on which the name of the elected candidate is officially recognized and January 25th of the year in which the newly elected authorities begin their term, who must receive all documentation in accordance therewith and sign for the record; and, 3) THIRD STAGE. Taking of office by the newly elected municipal authorities, which shall take place on January 25th of the year in which the term begins. For all purposes, the first and second stages shall be subject to the observation of the Municipal Transparency Citizen Commission.

C.- (Added by Decree 143-2009) The ceremony for the transfer of command shall be conducted by the Transition and Transfer Commission of Municipal Government, chaired by the outgoing Mayor and composed of representatives from both parties. The final act of this stage shall be the swearing-in of the new Municipal Corporation, in accordance with the Electoral Law and the provisions of Political Organizations. Once the approved agenda has been exhausted, the Municipal Secretary shall read the minutes taken, which shall be signed by the outgoing Municipal Corporation and the incoming Municipal Corporation. The foregoing provisions shall be developed and supplemented by regulatory provisions and specific manuals prepared and approved by the Association of Municipalities of Honduras (AMHON). TITLE V OF MUNICIPAL TREASURY CHAPTER I OF GENERAL ADMINISTRATION

(According to reform by Decree 48-91) Municipal Treasury shall consist of:

• 1)

  Urban and rural lands, as well as other real property whose ownership or possession belongs to the Municipality, without prejudice to the provisions of special laws;

• 2)

  Urban lands registered in favor of the State whose ownership is transferred to it by the Executive Power in any capacity;

• 3)

  National or ejidal lands granted by the State as areas for population growth.

  Law of Municipalities Association of Municipalities of Honduras ADMINISTRATION OF MUNICIPAL TREASURY DOMAIN OVER FOREST EJIDOS Rural lands of agricultural and livestock vocation are subject to the provisions of the Agrarian Reform Law;

• 4)

  Contributions made by the Executive Power in favor of the Municipalities or resources transferred to it;

• 5)

  Values acquired by the Municipality in the form of loans with national and foreign entities;

• 6)

  Resources obtained by the Municipality in the form of inheritance, bequests, or donations;

• 7)

  Other property, rights, income, or assets of any kind that the Municipality receives or to which it is entitled.

(As amended by Decree 127-2000) Municipal Treasury is administered by the Municipal Corporation directly or through delegation to the Mayor, within each fiscal year that begins on January 1st and ends on December 31st of each year. Rural ejidal immovable property with forestry vocation shall pass to full ownership of the Municipality, once its vocation and the perimeter of the forestry area have been determined, it being understood that the forestry vocation and its perimeter shall be established technically by the State Forestry Administration at the request of the Municipality.

Law of Municipalities Association of Municipalities of Honduras NATIONAL AGRARIAN INSTITUTE GRANTS TITLE TO MUNICIPALITY MUNICIPALITY TITLES LANDS For such purpose, the National Agrarian Institute (INA) shall grant the respective title of transfer within a maximum period of one hundred eighty (180) calendar days counted from the date of receipt of the petition; in case of non-compliance, the Municipality may institute executive action for performance in order to obtain the granting of the corresponding Deed before the competent Courts. The title shall be registrable in the Property Registry without necessity of a Public Deed. Municipalities must achieve sustainable management, directly, in association, or through third parties, of the forestry resources of their property, in accordance with their vocation and with the management plan approved by the State Forestry Administration. CHAPTER II OF MUNICIPAL PROPERTY

(According to amendment by Decree 127-2000) Municipalities may equitably title in favor of third parties, land of their property that is not of forestry vocation, being able to charge for such purpose the corresponding values, provided that they do not violate the provisions of this Law.

Municipal Law Association of Municipalities of Honduras MUNICIPAL DOMAIN IN INHABITED EJIDOS EJIDOS IN CONCESSION The ejidal real property that does not correspond to those designated in the preceding Article, where there are permanent human settlements, shall be titled in full domain by the National Agrarian Institute (INA), within a maximum period of one hundred eighty (180) calendar days counted from the date of receipt of the application, gratuitously in favor of the municipality, once its perimeter has been delimited. In the case of ejidal real property and those other properties of municipal domain, where there are human settlements or that are within urban limits and that are in possession of private parties without having full domain, the Municipality may, at the request of these, grant title of full domain by paying the amount agreed by the Municipal Corporation, at a price not less than ten (10%) percent of the last cadastral value, or failing that, of the real value of the property, excluding in both cases improvements made at the expense of the possessor. The following are excepted from the foregoing provisions: ejidal land located within the limits of human settlements that have been or are being held by natural or legal persons through concessions from the State or the Municipality, land that shall pass in favor of

Municipal Law Association of Municipalities of Honduras SALE PRICE IN MARGINALIZED AREAS HOUSING OF SOCIAL INTEREST Municipality once the concession period is concluded. In the case of urban properties or in marginalized human settlements inhabited as of December 31, 1999, by persons of limited resources, the value of the property shall be a price not exceeding ten percent (10%) of the cadastral value of the property, excluding improvements made by the possessor. No person may acquire under this procedure more than one lot, unless it is municipal private land whose full domain has been acquired by purchase, donation, or inheritance. In other cases, the municipality may establish social interest housing programs, in which case the sale prices and payment methods shall be determined based on the payment capacity of the beneficiaries and subject to the respective allocation regulations, in all cases being required to recover its cost. When private projects are of social interest, the Municipal Corporation may exempt it from one or more of the urban planning requirements relating to infrastructure regarding pavement and curbing. Exceptionally in social interest projects, municipalities may authorize minimum housing and urbanization projects

Municipal Law Association of Municipalities of Honduras ONE LOT PER COUPLE ALLOCATION OF FUNDS FROM LAND SALES within a progressive development framework. For purposes of the provisions of this article, the appraisal shall exclude the value of improvements made by the possessor or occupant. No more than one lot may be granted in domain to each couple in social interest housing programs, nor to those who already have housing. For these purposes, the Municipal Secretary shall keep control of the titles granted, under penalty of incurring liability.

(According to amendment by Decree 127-2000) All revenues derived from the sale of the property referred to in the preceding article shall be allocated exclusively to projects of direct benefit to the community, approved by the Municipal Corporation, subject to the prior opinion of the Municipal Development Council. Any other use given to this revenue shall be sanctioned in accordance with the provisions of this Law. Any person within the municipal jurisdiction shall have the authority to report or accuse the official who violates the provisions of this Chapter before the Courts of the Republic. The Municipalities shall ensure that sufficient areas are reserved from their real property for social services, for interconnections of streets, avenues, boulevards, sidewalks, parking areas, and for zones of green space, recreation, and sports.

(Interpreted 7) (According to amendment by Decree 127-2000) National real property for public use such as beaches, up to a distance of ten (10) meters measured from the highest tide, parks, streets, avenues, bridges, riverbanks, coastlines, lakes, lagoons, rivers, public utility and service works, as well as property intended for these purposes or for green areas, may not be alienated, encumbered, attached or foreclosed, under penalty of absolute nullity and civil and criminal liability for those involved. Riparian property owners shall permit access to beaches, lakes and rivers, leaving adequate spaces for streets of no less than 15 meters in length, each one hundred meters in urban areas and each 300 meters in rural areas. In no case may title be granted in favor of private parties over national and municipal property for public use, nor over those other properties that have historical or cultural value or that are affected for the provision of a public service. Should the provision of the public service cease or if the property should become unnecessary for its provision and the safety and welfare of the community would not be affected, the Municipal Corporation may remove its public character through a resolution adopted following consultation with the residents of the respective town, neighborhood, colony or village, held in open town meeting. It may also alienate such property in cases of concession of the provision of the service, subject to applicable regulations on the matter. The remaining municipal real property may be transferred, in the case of housing, through the regulatory procedure for adjudication approved by the Corporation. It may also transfer real property to another public institution, in which case the agreement of the Corporation and the other institution shall suffice. In matters not provided for in this article, the provisions of the Civil Code shall be observed. CHAPTER III OF INCOME

The revenues of the Municipality are divided into tax revenues and non-tax revenues. Tax revenues are those derived from taxes, service fees and contributions; and non-tax revenues are those that enter the Municipality in the form of sales, transfers, subsidies, inheritances, bequests, donations, fines, surcharges, interest and credits. CHAPTER IV OF TAXES, SERVICES, FEES AND CONTRIBUTIONS

It is incumbent upon the Municipalities to establish the rates for services and the amounts for contributions for improvements. They shall not be able to create or modify taxes.

(According to amendment by Decree 177-91) the following have the character of municipal taxes:

• 1)

  Real Property;

• 2)

  Personal;

• 3)

  Industry, Commerce and Services;

  Law of Municipalities Association of Municipalities of Honduras TAX ON REAL PROPERTY ADJUSTMENT OF CADASTRAL VALUE 4) Extraction and Exploitation of Resources, and; 5) Livestock.

(According to amendment by Decree 124-95), the Tax on Real Property shall be paid annually, applying a rate of up to L.3.50 per thousand, in the case of urban real property and up to L.2.50 per thousand, in the case of rural property. The applicable rate shall be set by the Municipal Corporation, but in no case shall the increases be greater than L.0.50 per thousand, in relation to the current rate; the amount to be paid shall be calculated according to its cadastral value and, in the absence thereof, according to the declared value. The cadastral value may be adjusted in years ending in (0) zero and in (5) five 8, following the following criteria: 8 By means of Decree 124-95 the following was established: Article 3. The determination of the values corresponding to 1995, pursuant to the provisions of reformed Article 76 of the Law of Municipalities, shall be previously agreed upon with the different social and economic sectors of their respective jurisdictions, within a period of (90) days counted from the date of entry into force of this Decree. For subsequent years the agreement of these same values shall be effected within a term of ninety (90) days prior to the date of approval of the budget of each municipality. Article 4. After the agreement period referred to in the first paragraph of Article 3 has elapsed, taxpayers shall be subject to the credits and debits resulting from the agreed cadastral values; with a period of thirty (30) days to make the respective payment or claim the corresponding refunds.

Law of Municipalities Association of Municipalities of Honduras EXEMPT FROM PAYMENT a) Land use; b) Market Value; c) Location; and d) Improvements The Tax shall be paid in the month of August of each year, applying in case of default, a surcharge of two percent (2%) monthly 9, calculated on the amount of the tax to be paid, except in the year 1995. The following are exempt from payment of this tax 10:

• a)

  Real property intended for the dwelling of its owner, as follows: 1. With respect to the first ONE HUNDRED THOUSAND LEMPIRAS (L.100,000.00) of its registered or declared cadastral value in municipalities with 300,001 inhabitants or more. 2. With respect to the first SIXTY THOUSAND LEMPIRAS (L.60,000.00) of its registered or declared cadastral value in Those who are included in the ranges of exceptions of reformed Article 76 of the Law of Municipalities shall not be required to make any payment. 9 What is established by Article 109 of this Law shall apply. 10 According to Article 220 of the Electoral Law, real property of political parties is exempt from municipal taxes and fees.

  Law of Municipalities Association of Municipalities of Honduras PERSONAL TAX municipalities with 75,000 to 300,000 inhabitants. 3. With respect to the first TWENTY THOUSAND LEMPIRAS (L.20,000.00) of its registered or declared cadastral value in municipalities with up to 75,000 inhabitants.

• b)

  State property (Interpreted 11);

• c)

  Temples intended for religious worship and their parish centers;

• d)

  Centers of free education or nonprofit education, assistance or social welfare centers and those belonging to private development organizations, qualified in each case by the Municipal Corporation; and e) Centers for industrial, commercial and agricultural exhibitions, belonging to nonprofit institutions qualified by the Municipal Corporation.

(According to reform by Decree 48-91). Every natural person shall pay annually a single personal tax on their annual income in the municipality where said income is received, in accordance with the following table: 11 According to Decree 171-98, the following was established: Article 4. To interpret literal b) of Article 76 of the Law of Municipalities, which was reformed through Decree No. 124-95 dated August 8, 1995, in the sense that private individuals who occupy, possess, exploit, use or usufruct state or communal property are not exempt from payment of the Tax on Real Property.

Law of Municipalities Association of Municipalities of Honduras SWORN DECLARATION OF LPS. UP TO LPS. THOUSAND 1 5,000 1.50 5,001 10,000 2.00 10,001 20,000 2.50 20,001 30,000 3.00 30,001 50,000 3.50 50,001 75,000 3.75 75,001 100,000 4.00 100,001 150,000 5.00 150,001 or more 5.25 The persons referred to in this Article shall present no later than the month of April of each year a sworn declaration of the income received during the previous calendar year, in the forms that the Municipality shall provide free of charge for such purpose. The fact that the taxpayer has not obtained the form does not exempt him from the obligation to make the declaration, which in this case may be presented on plain paper with the requirements contained in the same form. The presentation of the declaration outside the deadline established in this Article shall be sanctioned with a fine equivalent to ten percent (10%) of the tax to be paid.

Law of Municipalities Association of Municipalities of Honduras PAYMENT DATE FINES EXEMPT FROM PAYMENT This tax shall be paid no later than the month of May; at the discretion of the municipality, it may be withheld at the source in the first quarter of the year, with employers obligated to withhold it and remit it to the Municipality within a period of fifteen (15) days after having received it. Failure to comply with the provisions of the preceding paragraph shall be sanctioned with a fine equivalent to twenty-five percent (25%) of the amount failed to be withheld and with three percent (3%) monthly on the amounts withheld and not remitted within the specified period; without prejudice to paying the amounts withheld or failed to be withheld. The following are exempt from payment of this tax:

• a)

  Those who are constitutionally exempt;

• b)

  Retirees and pensioners for disability, on the amounts they receive for these concepts;

• c)

  Citizens over sixty-five (65) years of age who have annual gross income below the vital minimum set by the Income Tax Law, and;

• ch)

  Those who, when for the same income, are individually subject to the Tax on Industries, Commerce and Services

  Law of Municipalities Association of Municipalities of Honduras TAX ON INDUSTRIES, COMMERCE AND SERVICES Each year, in the month of February, the Municipality shall send to the General Tax Authority a report that includes the name of the taxpayer, their National Tax Registry number and the declared value. The Deputies elected to the National Congress and public officials with national jurisdiction appointed constitutionally may make payment of this tax in the Municipality of their habitual residence or where they exercise their functions, at their election.

(According to amendment by Decree 48-91) Tax on Industries, Commerce and Services is that which is paid monthly by every natural person or individual or corporate merchant for their mercantile, industrial, mining, agricultural activity, provision of public and private services, electronic communication, urban development construction companies, casinos, savings and loan banking institutions, insurance companies and any other lucrative activity, which shall be taxed according to their volume of production, income or annual sales, as follows:

Law of Municipalities Association of Municipalities of Honduras TAX ON BILLIARD HALLS AND CONTROLLED PRODUCTS from L.0.00 to L.500,000.00 L.0.30 per thousand from L.500,001.00 to L.10,000,000.00 L.0.40 per thousand from L.10,000,001.00 to L.20,000,000.00 L.0.30 per thousand from L.20,000,001.00 to L.30,000,000.00 L.0.20 per thousand from L.30,000,001.00 onward L.0.15 per thousand The value of exports of products classified as non-traditional shall not be computed for the calculation of this tax. The taxpayers referred to in this Article are obligated to present in the month of January of each year, a sworn statement of the economic activity of the prior year. The failure to comply with this provision shall be sanctioned with a fine equivalent to the tax corresponding to one month.

(As amended by Decree 177-91) Notwithstanding the provisions of Article 78, the establishments detailed hereinafter shall pay the following taxes: 1) Billiard halls, for each table shall pay monthly the equivalent of one daily minimum wage; 12 See Article 122-A of this Law

Law of Municipalities Association of Municipalities of Honduras TAX ON EXPLOITATION OF RESOURCES 2) The manufacture and sale of products subject to price control by the State shall pay monthly its tax based on its annual sales in accordance with the following scale: PER THOUSAND From L. 0 to L. 30,000,000.00 L. 0.10 From L. 30,000,001.00 onwards L. 0.01 The tax indicated in this Article shall be paid during the first ten (10) days of each month, without prejudice to the payment for income from other products that must be made in accordance with the provisions of the foregoing Article 78.

(According to amendment by Decree 48-91) Extraction or Exploitation of Resources Tax is that paid by natural or juridical persons who extract or exploit quarries, minerals, hydrocarbons, forests and their derivatives; fish, hunt or extract maritime, lacustrine or fluvial species in seas and lakes, up to 200 meters in depth and in rivers. The rate, except for cases contemplated in the following paragraphs, shall be 1% of the commercial value of the extraction or exploitation of the

Municipal Law Association of Municipalities of Honduras METALLIC MINING TAX resource within the municipal territory, independent of its center of transformation, storage, processing or collection, or any other provision that the State may agree upon. In the case of metallic mineral exploitation, in addition to the tax on Industries, Commerce and Services, a sum equivalent to fifty cents of United States dollars shall be paid to the Municipality for each ton of processable material or ore, in Lempiras, in accordance with the Customs Valuation Factor. In the case of common salt and lime, Extraction or Exploitation of Resources Tax shall be paid starting from two thousand (2,000) metric tons. When it comes to metallic mining exploitation and while refineries are established in our country to operate the industrial separation of metals, the Municipalities shall designate the personnel they deem appropriate to the sites of collection or storage of processable material or ore that companies maintain, to verify the weight of shipments and to take samples thereof, with the purpose that those, the Municipalities, at their own expense

Municipal Law Association of Municipalities of Honduras REPEALED TRADITION TAX LIVESTOCK TAX FIRE SERVICES may verify in national or foreign laboratories the type and class of materials exported.

(Repealed by Decree 48-91) The Transfer Tax on Real Property is that which the transferor pays at the moment of effecting the sale of a real property based on its cadastral value, registered with the following rate: 1) Urban properties with improvements 3% 2) Urban vacant land 4% 3) Rural properties with improvements 2% 4) Rural vacant land 3% Once the sale is effected, the Notary shall insert the respective deed, the certificate of municipal solvency, and the receipt of payment of this tax.

Livestock Tax: It is that which is paid for livestock slaughter, as follows:

• 1)

  For large livestock one daily minimum wage, and;

• 2)

  For small livestock half the daily minimum wage. Without prejudice to exhibiting the bill of sale in the slaughter of large livestock at the time of paying the tax receipt.

Fire Department Service: It is that which shall be paid by every individual or corporate person, merchant and industrial entity. Income from this concept shall be invested exclusively in the operational and maintenance expenses of the fire department bodies.

Municipalities are empowered to establish rates for:

• 1)

  The provision of direct and indirect municipal services;

• 2)

  The utilization of municipal or ejidal property; and,

• 3)

  Administrative services that affect or benefit the inhabitant of the municipal territory. Each Budget Plan shall establish the rates and other details of their collection based on the actual costs incurred by the Municipality and rates may only be charged to the person who receives the service.

(Interpreted 13) The contribution for improvements is that which shall be paid to the Municipalities, until such time as they recover in total or in part the investment, by the owners of real property and other beneficiaries of 13 According to Decree 171-98, the following was established: Article 5. To interpret Article 85 of the Law of Municipalities, in the sense that they are obligated to payment of the contribution for improvements, under the toll mechanism, persons who circulate in motor vehicles on public roads, when it is a matter of recovering in total or in part their cost.

Law of Municipalities Association of Municipalities of Honduras PERCENTAGE OF THE CONTRIBUTION FOR IMPROVEMENTS LOANS AND FINANCIAL OPERATIONS municipal works, when as a result thereof, a benefit is produced for the property or person.

Municipalities are authorized to decide on the percentage of the cost of the work or services to be recovered from the beneficiaries, taking into account, in addition to the cost of the work, the economic and social conditions of the benefited community, and Municipalities shall issue for each work their own Regulation for Distribution and Collection of Investments. Once the cost of a work or service has been distributed among the beneficiaries, the Municipality shall make the payment of the contribution on the benefited property enforceable against its owner, or against the user of the improved service. CHAPTER V OF CREDITS AND TRANSFERS

(According to reform by Decree 48-91) Municipalities may contract loans and carry out other financial operations with any national institution, preferably a state entity. When loans are made with foreign entities, the procedures established in the Public Credit Law shall be followed.

Law of Municipalities Association of Municipalities of Honduras MUNICIPAL BONDS DESTINATION OF LOAN AND BOND FUNDS PAYMENT OF NON-RECOVERABLE INVESTMENTS TRANSFERS OF NATIONAL TAX REVENUES TO MUNICIPALITIES

Municipalities may issue bonds for the financing of works and services, with authorization from the Secretariat of Treasury and Public Credit, subject to a favorable opinion from the Board of Directors of the Central Bank of Honduras.

Funds obtained through loans or bonds shall not be allocated to purposes other than those authorized.

No more than 20% of the Municipality's ordinary annual income may be allocated to the payment of loans or issuance of bonds when financing works whose investment is not recoverable.

(According to amendment by Decree 143-2009) The State shall transfer annually to the municipalities, by anticipated monthly installments, from the tax revenues of the General Budget of Income and Expenditures of the Republic and directly from the State Department in charge of Finance (SEFIN) to the accounts of the municipalities registered in the

Municipal Law Association of Municipalities of Honduras ERP FUNDS the national banking system 14, seven percent (7%) in the year 2010, eight percent (8%) in the year 2011, nine percent (9%) in the year 2012, ten percent (10%) in the year 2013 and eleven percent (11%) from the year 2014 onwards. This percentage shall be distributed as follows: 1) Fifty percent (50%) of the transfer shall be distributed in equal parts to the municipalities; and 2) Fifty percent (50%) shall be distributed according to the following criteria:

• a)

  Twenty percent (20%) based on projected population according to the latest Population and Housing Census by the National Institute of Statistics (INE);

• b)

  Thirty percent (30%) based on poverty, in accordance with the proportion of poor population of each municipality based on the method of Unmet Basic Needs (UBN), according to the latest Population and Housing Census. From these revenues, municipalities shall allocate one percent (1%) for the execution and maintenance of programs and projects for the benefit of children and adolescents, and two percent (2%) for programs and projects for economic and social development and the fight against violence against women, which has increased in an alarming manner, and thirteen percent (13%) for the operation and maintenance of social infrastructure, it being understood that this includes the necessary allocations to ensure the sustainability of said infrastructure. They may also use up to fifteen percent (15%) for their own administrative expenses; municipalities whose own annual revenues, excluding transfers, do not exceed Five Hundred Thousand Lempiras (L.500,000.00), may allocate for such purposes up to double this percentage.

  Municipal Law Association of Municipalities of Honduras TRANSFER TO THE SUPERIOR COURT OF ACCOUNTS One percent (1%) of the transfers referred to in the first paragraph of this Article shall be allocated to the Superior Court of Accounts (TSC), as municipal counterpart to conduct training, monitoring, compliance with recommendations and greater coverage of municipal audits. It is understood that while resources from other sources are identified to fulfill these obligations, the Superior Court of Accounts (TSC) shall formalize an agreement with the Association of Municipalities of Honduras (AMHON) within thirty (30) days following the effective date of this Decree for the purpose of joint planning:

  • 1)

    The training plan for municipalities classified by the State Department in charge of Governance and Justice in categories A, B, C and D and for municipal associations or consortiums;

  • 2)

    Follow-up on recommendations arising from municipal audits conducted; and,

  • 3)

    To agree on a plan to expand coverage of municipal audits in order to reach one hundred percent (100%) of municipalities.

    Municipal Law Association of Municipalities of Honduras OTHER USES OF THE TRANSFER, CONTRIBUTIONS TO AMHON AND TO MUNICIPAL ASSOCIATIONS The remainder of the transfer resources shall be allocated to investment, to cover the counterpart required by the organisms financing the projects; to the payment of contributions to the Association of Municipalities of Honduras (AMHON), to the payment of contributions that municipalities make to municipal associations or consortiums prior to a decision by the Municipal Corporations by affirmative vote of two-thirds of their members, and for transfers in goods or services to communities for investment, and in all cases respecting the provisions of Article 98, numeral 6), of this Law. Municipalities that enjoy the economic benefit established in Decree No. 72-86 dated May 20, 1986, may avail themselves of the regime established in this Article, provided that they renounce before the State Department in charge of Finance the benefit established in the aforementioned Decree. The transfer must be deposited in the Municipal Treasury and managed in a bank account in the name of the respective Municipality, and funds therefrom may be disposed of only with the joint and several signature of the Mayor and Municipal Treasurer.

    Municipal Law Association of Municipalities of Honduras BUDGET CONCEPT BUDGET CONTENT CHAPTER VI OF THE BUDGET

The Budget is the financial plan by programs of mandatory compliance of the Municipal Government, which responds to the needs of its development and which establishes the norms for the collection of income and the execution of expenditure and investment.

(As amended by Decree 48-91) The Budget of Expenditures must contain a clear description of the programs, sub-programs, activities and tasks, and must make reference therein to supporting documents and set forth the following allocations:

• 1)

  Complete financial plan for the respective fiscal year;

• 2)

  A general summary of expenses for the concept of salaries, wages, daily wages, materials and equipment and obligations for services;

• 3)

  Payments to public institutions, such as the Honduran Social Security Institute, Institute of Professional Training, Autonomous Municipal Bank, National Institute of Pensions and Retirement Benefits for Employees and Officials of the Executive Branch, National Service of Aqueducts and Sewerage, National Electric Power Company or others;

• 4)

  Expenses to which the Municipality is legally obligated by executed contracts;

• 5)

  Investments and Projects;

• 6)

  Transfer to the Fire Department of the Municipality;

• 7)

  Other expenses for obligations incurred; and,

• 8)

  Other operating expenses.

(According to amendment by Decree 48-91) The Revenue Budget shall contain an estimate of the revenues expected for the period, deriving from the following sources:

• 1)

  Proceeds from taxes established in this Law;

• 2)

  Proceeds from fees and contributions contained in the Schedule of Municipal Charges;

• 3)

  Capital Income;

• 4)

  Proceeds from the sale of property;

• 5)

  Value of loans and agreements with national and foreign banks;

• 6)

  Capital Transfers that the Executive Power grants in application of this Law, and from the private sector;

• 7)

  Resources obtained from taxes and recovery of public works; and,

• 8)

  Other extraordinary income.

  Law of Municipalities Association of Municipalities of Honduras PRESENTATION AND APPROVAL OF THE BUDGET CODIFICATION AND NOMENCLATURE OF THE BUDGET SUBMISSION OF BUDGET COPY BUDGET STANDARDS

(According to reform by Decree 48-91) The Budget must be submitted for consideration by the Corporation no later than September 15 of each year. If, due to force majeure or other causes, it has not been approved by December 31, the budget from the previous year shall be applied in the following year. For its approval or modification, the affirmative vote of more than half of the members of the Municipal Corporation is required.

The Secretariat of Governance and Justice shall provide assistance to the Municipalities in the system of codification, nomenclature, and classification of accounts of the budget by programs and estimation of revenues.

A copy of the approved budget and the corresponding final liquidation for the preceding year shall be submitted to the Secretariat of Planning, Coordination and Budget no later than January 10 of each year.

(According to reform by Decree 48-91) The formulation and execution of the Budget shall be subject to the following provisions:

• 1)

  Expenditures shall in no case exceed the income;

• 2)

  Ordinary fixed expenses may only be financed with ordinary income of the Municipality;

• 3)

  Extraordinary income may only be made available through budget amendments;

• 4)

  Extraordinary income may only be allocated to capital investments;

• 5)

  No commitment may be entered into nor payments made outside the allocations contained in the Budget, or in contravention of the budgetary provisions thereof;

• 6)

  (According to reform by Decree 127-2000) Operating expenses shall not exceed the following limits, under penalty of incurring liability: Annual Income Current Operating Expenses Up to 3,000,000.00 up to 65% From 3,000,000.01 to 10,000,000.00 up to 60% From 10,000,000.01 to 20,000,000.00 up to 55% From 20,000,000.01 to 32,000,000.00 up to 50% From 32,000,000.01 to 50,000,000.00 up to 45% From 50,000,000.01 onwards up to 40% 7) Goods and funds derived from donations and transfers for specific purposes may not be used for different purposes; 8) No appointments may be made nor economic commitments acquired when the allocation is exhausted or proves insufficient, without prejudice to the annulment of the action and the assessment of corresponding liabilities. The violation of the foregoing shall be grounds for suspension of the responsible official or employee and recurrence shall be cause for removal.

(As reformed by Decree 143-2009) The Municipality may create enterprises, divisions or any deconcentrated municipal entity, which shall have their own budget approved by the Municipal Corporation. Likewise, it may create revolving funds which shall be held in custody by the Municipal Treasurer.

A.- (Added by Decree 127-2000) The Municipalities may only contract works or services necessary for the development of the Municipality with natural or legal persons who have legal capacity to do so. Municipal civil works whose cost exceeds ONE HUNDRED TWENTY THOUSAND LEMPIRAS (L.120,000.00) at constant values as of December 31, 1999, shall be directed by a practicing Civil Engineer, on a part-time basis. If the cost exceeds SIX HUNDRED THOUSAND LEMPIRAS (L.600,000.00), always at the same constant values, they shall be directed by a permanent practicing Civil Engineer. The subdivision of works for contracting purposes is prohibited. TITLE VI OF PERSONNEL CHAPTER I OF EMPLOYEES

The Municipal Mayor has the authority to appoint, promote, transfer, and remove personnel, in accordance with the Law, except for those designated in Articles 49, 52, 56, and 59.

(REPEALED BY DECREE 149-97 Municipal employees and servants not elected shall be subject to the Civil Service regime, to guarantee them employment stability.)

Spouses or relatives within the third degree of consanguinity and second degree of affinity of the Municipal Mayor or members of the Municipal Corporation shall not be able to hold any position within municipal administration. Those who subsequently incur causes of incompatibility and those who are selected as candidates in cases where there is a competitive examination are excepted.

(According to reform by Decree 48-91) Municipalities are obligated to maintain an updated Manual of Classification of Positions and Salaries. They shall, furthermore, establish systems of technical training and scientific research, both for elected officials and for appointed officials, on different activities and programs.

Municipal Corporations may affiliate their working personnel to the Retirement and Pension system for Employees and Officials of the Executive Power, provided that their economic conditions permit it. CHAPTER II OF THE MUNICIPAL DEVELOPMENT INSTITUTE

(According to amendment by Decree 48-91) The Municipal Development Institute is hereby created with legal personality and its own assets.

Law of Municipalities Association of Municipalities of Honduras PRESCRIPTION OF MUNICIPAL TAXES RESPONSIBLE PARTIES FOR PRESCRIPTION The Institute shall be an organism designed to promote the comprehensive development of Municipalities, through the training of municipal officials and employees, technical advisory services, the promotion of international cooperation and the coordination of national entities providing municipal support. A special Law shall regulate its organization and functioning. The municipalities shall allocate their own or shared resources for its operation. TITLE VII PRESCRIPTION SOLE CHAPTER

(According to amendment by Decree 48-91) The actions that municipalities may have against private parties arising from tax obligations, for the purposes of this Law and subordinate regulations, shall prescribe within a period of five (5) years, interrupted only by judicial actions.

When prescription occurs due to negligence attributable to municipal officials or employees, they shall be liable for damages and losses that may have been caused to the Municipalities.

Law of Municipalities Association of Municipalities of Honduras NON-PRESCRIPTION OF MUNICIPAL REAL PROPERTY PROPERTY TITLE TO COUPLES CERTIFICATION EQUIVALENT TO TITLE

(Pursuant to amendment by Decree 125-2000) Rights over municipal real property shall be imprescriptible. No prejudicial proceedings or precautionary measures may be decreed over municipal real property15. Every title of ownership granted by the Municipality in fulfillment of social policy shall be issued jointly with the spouse, domestic partner, or partner of the household. The certification of the municipal agreement shall be equivalent to the title of ownership and may be registered in the Property Registry without the necessity of a public deed; it shall be exempt from payment of the Stamping Tax on Contracts and the Real Property Transfer Tax; however, they must comply with the other registration requirements. It is prohibited for the National Agrarian Institute (INA) to hold title to lands in the cores of protected areas, national and municipal areas, as well as in real property of which Municipalities are full owners. 15 Pursuant to Decree 125-2000 the following was established: Article 2.- Prejudicial proceedings and precautionary measures issued in relation to municipal real property shall be cancelled ex officio or at the request of any interested party, within a period of thirty days counted from the effective date of this Law.

Law of Municipalities Association of Municipalities of Honduras INTEREST AND SURCHARGE FOR TAXES DISCOUNT FOR EARLY PAYMENT PREFERENTIAL CREDIT FOR TAXES TITLE VIII GENERAL PROVISIONS

(According to amendment by Decree 127-2000) The delay in payment of any municipal tax shall give rise to the payment of annual interest equal to the rate that banks utilize in their active commercial operations, plus a surcharge of two percent (2%) annually calculated on outstanding balances.

The Municipalities may receive in advance the payment of municipal taxes; in these cases they shall reduce ten percent (10%) of the total; likewise, in special cases such as fortuitous event or force majeure, they shall extend the collection period for up to thirty days or until the causes that generated the calamity or emergency cease. The benefit of advance payment shall only be applicable when made four months before the legal payment date.

Any debt arising from the payment of the Property Tax, industry, commerce, services, contribution for improvements constitutes a preferred credit in favor of the Municipality and for its judicial claim shall proceed by executive action. The certification of the amount owed, issued by the Municipal Mayor, shall serve as an Executive Title.

Law of Municipalities Association of Municipalities of Honduras ENFORCEMENT FOR THE COLLECTION OF TAXES REGISTRATION IN THE PROPERTY REGISTRY ACCOUNTABILITY IN OPEN TOWN HALL PUBLICATION IN MUNICIPAL GAZETTE

Delinquency in the payment of taxes established in this Law shall give rise to the Municipality exercising judicial collection proceedings, prior to two written demands at intervals of one month each, and thereafter may file the corresponding Summary Judgment against the taxpayer debtor, with the certification of non-payment, issued by the Municipal Mayor, serving as the Executive Title.

Real property shall guarantee the payment of taxes that fall upon the same, regardless of any change of owner that may occur thereupon, even when they refer to judicial or extrajudicial foreclosures, new owners shall cancel said taxes, prior to registration in the Property Registry.

Municipal Corporations shall have the obligation to respond in open cabildo immediately to the petitions regarding their management raised by those who attend the same; and in the case of a different particular matter, they shall resolve within the period of fifteen days.

The Municipalities, when their resources permit, are obliged to publish the Municipal Gazette wherein shall appear their most relevant resolutions, a summary of the budget, its settlement, and the response to requests for accountability. The edition of the Municipal Gazette shall be made at least semiannually. The form of its issuance shall be subject to the economic capacity of the Municipalities.

In order to finance the publication of the Municipal Gazette, any resident of the respective municipality shall be able to acquire it at the price established in the Budget Plan. Furthermore, the Municipalities may sell advertising space for the purpose of financing its costs.

(According to amendment by Decree 127-2000) The following shall be grounds of public utility and social interest for decreeing the total or partial expropriation of real properties, in addition to those determined in the laws in force: works of security, beautification and embellishment of neighborhoods, opening or expansion of streets, roads, buildings for markets, plazas, parks, public gardens, recreation and sports areas, construction of urban and interurban transportation terminals, educational centers, clinics and hospitals, dams, potable water systems and their treatment, as well as solid waste systems, oxygenation zones, areas for urbanization and protection of biodiversity, watersheds and their tributaries, and other public works of community or municipal necessity as qualified by the Municipal Corporation. Exceptionally, for the same purposes, it may acquire real property through direct contracting at its cadastral value, when no others are available, and must provide evidence of these circumstances. To proceed with expropriation, the procedures established in the Constitution of the Republic and in the Compulsory Expropriation Law shall be observed insofar as they are applicable. With respect to properties of the State, the municipality, or those in which private parties have only useful domain, only the value of improvements shall be recognized. The Municipal Corporation may also encumber private property with easements, provided that the utilization of the encumbered real property is necessary for the provision of a public service. The easements shall include, furthermore, the right to inspect the real property and to enter thereinto in order to perform the repairs that may be necessary for the provision of the service.

(According to amendment by Decree 48-91) The execution of urban development plans

Law of Municipalities Association of Municipalities of Honduras CLAIMS FOR ACTS OF THE GOVERNANCE OFFICE COORDINATION OF WORKS, SERVICES AND INVESTMENTS and the establishment of reserves for future extensions of cities, or for the protection of the ecological system, are of public utility and social interest. The Secretary of State in the Offices of Governance and Justice, through the General Directorate of Municipal Technical Assistance, shall collaborate with the municipalities for the fulfillment of the provisions of this Article and for the delimitation of the urban perimeter. The plans related to future expansions of cities shall be submitted for approval of the Executive Power 16.

The Municipal Corporation may appeal to the Secretariat of State in the Office of Internal Governance and Justice against resolutions, agreements, dispositions, acts or orders issued by the Departmental Governorship or other authority when such acts injure the municipal interest. This Secretariat of State shall have the term established in Article 138 of the Administrative Procedure Law to resolve the matter accordingly.

(According to amendment by Decree 143-2009) Any execution of public works and services 16 This paragraph was Repealed by Article 4 of Decree 127-2000)

Law of Municipalities Association of Municipalities of Honduras CONDONATION OF TAXES AND PAYMENT PLAN OBLIGATION OF THE DEI AND CENTRAL BANK or development investments in the municipal jurisdiction, which any state entity, private entity, Non-Governmental Organization (NGO's) and similar organizations may undertake, shall be in harmony with the Municipal Development Plan and in coordination with the Municipal Corporation.

Except as authorized in this Law, Municipalities may not remit taxes, their penalties, late fees, or any surcharge, notwithstanding they remain authorized to establish payment plans.

(According to reform by Decree 127-2000) The Executive Revenue Directorate (DEI) is obliged to extend ex officio to the Municipalities the respective sales tax exemption certificate and to provide in writing to the Municipalities all information relating to tax revenues and their quarterly performance, as well as any other information required regarding the assets or income of natural or legal persons in their territory for tax purposes, provided that in all cases the right to privacy is respected. The Central Bank of Honduras shall have the same obligation to provide information.

Law of Municipalities Association of Municipalities of Honduras TAXES ON VALUE ADDED ENVIRONMENTAL RATE

A.- (Added by Decree 127-2000) Decentralized institutions that carry out economic activities, processors and resellers of coffee and other non-traditional crops, are obligated to pay the corresponding municipal taxes on the added value they generate. Likewise, they are obligated to pay the fees for services rendered, rights for licenses and permits, and municipal contributions. They may also impose fees and contributions for the services they provide in matters of environmental preservation. The amounts paid as concepts of taxes, fees, rights, and contributions declared by the taxpayers plus the adjustments introduced by the Tax Administration of the municipalities, shall be deposited immediately in the Municipal Treasury. Refunds for the payment of the tax actions specified in the preceding paragraph that result from the corresponding adjustments shall be made by the municipalities no later than fifteen (15) days following the date on which such refund was recognized.

Law of Municipalities Association of Municipalities of Honduras OFFICIAL ASSESSMENT FOR TAXES SANCTIONS TO MUNICIPAL OFFICIALS AND EMPLOYEES PROCEDURE FOR IMPOSING SANCTIONS When in the exercise of the tax action there exists doubt regarding the veracity of the declarations, for the purpose of paying municipal taxes, fees, rights, or contributions, or when the taxpayer denies such obligation, the Mayor, in accordance with the opinion of the tax administration, shall proceed ex officio to assess said taxes, fees, rights, and contributions.

B.- (Added by Decree 127-2000) Without prejudice to the provisions of this Law, in special cases, a fine of ONE HUNDRED LEMPIRAS (L.100.00) to ONE THOUSAND LEMPIRAS (L.1,000.00) shall be imposed upon members of the Municipal Corporation, municipal officials and employees for non-compliance with their respective functions and obligations provided for in the Law or for infractions thereof, according to the severity of the infraction, for the first offense; for the second offense, double the maximum shall be applied; and for the third and subsequent offenses, suspension from office for up to three (3) months; the foregoing without prejudice to the performance of the obligation or function that failed to be executed in a timely and proper manner, the indemnification for damages and losses, and the removal of such official or employee.

C.- (Added by Decree 127-2000) For the purposes of the foregoing articles, sanctions shall be imposed by the Corporation upon the Mayor, the Aldermen considered individually, the Secretary, Treasurer and Auditor, by the Secretariat of State in the Offices of Governance and Justice upon the Municipal Corporation in plenary; by the Municipal Mayor upon employees and by the Mayor or by the Municipal Judge of Police, upon private individuals. The sanctions imposed shall be recorded in a book that the respective Secretary shall maintain for such purpose.

D.- (Added by Decree 127-2000) The sanctioned parties may appeal against the respective resolutions in accordance with the Administrative Procedure Act. Fines and indemnities shall be deposited in the Municipal Treasury. TITLE IX TRANSITIONAL PROVISIONS

The entry of municipal employees into the Civil Service regime shall be made within a period that shall not exceed three years.

The Government of the Republic, with respect to its obligation to transfer five percent (5%) of its tax revenues from the General Budget of the Republic, as indicated in article 91 of the Law of Municipalities Association of Municipalities of Honduras Delimitation of Urban Perimeters, shall make the first delivery during the year 1992, in the amount equivalent to two percent (2%), in 1993 it shall contribute the equivalent of four percent (4%); and in the year 1994 its transfer shall be completed at five percent (5%).

(According to amendment by Decree 127-2000) Every Municipality shall have fully delineated, by means of resolutions of the Municipal Corporation, the urban limits of all human settlements within its jurisdiction, based on the technical study prepared for such purpose. The delineation shall include zoning and shall serve for urban planning, administrative, tax collection, as well as ordering and planning purposes of the settlements. The resolution approving the delineation shall be notified to the National Agrarian Institute (INA), National Geographic Institute, National Institute of Statistics (INE), and to the Secretary of State in the Departments of Internal Affairs and Justice. Said resolutions shall respect the regulations contained in Convention 169 of the International Labour Organization (ILO), approved by Decree No. 26-94, dated May 10, 1994. Any interested party may challenge the agreement within the periods established in the Law of

Law of Municipalities Association of Municipalities of Honduras Administrative Procedure. For this purpose, limits of human settlements are the perimeters of land areas designated for housing or residence of persons, which are established with the purpose of safeguarding health, integrity, and human welfare, which shall meet the following minimum conditions:

• 1)

  Congregation of persons and a minimum number of dwellings to be fixed by the Regulation of this Law;

• 2)

  Laying out of streets; and,

• 3)

  A minimum of public and community services. In the delineation, the Corporation shall base itself on the study prepared for such purpose, with a projection of twenty (20) years and taking into account the growth of the last two decades and, furthermore, any unexpected growth originating from industrial parks or the creation of massive sources of employment. It shall also take into account the vocation of the land, particularly its suitability for habitability and the exclusion of areas where optimal utilization can be achieved for other productive purposes.

  Law of Municipalities Association of Municipalities of Honduras REGULATIONS OF ASSOCIATIONS OF MUNICIPALITIES DOES NOT APPLY TRADITION TAX REPEALED The delineation and demarcation shall be carried out using the technical procedures established by the Regulation of this Law.

A.- (Added by Decree 143-2009) For the fulfillment of the provisions contained in Articles 20-D and 20-E, the associations or groupings of municipalities shall adapt the regulatory instruments that govern their organization and functions, to the General Regulation of Organization, Operation and Attributions, which shall be elaborated and approved within a period not exceeding three (3) months from the effective date of these provisions.

The Syndics elected on November 26, 1989, currently in office, shall continue in their positions solely during the present term, and shall serve exclusively as auditor of the respective Municipality, being required to participate in sessions with voice and vote.

(Repealed by Decree 48-91. The Property Transfer Tax referred to in article 81 of this Law shall continue to be paid through the Secretariat of State in the Offices of Treasury and Public Credit and collection shall be transferred to the Municipalities, as of the first of January of one thousand nine hundred ninety-three (1993).)

A.- (Added by Decree 48-91) The Municipalities, the National Agrarian Institute (INA) and the Secretary of State in the Offices of Governance and Justice, shall collaborate for the purpose that within the term of two (2) years all urban perimeters shall be defined. TITLE X FINAL PROVISIONS

(As amended by Decree 48-91) This Law repeals the Law of Municipalities and Political System, contained in Decree No. 127 of April 7, 1927 and its amendments, Decree No. 5 of February 20, 1958, Decree No. 33 of March 31, 1958, Decree No. 370 of August 30, 1976 and Decree No. 73-84, of May 10, 1984. This Law shall be regulated by the Executive Power through the State Secretariat of the Departments of Governance and Justice.

This Law shall be published in the Official Gazette "La Gaceta" and shall enter into force on the first of January of 1991 – 111 of 221 – Law of Municipalities Association of Municipalities of Honduras nineteen hundred ninety-one. Given in the city of Tegucigalpa, Municipality of the Central District, in the Session Hall of the National Congress, on the twenty-ninth day of the month of October of nineteen hundred ninety. RODOLFO IRIAS NAVAS President MARCO AUGUSTO HERNANDEZ ESPINOZA Secretary CARLOS GABRIEL KATTAN SALEM Secretary To the Executive Power Therefore: Let it be executed. Tegucigalpa, M.D.C. 7 November 1990 RAFAEL LEONARDO CALLEJAS President The Secretary of State in the Departments of Interior and Justice FRANCISCO CARDONA ARGUELLES. – 112 of 221 – Law of Municipalities Association of Municipalities of Honduras AGREEMENT N. 018-93 Tegucigalpa, M.D.C. 1 February 1993. THE PRESIDENT OF THE REPUBLIC. CONSIDERING: That the National Congress of the Republic issued Decree No. 134-90 dated 29 October 1990, which contains the Law of Municipalities, the same that entered into force as of 1 January 1991. CONSIDERING: That it is within the authority of the Executive Power to issue Agreements and Decrees and to issue Regulations and Resolutions in accordance with the Law. CONSIDERING: That every Regulation Project for the application of a Law shall be reviewed by the Office of the Attorney General of the Republic, as established in article 41 of the Law of Administrative Procedure and in compliance therewith, its opinion was solicited and it being of the favorable opinion to approve this Regulation of the Law of Municipalities. CONSIDERING: That the Law of Municipalities grants to the Municipality the necessary autonomy not only for the purposes of organizing the Honduran Municipality, but also the objective of raising the standard of living of its inhabitants by balancing internal economic and social development, and that in order to achieve these and other objectives it is of imperative necessity to enact the legal regulatory provisions that facilitate the better application of the Law. THEREFORE: In exercise of the powers conferred upon it by article No. 245, attribution 11 of the Constitution of the Republic. AGREES: To approve the following Regulation of the Law of Municipalities. GENERAL REGULATION OF THE LAW OF MUNICIPALITIES TITLE I SOLE CHAPTER OBJECTIVE AND DEFINITION

This Regulation has as its objective to develop complementarily some of the provisions of the Law of Municipalities in order to allow its just, timely, and efficient application by the municipal Corporations and other interested parties in the exercise of the powers that the Law confers upon them. OF THE TERRITORY

For the purposes of article 21 of the Law that defines the concept of territory, Jurisdiction is understood as the power to extend its authority throughout the entire municipal term, and by competence, the capacity to know and resolve all matters that correspond to the Municipality, in accordance with what the Law may establish, or are a consequence of municipal autonomy and are not attributed by Law to another entity. OF THE POPULATION

• a)

  A neighbor shall be understood as the habitual resident who is a domiciled inhabitant within the municipal term, whether because he remains with the intention of doing so indefinitely or because he remains within the municipal term by reason of a position, office or function that requires his mandatory residence. The provisions established in Article 77, subsection ch), final paragraph of the Law of Municipalities are excepted.

• b)

  Persons who remain within the municipal term for a period greater than six months shall be considered for the application of this Law as neighbors. Likewise, one who has alternate residence in two or more municipalities shall be considered a neighbor in the municipality in which he resides the greater part of the year, even though he were also registered in another municipality.

• c)

  The foregoing provisions are applicable to Hondurans and to foreigners who have the status of Residents.

A transient shall be understood as one who does not habitually reside within the Municipal jurisdiction but who remains occasionally therein.

Citizens may take action against the acts or resolutions of the Municipality, as well as for the imposition of liability on the Corporation or one of its members in matters not provided for in the Law of Municipalities, proceedings shall be conducted in accordance with articles 54, 55, 56, 61, 62, 68, 69, 129, 130, 137, 139, 146, 147, 149 and other applicable provisions of the Administrative Procedures Law. These claims against the acts, agreements and resolutions of the Municipality shall be formalized in accordance with the provisions of the Administrative Procedure Law.

Law of Municipalities Association of Municipalities of Honduras

In order for the citizen to be able to make requests of a particular or general nature, he or she must be a subject of rights and obligations in accordance with the Law.

The petition for accountability referred to in Art. 24 of the Law shall be requested following the procedure indicated in the Administrative Procedure Law; the case is excepted when it is made in open town council. TITLE II CHAPTER I Of the Municipality

For the purposes of preparing and executing rural and urban development plans, the Corporations may rely on the technical assistance of municipal planning units, and failing that, on the General Directorate of Urban Planning, in order to formulate, plan, execute, and harmonize them with the national development plans.

The municipality shall adopt forms of administration that allow it to create and organize other executing units with broad administrative powers, created under special administrative and accounting systems. It shall prepare the programs and technical studies that the public service requires and shall coordinate them with the policies and directives established by the central government. For municipal public services, the Municipal Corporation may create special bodies that act in the name and representation of the Municipality in matters related to the provision of said service. CHAPTER II OF THE MUNICIPAL CORPORATION

The competent authority to enter into contracts shall be the Mayor, requiring prior approval of the Municipal Corporation when the Law of Municipalities or other laws so provide.

The Corporation as the municipal legislative body shall issue, reform, and repeal rules of general application within the municipal territory that shall have the character of ordinances or mandatory provisions and are binding for all residents, inhabitants, and transients.

Resolutions, agreements, and other decisions shall be adopted with the affirmative vote of the majority of the members present of the Municipal Corporation, and in case of a tie in the voting, the Mayor shall have the right to a double vote, that is to say, to the casting vote.

All resolutions of the Municipal Corporation shall enter into force once the minutes have been approved and ratified or when the corresponding remedies have been exhausted. Exempt from this provision are resolutions of a general character, which shall enter into effect on the day following their publication in the Official Gazette, La Gaceta, and/or in the Municipal Gazette, as applicable, or in any other suitable means of communication in the municipal territory, and administrative resolutions that are of immediate execution.

The Corporation shall issue its internal regulations in order to regulate its deliberative function.

The granting of powers of attorney referred to in Article 25, numeral 8 of the Law shall always be made for specific cases and shall be registered in the respective Property Registry in order to exercise acts of strict ownership.

The Municipal Corporation, by resolution of two-thirds of its members, may convene a plebiscite as referred to in numeral 10, Article 25 of the Law, to all citizen residents of the municipal term, in order to make decisions on matters of paramount importance in the judgment of the Corporation. The result of the plebiscite, which shall be computed by the Corporation with the assistance of 3 notable residents appointed by it, shall be binding and must be published.

For the purposes of holding a plebiscite, the following shall be considered matters of utmost importance, among others: a) Those expressly designated by the Law and this Regulation. b) Those that have a direct relationship with the very existence of the municipality, its autonomy, the defense of its essential natural resources and the preservation and improvement of the ecological system and the environment, the establishment or substantial modification of rates and contributions, the execution of physical works of magnitude, the adoption of programs and long-term commitments.

The Municipal Mayor shall have the inescapable obligation to convene a plebiscite within the five days following the date on which the resolution approving its holding has become final. The convocation shall be made no less than thirty days in advance of the date on which the consultation is to take place and shall be published in the Municipal Gazette when available and in a written newspaper that has circulation in the Municipality, in addition to any other means of communication, including public notices and announcements in public places that ensure its broad dissemination and knowledge by the majority of the inhabitants. The convocation must contain at minimum the following information: a) Date and municipal jurisdiction to which the plebiscite is limited; b) Subject matter submitted to consultation and the specific matters on which the citizens shall pronounce themselves; c) The circumstance that the result of the voting is mandatory for both the Municipality and the citizenry. For the holding of a plebiscite, the following rules shall be observed: 1. Within the five days following the convocation, the Municipal Corporation shall form a local commission charged with the preparation, holding, and supervision of the plebiscite, composed of three notable representatives of the active forces of the interested community and two members of the Corporation. 2. Within the five days following its installation, the local commission shall prepare and approve a Regulation for the practice of the plebiscite, contemplating aspects such as:

• a)

  The time at which it shall be held;

• b)

  Different locations where voting urns shall be placed, indicating city, neighborhood, district, village, hamlet, etc.;

• c)

  Content of the ballots;

• d)

  Citizen requirements to exercise the right to vote;

• e)

  Organizations to which the citizen may appeal for support or to lodge complaints regarding the holding of the consultation;

• f)

  Others deemed appropriate for the normal conduct of voting. The Regulation and any other additional provisions issued by the local commission shall be published immediately after their issuance. 3. The local commission shall appoint auxiliary subcommissions for determined zones, composed of two representatives of the community and one representative of the Municipality. 4. Once voting has concluded, the local commission, according to partial count records, shall proceed to the general tally and shall prepare the respective record, and the result contained therein shall be made public within the following twenty-four hours, granting an unextendable period of ten days (10) to challenge the formality of the process, during which time the administrative acts authorized by the plebiscite shall be suspended. Upon expiration of this period, the result shall be considered final and the Commission shall make an official declaration by preparing the corresponding record, which together with all other documents shall be delivered in solemn ceremony to the Municipal Corporation. 5. The Corporation in the same special session in which it receives the final record shall review it and shall order that it be incorporated in full in the minutes of the session, adding thereto the formal statement of faithfully complying with the result of the plebiscite, as an expression of the sovereign will of the inhabitants of the Municipality. 6. The result of the voting, contained in the Municipal Agreement approved in accordance with the provisions of the preceding paragraph, shall enter into force once it is published in the Municipal Gazette and/or in the Official Gazette "La Gaceta," or other local means of communication; and 7. For the practice of the plebiscite, the Corporation may request the collaboration of the National Electoral Tribunal.

The gathering of residents of a municipal district and/or the representatives of locally constituted legal organizations, with the authorities of the Municipal Government in open town council sessions or in consultative assemblies, constitute an instrument of necessary direct communication for efficient administration that responds to the aspirations of the population and is a permanent expression of the popular will. For the holding of this class of meetings, the following rules shall be observed:

Law of Municipalities Association of Municipalities of Honduras 1. In accordance with article 32 of the Law of Municipalities, open town council sessions shall be held with the community or with one or more sectors thereof, at least five times during the year; for failure to comply with this requirement, the members of the Municipal Corporation shall incur responsibility in accordance with article 39 of the Law; 2. Consultative assemblies with representatives of legally constituted local organizations referred to in article 25 numeral 9 of the Law shall be held as many times as necessary in accordance with the broad communication that must exist between the Municipality and such representatives. 3. In any of the cases referred to in the two preceding subsections, the call shall be decided by simple majority of the members of the Municipal Corporation; the resolution on the call may be adopted at the initiative of any of its members or at the request of the interested parties. When it is an open town council, the request must be made in writing and

Law of Municipalities Association of Municipalities of Honduras supported by at least one-fourth of the requesting sector. 4. Once the call for an open town council has been decided, the Municipal Mayor shall have the inescapable obligation to effect it within the term of five days after the resolution to convene becomes final. 5. The open town council session shall be set for a date not less than eight nor more than fifteen days after the publication of the call, which shall be made through all available means of communication, including notices in the Municipal Gazette, if available, municipal ordinances, etc., in simple language and indicating the matters to be addressed. The presence of the members of the Corporation is mandatory under the same terms as ordinary sessions, but the failure to form a quorum shall not prevent the holding of an open town council. 6. The Mayor or whoever presides over the meeting shall open the session and the Secretary shall read the agenda; subsequently the Mayor or substitute shall indicate the procedure to be followed.

Law of Municipalities Association of Municipalities of Honduras In accordance with the number of attendees and the available time, the use of the floor shall be permitted, endeavoring that each speaker may address each matter at least once; 7. In accordance with article 114 of the Law, the Municipal Corporation shall have the obligation to respond immediately to the petitions regarding its administration or matters of general interest raised by the attendees, except for the rendering of accounts which for technical reasons shall be made public within the next fifteen days, as well as in cases of particular interest. Matters of general interest shall be understood as those affecting the entire community and of a particular nature those affecting only one resident or a specific group. 8. The Secretary shall draw up the minutes containing a brief detail of all proceedings, which shall be signed by the members of the Municipal Corporation present and the Secretary who certifies it shall be published in accordance with article 35 of the Law. Any resident may make use of the remedies granted by the Law to

Law of Municipalities Association of Municipalities of Honduras lodge a complaint when he considers that the contents of the minutes do not correspond to what occurred; and 9. The procedure to be followed in the case of the consultative assemblies referred to in article 25 numeral 9 of the Law shall be determined by the Municipal Mayor or legal substitute, taking into account the purpose for which it was called, the duration thereof, matters to be addressed, and the conveniences of the common purposes pursued.

For purposes of article 30, numeral 3 of the Law, remunerated administrative positions shall be understood as those that appear recorded in the Budget of Income and Expenses of the Municipality, with the exception of popularly elected positions. The administrative positions referred to in the preceding paragraph may not be held by Members of the Municipal Corporation; consequently, neither shall they exercise administrative acts that are of the exclusive attribution of the Mayor or that, by delegation thereof, correspond to other officials.

In the event that the Municipality has limited economic resources that only permit the payment of per diems, these shall be paid to the members who attend the sessions and shall be made effective with the certification that the Municipal Secretary shall issue monthly for such purposes. When the Municipality's financial situation permits, it may agree to the payment of salaries to its members on the understanding that they shall perform their duties on a full-time basis in accordance with the schedule that governs the rest of the personnel. Salaries shall be paid for the performance of permanent commissions under the consideration that the Alderman assigned shall have the capacity for the performance thereof.

When the Secretary fails to prepare municipal minutes, or omits therefrom any part of the proceedings, or refuses to sign them, he shall incur the offense of breach of duties of public officials, without prejudice to the administrative and civil actions that may be applicable. A member of the Corporation who, having been present at the respective session, refuses to sign the corresponding minutes shall incur the same offense. CHAPTER III REGARDING THE REMOVAL AND SUSPENSION OF MEMBERS OF THE MUNICIPAL CORPORATION

Law of Municipalities Association of Municipalities of Honduras

The members of the Municipal Corporation shall incur liability whether penal, civil, or administrative:

• a)

  When in the performance of their duties they commit by action or omission crimes against the exercise of the rights guaranteed by the Constitution of the Republic, abuse of authority, violation of the rights of citizens and failure to fulfill the duties of public officials, bribery, misappropriation of public funds, dealings incompatible with the exercise of their public functions, fraud and illegal exactions, prevarication, denial and delay of justice and others as such typified by national legislation;

• b)

  For the commission of any crime independently of their condition as municipal officer and those which the law requires the restitution of material and moral damages and the indemnification of damages and losses; and c) When by action or omission the municipal member, without intending to cause damage but with fault through recklessness or negligence, produces an unlawful result that injures the person, their property and rights.

  Law of Municipalities Association of Municipalities of Honduras

The members of the Municipal Corporation may be: a) Suspended from their offices; and, b) Removed from the same.

The suspension of office implies temporary disqualification to exercise the functions that correspond to the officeholder under the Law: Removal entails the permanent separation from the office for which he was elected by the people. The grounds for suspension are:

• a)

  Having been issued a warrant of arrest for crimes that warrant a penalty of imprisonment;

• b)

  For immoral conduct duly proven before the competent authority, immoral conduct is understood as the commission of facts or acts contrary to the decorum and good customs of the population.

• c)

  For actions that imply abandonment or absence from office and any conduct harmful to the interests of the community. Abandonment or absence from office shall be understood as failure to perform duties for more than three consecutive days or alternatively three consecutive ordinary sessions without justified cause before the Corporation;

  Law of Municipalities Association of Municipalities of Honduras d) For irregular actions in the management or custody of municipal property, without prejudice to what may correspond as removal.

The penalty of suspension shall not be less than eight nor more than thirty working days, except in cases of accusation in criminal matters which shall be maintained until such time as the respective acquittal sentence becomes final or the arrest warrant that gave rise to the suspension is revoked, and in the case of misappropriation of Municipal Treasury funds, until the final report from the Office of the Comptroller General of the Republic is obtained. To determine the applicability of the suspension penalty, the procedure shall be conducted in accordance with the provisions of Article 30 of this Regulation.

Once the suspension sanction has been served or, as the case may be, criminal acquittal has been proven, the member of the Municipal Corporation shall be reinstated without further proceedings to his or her functions, subject to the Executive Agreement for reinstatement.

The members of the Municipal Corporation may be removed from their offices for the following causes:

• a)

  For having been executorily convicted by final judgment rendered due to a crime deserving a greater penalty. A conviction is understood to be executory when no legal remedy is available against the respective judgment.

• b)

  When by supervening circumstances or facts the member becomes included in any of the causes of disqualification established in article 31 of the Law of Municipalities for holding such office.

• c)

  For taking advantage of their position for personal benefit, or to favor companies of which they are a partner or relatives within the fourth degree of consanguinity or second degree of affinity, a situation that must be proven before the competent authority.

• d)

  For embezzlement of Municipal Treasury proven by means of a final and binding report from the General Comptroller's Office of the Republic.

To hear matters regarding the suspension or removal of a member of the municipal Corporation, the State Department of Interior and Justice shall open an administrative file with the documents and other proceedings that it may conduct or order to be conducted; it shall set a hearing so that the accused party may make allegations and present evidence for their defense that may serve their right of defense; it shall hear the advisory opinion of the Corporation and of the Departmental Governor and once all proceedings have been exhausted, it shall issue a resolution within the term of fifteen (15) days counted from the date of the last proceeding, deciding whether or not the suspension or removal proceeds, as well as the type of responsibility in which it has incurred.

The Agreement containing the resolution shall be served personally upon the municipal official responsible, within a maximum period of five days counted from the date of its issuance, through the Departmental Governor, leaving a record in the file of the place, day and time of service and signed by the serving officer and the person served, if he so wishes; if he refuses to sign, he shall incur the criminal liability contemplated in the preceding article 22.

Once the suspension agreement has become final, a certified copy of the resolution shall be transmitted in its entirety to the Corporation and to the affected municipal official. When removal from office is involved, said proceedings shall be transmitted additionally to the General Comptroller's Office of the Republic or to the National Electoral Tribunal, as applicable.

Law of Municipalities Association of Municipalities of Honduras

Vacancies occurring in the Municipal Corporation for whatever reason and whether temporary or permanent in nature shall be filled by the Executive Power through an agreement to be issued by the Secretariat of State in the Offices of Governance and Justice at the proposal of the central governing bodies of the political organization to which the replaced member belongs. If the political body fails to propose the substitute within a period of thirty (30) days, the appointment shall be made by said Secretariat of State, giving preferential consideration to citizens of the political organization to which the member to be replaced belongs.

In any of the foregoing cases, the substitutes shall be sworn in by the corresponding Departmental Governor, who shall draw up a record and issue certification of the matter.

The member of the Corporation affected by the resolution of removal or suspension may lodge a claim against it before the administrative contentious jurisdiction.

When the grounds for suspension or removal are of an administrative character, criminal action may not be initiated against the alleged offender until after the corresponding administrative procedure has been exhausted. TITLE III CHAPTER I OF THE DEPARTMENTAL GOVERNOR

Complaints filed against one or more officials of the Municipality shall be processed by the Departmental Governor by bringing them to the knowledge of the Municipal Corporation with a hearing of the parties involved. When the complaint is filed against the entire Municipal Corporation, prior to the submission of the report to the Secretariat of State in the Offices of Interior and Justice, the Corporation in full session must be heard. The same procedure shall be used for conflicts that arise between Municipalities.

Regarding conflicts over jurisdictional boundaries between municipalities of the same Department, the Departmental Governor shall have jurisdiction and shall resolve such matters in the first instance. If such conflicts occur between municipalities comprised in two or more departments, the respective Departmental Governors shall act collegially, and the second and final administrative instance shall be constituted by the Secretariat of Governance and Justice.

Law of Municipalities Association of Municipalities of Honduras CHAPTER II OF THE MUNICIPAL MAYOR

The Mayor, in his capacity as General Administrator of the Municipality, for the timely and effective fulfillment of the objectives established by the Municipal Law, shall conceive a Government Plan that contains at minimum the following elements: 1) A precise definition of local government policies in all areas of Municipal activities 2) Objectives and goals in the short, medium, and long term. 3) Prioritization of strategic objectives which could include among others: a) The reorganization of the structure and functioning of the Municipality b) The preparation, implementation, and monitoring of the normative instruments of municipal administration such as: personnel regulations, regulations for the operation and maintenance of public services, accounting manuals, budget and audit procedures. c) The planning and execution of operational plans d) The planning, execution, and maintenance of public services. e) The preservation and control of the environment. f) The integration of the community into the municipal development process.

The legal representation of the Municipality corresponds to the Mayor and has among others the following powers:

• 1)

  To enforce through administrative and judicial means, the collection of taxes, fees, services, contributions, fines and surcharges established by Law and the Tax Ordinance issued by the Municipal Corporation in its case.

• 2)

  To grant special powers of attorney for litigation to law professionals so that they may sue or defend the Municipality in civil, criminal, administrative, contentious administrative, labor and other lawsuits.

• 3)

  To execute and grant contracts or public or private concessions in accordance with what is established in Article 10 of this Regulation.

• 4)

  To grant public instruments for matters pertaining to administration.

  Law of Municipalities Association of Municipalities of Honduras

The Mayor, as the executive authority of the municipal district, by his signature shall sanction and grant the force of law to the Agreements, Ordinances, and Resolutions issued by the Municipal Corporation for the inhabitants of the Municipality.

All Agreements, ordinances and resolutions sanctioned and published by the Mayor shall have the character of inescapable mandatory obligation for all civil and military authorities, which in turn shall support the Municipal Mayor in making effective the requests for cooperation that the holder of the respective authority of the municipal jurisdiction may submit to him. Should the demanded collaboration not be obtained, the Mayor shall bring the matter to the knowledge of the municipal Corporation with a detailed report that includes the damages and losses caused by the lack of collaboration or assistance, which shall be forwarded to the Departmental Governor or to the Minister or superior of the negligent party, with a copy to the Secretariat of State in the Offices of Governance and Justice.

The Municipal Mayor, in application of article 46 of the Law, is obliged to present to the Municipal Corporation on a quarterly basis a report of his administrative management for its knowledge and approval when appropriate.

Law of Municipalities Association of Municipalities of Honduras This report shall contain a detailed account of the expenses and the budget executed to date. Semiannually, he shall send the same report to the Central Government through the State Secretariat in the Offices of Government and Justice. Non-compliance with this provision shall make the Municipal Mayor responsible in accordance with the terms of articles 38 and 39 of the Law of Municipalities. CHAPTER III OF THE MUNICIPAL AUDITOR

The functions of the Auditor are, among others:

• a)

  To exercise preventive audit of the financial operations of the Municipality.

• b)

  To exercise control of the patrimonial assets of the Municipality.

• c)

  To ensure faithful compliance with the Laws, regulations, ordinances and other corporate provisions by municipal employees and officials.

• d)

  To issue opinions, reports and provide responses to inquiries in matters within its competence at the request of the Corporation or the Mayor.

  Law of Municipalities Association of Municipalities of Honduras e) Those assigned to it by Law, its regulation and other normative provisions of municipal administration.

The following persons shall not be appointed as Auditor: a) Relatives within the fourth degree of consanguinity or second degree of affinity with any member of the Municipal Corporation, the Treasurer and the Municipal Secretary or municipal employee who manages funds or assets. b) Those who are partners or legal representatives of private entities that have contracts or concessions with the Municipal Corporation.

In addition to the provisions established in Art. 54 of the Law, the Municipal Corporation shall receive the monthly reports rendered by the Auditor. The latter, in the event that irregularities are found, shall formulate the pertinent objections to the official or employee who, in its judgment, is responsible for mismanagement of municipal assets. Within a non-extendable period of fifteen days (15), the objected official or employee shall submit in writing the refutations that correspond to their defense.

Law of Municipalities Association of Municipalities of Honduras If in the judgment of the Municipal Corporation the refutations do not invalidate the objections made by the Audit Office, it shall validate them through resolution, granting the employee or official a non-extendable period of eight days (8) to remit to the Municipal Treasury the amounts appropriated or unlawfully subtracted, or to remedy the fault in the event it is not a monetary matter; deducting in such case the legal liabilities that correspond.

The Auditor shall attend the sessions of the Municipal Corporation whenever summoned, in which he shall present reports and provide responses to inquiries formulated by the members of the Municipal Corporation.

When the General Comptroller of the Republic formulates and confirms audit exceptions for actions that should have been noted by the Auditor, the latter shall be jointly and severally liable with the official or employee subject to the exception. CHAPTER IV THE MUNICIPAL DEVELOPMENT COUNCIL

The Municipal Development Council (CDM) is a technical advisory body that all Municipalities of the country are obligated to establish. This Council shall have the following functions:

• a)

  To advise the Municipal Corporation in the process of elaboration and execution of urban and rural development plans

• b)

  To advise the Corporation and Mayor on administrative reorganization plans and in the formation of local regulatory instruments in accordance with the Law

• c)

  In a special manner, to advise the Municipal Mayor's Office in the formulation of program budgets, operational plans, investment programs and their respective regulations.

• d)

  To advise the Corporation on the obtaining and contracting of loans for works of positive benefit to the community.

• e)

  To assist the Corporation when states of emergency or public calamity occur and it becomes necessary to mobilize community resources to address such emergencies.

• f)

  To advise the Corporation in the execution of agreements with the Central Government and with other decentralized entities with which it concurs in the exploitation, renewal, conservation and improvement of natural resources.

• g)

  In accordance with its composition and when the Municipal Corporation deems it pertinent, to serve as an instrument of communication between the Municipality and the community.

This council shall be composed of representatives of the vital forces of the population and shall be appointed by the Municipal Corporation of each municipal district. The number of representatives may not exceed the number of Aldermen that make up the respective Corporation and shall serve in their functions for one year renewable during the period that the Municipal Corporation that elected it remains in office. The Corporation may remove from office a member of the Council when he fails to comply with the responsibilities or functions assigned to him.

The Council shall be confirmed during the first ninety days of the commencement of the Municipal Government, drawing up minutes of the appointments and issuing notification to the assigned persons or the institution they represent and to the corresponding governmental authorities.

The opinions and recommendations issued by the Municipal Development Council shall be communicated to the Municipal Corporation for its knowledge and related purposes.

Law of Municipalities Association of Municipalities of Honduras

The Municipal Development Council shall meet mandatorily once per month. The convocation shall be effected by the Mayor, with indication of agenda, date, time, and place of session. CHAPTER V OF THE AUXILIARY MAYORS

Auxiliary Mayors are delegates of Municipal Mayors and function as direct representatives in the municipal jurisdiction that has been assigned to them. In accordance with Article 59 of the Law, the same requirements are necessary to be Auxiliary Mayors as are required to be Municipal Councilors. The functions of Auxiliary Mayors are, among others:

• a)

  To comply with and enforce laws, regulations, ordinances, and other provisions issued by the Corporation or the Municipal Mayor, within the scope of their jurisdiction.

• b)

  By express delegation of the Mayor, to resolve matters within municipal competence in their jurisdiction.

• c)

  To receive and address information, complaints, grievances, and concerns of residents regarding matters that affect the welfare of the community. When the decision is not within their administrative reach, they shall bring it to the attention of the Municipal Mayor so that it may be resolved in the appropriate manner.

• d)

  To receive all notifications made by residents regarding lost property or the appearance of persons unknown to the community.

• e)

  Such other functions as are assigned to them by Law.

The Assistant Mayors shall be appointed by the Municipal Corporation upon the proposal of the Mayor, who shall select them from the lists of three candidates presented by the communities. These lists of three candidates shall arise from the majority will of the residents. The Mayor shall convene, within ninety days following the assumption of his office, the corresponding communities so that they meet in assembly and nominate the aforementioned list of three candidates.

The Municipalities shall recognize the community boards duly organized and arising from the majority will of the residents of the respective neighborhoods, colonies and villages. For which purpose, the community boards must accredit the granting of the respective legal capacity and that their Board of Directors are currently exercising their functions in accordance with their bylaws and legally registered before the State Secretariat in the Departments of Internal Governance and Justice.

Law of Municipalities Association of Municipalities of Honduras TITLE IV CHAPTER I OF PUBLIC SERVICES

Public service is the activity carried out by the Municipality to satisfy a collective need, either through its own administrative structure or by means of private parties, through contract or administrative concession.

Municipal public services may be provided and administered: a) By the Municipality itself b) By its service units and companies established for such purpose. c) By mixed enterprises and d) Through concessions granted to private parties by contract in accordance with the Law.

A mixed enterprise, to which numeral 2 of article 25 of the Law refers, is understood to be that constituted with economic contributions from the Municipality and from natural or legal persons.

The contribution of the Municipal Administration to the mixed enterprise may be the concession of the public service insofar as it is economically valuable, in which case the enterprise shall be the concessionaire of the service.

The mixed enterprise may be constituted by the Municipal Corporation, granting participation to private capital through public subscription of shares or, alternatively, by subscribing to the corresponding shares in enterprises that are already operating the service.

The duration of the enterprise to which the preceding article already refers shall be for the entire period during which the concession of the public service subject to exploitation subsists.

The contracts or agreements that the Municipality enters into with natural or legal persons for the construction, maintenance or administration of municipal services or works shall have the character of public law instruments in which, in addition to general conditions, special conditions relating to the quality of the service or work, quality or performance guarantees, as well as the amount, term and form of investment and its recovery, shall be established.

Municipal public service concession contracts or for the construction of a work, without prejudice to the provisions established in the State Contracting Law, shall contain among others the following:

• a)

  The submission of the concessionaire to the ordinances and regulations governing the operation of the service subject to the concession;

• b)

  The acceptance of the verification of its accounting by the Municipality and by the State control bodies.

• c)

  The form, conditions and manner in which indemnification shall be effected to the concessionaire by the Municipality when it must acquire the service or the work upon completion of the concession; unless the free transfer has been agreed upon. In any case, no payment shall be made from the indemnification for the transfer of the work or service, except until it has been approved by the Municipal Corporation and the resolution is final.

• d)

  The power of the Municipality to intervene, at the expense of the concessionaire, the public service that is provided or administered under irregular or illegal conditions.

• e)

  Causes of extinction, which could be: 1) Injuries to Municipal interests. 2) For breach of conditions of public health and hygiene, environment and ecology 3) Other causes constitutive of the resolution or rescission of contracts. CHAPTER II OF PROPERTY AND REAL ESTATE

For the purposes of article 70 of the Law, urban perimeter shall be understood to mean any of the following concepts:

• a)

  The territorial space delimited by Agreement of the Executive Power prior to the enactment of the Law.

• b)

  The territorial space urbanized or planned by the Municipalities for such purposes.

• c)

  The territorial space in which the municipalities have exercised administrative acts of an urban nature.

For the delimitation of urban perimeters and for the expansion of urban areas of the cities referred to in Articles 118 final paragraph, 125, and 127-A of the Law of Municipalities, growth factors and land use shall be taken into consideration, projected for a future period of no less than twenty years. For such purposes, the following procedure shall be followed:

• a)

  Prepare a study of growth trends, based on the expansion of urbanized areas that has occurred in the last two decades, and furthermore consider factors of explosive population growth, such as, for example, the establishment of industrial parks, opening of work centers with high demand for labor, and others.

• b)

  Once the study has been prepared with or without the technical assistance of specialized agencies, it shall be submitted to the Municipal Corporation for its approval. When it concerns delimiting the urban perimeter for the first time or when the study contains future expansions of cities, it shall be sent to the State Department of Internal Affairs and Justice for its approval, in accordance with Article 118 of the Law.

• c)

  Before the State Department of Internal Affairs and Justice approves the content of the study on delimitation of urban perimeters submitted by the Municipalities for approval, it shall refer them in consultation with the National Agrarian Institute so that it may render an opinion as to whether or not there exist conflicts in the vocation and use of land or if they contradict pre-existing plans in the agrarian sector. In the event of existing conflicts or silence from the National Agrarian Institute exceeding ten business days, the State Department of Internal Affairs and Justice shall resolve in accordance with what is appropriate.

• d)

  Once the study has been approved, the Corporation shall order the responsible party to carry out the physical delimitation of the new urban perimeter or the limit of future expansion so that the departments of Urban Control, Cadastre, and Tax Control shall proceed to incorporate and register the new areas for the purposes of administrative service provision, collection of taxes and fees that correspond. The procedure established herein is applicable in its entirety to the delimitation and expansion of urban radii of villages, hamlets, towns, and other population centers recognized as such by the competent municipal authority.

Regarding the percentages greater than 10% referred to in paragraph 1 of article 70 of the Law, the Municipalities shall consider criteria such as: A) The use and profitability of the land

Law of Municipalities Association of Municipalities of Honduras B) Location and market prices.

For the purposes of land sales in marginal zones, the Municipalities shall take into consideration, among others, the following factors:

• a)

  The use and/or intended purpose of the land by the purchaser.

• b)

  Family income in the respective urban area.

• c)

  The existence or lack of all or some of the basic services; and,

• d)

  The existence or absence of minimum social infrastructure.

The Municipality shall grant full ownership through the sale of urban and communal lands, and their use shall be subject to the provisions of the zoning plan and land use approved by the Municipality, when it exists, provided that the following conditions are demonstrated: a) Being current in obligations with the Municipality; and b) Complying with the norms and regulations established by the Municipality for the use of the property.

For the purposes of application of the Law, marginal zone shall be understood as that which lacks basic public services such as: drinking water and sanitary sewerage and basic social infrastructure services within a planned area of influence.

The Municipal Corporation shall issue such regulations as it deems appropriate, establishing expedited procedures for the process to be followed in the sale of lands.

The sanctions referred to in article 71 of the Law shall be applied in accordance with the provisions established in articles 38, 39, 40, 41 and 42 thereof. CHAPTER III OF REVENUES

The Income of the Municipality is divided into two categories: a) Ordinary; and b) Extraordinary. ORDINARY INCOME has its justification in the regularity of payment of the tax obligation and consists of those amounts that the Municipality collects in each fiscal year. Under this concept, the annual collection of taxes, fees for Municipal Services, Rights, Permits, Surcharges, interest on debts of taxpayers, fines, recovery of delinquent accounts, contributions for improvements, and transfers from the State provided for by Law are included. EXTRAORDINARY INCOME consists of those amounts collected only occasionally and under special circumstances, for which an expansion of the approved budget is required. Under this class of Income are included inheritances, bequests, donations, subsidies, subventions, and non-mandatory and non-budgeted transfers.

The revenues of the Municipality are also classified into: a) Current Revenue b) Capital Revenue CURRENT REVENUE comprises those revenues derived from the normal activity of the municipality and which do not represent indebtedness or diminution of assets. This class of revenues is subdivided into:

Law of Municipalities Association of Municipalities of Honduras 1) Tax Revenue and 2) Non-Tax Revenue. Tax revenues comprise the funds or revenues derived from the collection of taxes, service fees and other charges; non-tax revenues include collections from fines, surcharges, recoveries from collection of delinquent accounts and other current revenues. Capital Revenues are those that alter the patrimony of the municipality, such as those derived from the contracting of loans, the sale of assets, the proceeds from special assessment contributions, those generated from the issuance of bonds, transfers, subsidies, inheritances, bequests, donations, credits and in general any other revenue of this nature. CHAPTER IV OF TAXES, FEES, AND CONTRIBUTIONS

It shall be the responsibility of the Municipalities, through their Municipal Corporations, to create, reform, or repeal rates for the concept of services, rights, charges, and other municipal levies, with the exception of taxes, which must be decreed by the National Congress of the Republic.

Law of Municipalities Association of Municipalities of Honduras A municipal rate shall be understood as the payment made to the Municipality by the user of a local public service and which has been approved in the respective Levy Plan, in accordance with Article 84 of the Law. For these purposes, the Municipal Corporations shall make known to the contributing population the corresponding normative provisions by means of publications in the official newspaper "La Gaceta," the Municipal Gazette, or the most suitable means of communication in the respective municipal territories. It shall also be the responsibility of the Municipal Corporations to establish the amounts for the concept of contribution for improvements, in accordance with the costs of the works and other criteria of socioeconomic interest, as established by Decree No. 178-87 of November 10, 1987.

In accordance with what is established in article 75 of the Law, the following have the character of Municipal Taxes:

• 1)

  The tax on real property.

• 2)

  The personal or residential tax.

• 3)

  The Tax on industries, commerce and services

  Law of Municipalities Association of Municipalities of Honduras 4) The tax on extraction and exploitation of resources 5) The livestock tax. For the purposes of the foregoing paragraph, municipalities may not and are not authorized to modify, exempt, waive, reduce or forgive taxes, their fines, rules or any other surcharge, except in cases where the respective laws permit. Notwithstanding the foregoing, Municipalities are authorized to offer payment facilities and collect taxes, fines and surcharges by means of contracts for periodic or monthly payments. FIRST SECTION ON THE TAX ON REAL PROPERTY

The Tax on Real Property levies upon the value of real property assets located within the limits of the municipal jurisdiction, without regard to the domicile of the owner or of the person who possesses it with the intent of an owner. For the purposes of payment of this Tax, the following also have the status of taxpayers: persons holding usufruct on a gratuitous basis, beneficiaries of the right of habitation or those who have the use and enjoyment of real property. In the same capacity shall be persons subject to the regime of community ownership of real property.

Likewise, administrators, legal representatives, testamentary executors, guardians, and curators of property shall be jointly and severally liable for the obligation to pay this tax. When a property belongs to several persons, the obligation to pay the tax falls upon all of them, jointly and severally.

The tax on Real Estate Property shall be levied upon the value of the property or real estate patrimony registered as of May 31st of each year at the corresponding Municipal Cadastral Office. Likewise, the values of properties contained in sworn statements may be accepted without prejudice to the appraisal that may subsequently be conducted.

In accordance with article 76 of the Law, the rate that applies for the calculation of this tax is as follows: a) Between one Lempira with fifty centavos (L. 1.50.) and five Lempiras (L. 5.00) per each thousand of the value of real property located in urban zones; and,

Law of Municipalities Association of Municipalities of Honduras b) Between one Lempira with fifty centavos (L. 1.50) and two Lempiras with fifty centavos (L. 2.50) per each thousand of the value of real property located in rural zones.

For the purposes of the foregoing article, a real property is considered to be situated within the urban zone of a municipality when it is found in any of the cases referred to in article 65 of this Regulation. Lots, lands, or properties situated outside the limits of the urban zone are considered to belong to the rural zone of this municipality.

The applicable tariff shall be set annually by the Municipal Corporation in the corresponding Budget Plan or by means of Municipal Ordinances. Under no circumstances shall the increase agreed upon by the Municipal Corporation in any given year exceed fifty centavos of Lempira (L. 0.50) per thousand in relation to the current tariff.

In addition to the application of the tariffs established in Article 76 of the Law, the Municipalities shall apply criteria of tax justice such as:

• a)

  In the case of vacant urban land, the tariffs shall be applied according to the location of the land and its level of service infrastructure.

• b)

  When dealing with constructed real property, they shall be segregated by use and profitability in the case of real estate designated for commerce and industry, and when dealing with real property for residential use, the taxpayer's ability to pay shall be taken into account.

• c)

  In the case of rural real property, they shall be categorized into improved and unimproved lands, in accordance with their respective cadastral values.

• d)

  Other characteristics specific to the real property itself.

The cadastral value of real property shall be adjusted in years ending in zero (0) and five (5), applying the criteria established in Article 76 of the Law. In addition to the valuation factors set forth in Article 76 of the Law, the appraisal may be based on the following elements and circumstances:

• a)

  The declared value of the real property, with indication of the value of the land and of the building or construction;

• b)

  Sale price or current market value. This information may be supplemented with the current value of adjacent properties;

• c)

  Class of construction materials used in each and every part of the real property or built area; and,

• d)

  The direct benefits received by the real property from the execution of public service works.

The Municipality may update the values of real property at any time, in the following cases:

• a)

  When real property is transferred, under any title, with values higher than that registered in the corresponding Cadastral Department;

• b)

  When improvements are made to real property and the value thereof has not been notified to the Municipality; and,

• c)

  When real property secures commercial or banking operations for a value higher than that registered in the respective Municipality.

For the purposes of the preceding article, taxpayers subject to payment of this tax are obligated to present a sworn declaration before the corresponding Cadastral Office, or to the Mayor when such office does not exist, in the following acts:

• a)

  When they incorporate improvements to their real property in accordance with the authorized construction permit;

• b)

  When they transfer ownership by any title of the real property or properties of their ownership; and

• c)

  In the acquisition of real property by inheritance or by donation

  The aforementioned sworn declarations must be presented within thirty days following the completion of the improvements or the transfer of the real property. Non-compliance with these provisions shall be sanctioned in accordance with the provisions established in article 159 of this Regulation.

The tax on personal property and real property shall be paid in the month of August of each year. In the event of default, a surcharge of two percent (2%) per month shall be applied, which shall be calculated on the outstanding unpaid tax.

The fiscal period for this tax shall commence on the first of June and shall terminate on the thirty-first of May of the following year.

In accordance with the provisions established in article 76 of the Law, the following immovable properties are exempt from payment of this tax:

Law of Municipalities Association of Municipalities of Honduras a) For the first twenty thousand Lempiras (L. 20,000.00) of the registered or declared cadastral value of immovable properties inhabited by their owner. This exemption of twenty thousand Lempiras (L. 20,000.00) shall only be granted with respect to one immovable property, which is the one actually inhabited by the owner or the person who inhabits it with intent of ownership; b) Immovable properties owned by the State. Consequently, all immovable properties belonging to the three powers of the State: Legislative, Executive and Judicial, and those of decentralized institutions are exempt from this tax. c) Temples dedicated to religious worship. d) Centers of free education or non-profit education, those providing social assistance and welfare, and those belonging to Private Development Organizations, qualified in each case by the Municipal Corporation; and e) Centers for industrial, commercial and agricultural exhibitions, belonging to non-profit Institutions qualified by the Municipal Corporation.

With the exception of the real property included in subsections a) and b) of the preceding article, those interested in obtaining the corresponding benefits shall request annually in writing before the municipal corporation the exemption from the payment of the tax for each and every one of the real property contemplated in the category of exempt properties.

The tax on real property is levied upon immovable property, regardless of any change in ownership that may occur thereon, even when it refers to judicial or extrajudicial foreclosures in accordance with what is established in article 113 of the Law.

The respective Property Registrar shall permit the Cadastral Office of each Municipality to obtain information regarding all transfers of personal and real property effected within each municipal district. SECOND SECTION PERSONAL TAX

The personal or municipal property tax is a levy paid by natural persons on annual income received within a municipal term. For purposes of this Article, income shall be considered to include all classes of salary, wages, honorariums, profits, dividends, rent, interest, proceeds, benefits, participation, yield and in general any receipt in cash, securities or kind.

Law of Municipalities Association of Municipalities of Honduras

In the computation of this tax, the rate contemplated in article 77 of the Law shall be applied, which is as follows: LEMPIRAS UP TO LEMPIRAS TAX PER THOUSAND 1 5,000 1.50 5,001 10,000 2.00 10,001 20,000 2.50 20,001 30,000 3.00 30,001 50,000 3.50 50,001 75,000 3.75 75,001 100,000 4.00 100,001 150,000 5.00 150,001 OR MORE 5.25. The calculation of this tax shall be made by income bracket and the total tax shall be the sum of the amounts resulting from each bracket.

The personal tax shall be computed on the basis of the sworn statements of income obtained by taxpayers during the previous calendar year. Said sworn statements must be filed between the months of January and April of each year and the tax paid during the month of May. The forms for said statements shall be provided free of charge by the Municipality.

Law of Municipalities Association of Municipalities of Honduras

The obligation of taxpayers to present sworn declarations is not exempted by the fact that the corresponding forms have not been provided; in this case, the declaration of income may be made on common paper setting forth all the information required and made public by the Municipality.

The failure to present the sworn statement or its untimely representation shall be sanctioned in accordance with the provisions set forth in article 154 letter a) of this regulation.

Employers, whether natural or juridical persons, public or private, who have five or more permanent employees, are obligated to present in the first quarter of the year and in a form that shall be supplied by the municipal government, a payroll of their employees, accompanied by sworn declarations and the amount withheld for personal income tax from each of them.

The amounts withheld by employers shall be remitted to the Municipality within a period of fifteen days after having been withheld.

Law of Municipalities Association of Municipalities of Honduras

Employers or their representatives who fail to withhold the corresponding personal tax shall be held responsible for the amounts not withheld and shall be subject to the penalty established in Article 162 of this Regulation. Likewise, employers and their representatives who fail to remit within the deadline established in the preceding article the amounts withheld for these purposes shall be sanctioned in accordance with Article 163 of the same Regulation.

Those exempt from payment of personal income tax are: a) Those who are constitutionally exempt, as is the case of teachers in service in schools up to the primary level b) Persons who receive income or earnings by way of retirement benefits and pensions for temporary or permanent disability from the Retirement and Pension Institute of Employees of the Executive Branch (INJUPEMP), Teacher Pension Institute (IMPREMA), Honduran Social Security Institute (IHSS), Military Pension Institute (IPM), Pension Institute of the National Autonomous University of Honduras (IMPREUNAH) and from any other social security institution legally recognized by the State.

Law of Municipalities Association of Municipalities of Honduras c) Natural persons who are over sixty-five years of age and whose gross annual income exceeds the amount known as vital minimum or minimum exempt amount of income tax; and d) The income of natural persons that has been individually taxed with the industry, commerce and services tax.

With the exception of subsection c) of the preceding article, all income or revenues derived from sources other than those established in that article shall be subject to this tax.

The beneficiaries of the exemption from payment of the personal tax shall be obligated to present before the Municipal Mayor's Office the corresponding exemption request in accordance with the form established for such purpose.

The Deputies elected to the National Congress and Public Officials with national jurisdiction, appointed constitutionally, such as the Constitutional President of the Republic, the Magistrates of the Supreme Court of Justice, the Secretaries and Undersecretaries of State, the Comptroller General and Sub-Comptroller General of the Republic, the Attorney General and Sub-Attorney General of the Republic, the Director and Sub-Director General of Administrative Probity and the Chief of the Armed Forces, may effect payment of this tax in the Municipality of their habitual residence or where they exercise their functions, at their election.

No person who receives income in a Municipality shall be considered solvent in the payment of personal tax of that Municipality solely by virtue of having paid in another Municipality, with the exception of the officials established in Article 104 of this Regulation.

When a taxpayer receives income subject to this tax that originates from sources corresponding to two or more municipalities, the taxpayer shall: a) Pay personal tax in each Municipality, in accordance with the income received in that municipality. b) The municipal solvency certificate shall be obtained from the Municipality where the taxpayer has his domicile or habitual residence; if the taxpayer proves having paid the personal tax and other taxes to which he is obligated, the taxpayer shall also obtain the municipal solvency certificate from all Municipalities where he is obligated to pay his taxes and where he is found to be solvent with the Municipal Treasury, under penalty of his

Law of Municipalities Association of Municipalities of Honduras responsibilities in the event of non-compliance in the Municipality where he receives his income.

Each year in the month of February, the Municipalities shall send to the General Directorate of Taxation a report of all taxpayers subject to this tax. In this report shall be recorded principally: a) Full name of the taxpayer. b) National Tax Registry Number c) Declared Value.

The General Directorate of Taxation shall provide in writing to the Municipal Corporations all the information that may be required. THIRD SECTION TAX ON INDUSTRIES, COMMERCE AND SERVICES

The Tax on Industries, Commerce and Services is a monthly levy that falls upon the annual income generated by activities of production, sales of merchandise or provision of services. Consequently, subject to this tax are industrial, commercial, mining, agricultural, real estate development construction activities, casinos, insurance companies, provision of public or private services, electronic communication, banking and savings and loan institutions, and in general any other lucrative activity.

Based on the provisions established in Article 78 of the Law, natural or legal persons, whether individual or corporate merchants, who engage in a continued and systematic manner in the development of any of the aforementioned activities with intent to profit, shall be deemed to be taxpayers of the tax on industry, commerce, and services.

Every public enterprise, autonomous or not, engaged in the provision of public services, such as the Honduran Telecommunications Company (HONDUTEL), the National Electric Energy Company (ENEE), the National Autonomous Service of Aqueducts and Sewerage Systems (SANAA), or any other that may be created in the future, shall be obligated to pay this tax and comply with all obligations arising therefrom, in accordance with the amount of operations generated in each Municipality.

Taxpayers subject to this tax shall contribute according to their production volume, annual income or sales, as follows:

UP TO TAX PER THOUSAND L. 0.00 L 500,000.00 L 0.30 L 500,001.00 L 10,000,000.00 L 0.40 L 10,000,001.00 L 20,000,000.00 L 0.30 L 20,000,001.00 L 30,000,000.00 L 0.20 L 30,000,001.00 L onwards L 0.15

The amount of income obtained in the prior year shall serve as the basis for applying the respective rates per thousand established in the aforementioned tariff, and the sum of this result shall be the monthly amount to be paid.

Example: a natural or juridical person with gross annual income of Lps. 16,850.00; For the first 500,000.00, the rate of Lps 0.030 per thousand shall be applied; for the difference up to Lps 10,000,000.00, Lps. 0.40 per thousand shall be applied; to the balance of Lps 6,850,000.00, Lps 0.30 per thousand shall be applied.

The calculation is made as follows:

ICS = 500,000.00 x 0.30/1,000 = Lps 150.00 (Subtract the 500,000.00 from 10,000,000.00 and the resulting balance of 9,500,000.00 shall be multiplied by 0.040)

ICS = 9,500,000.00 x 0.40/1,000 = Lps. 3,800.00

ICS = 6,850,000.00 x 0.30/1,000 = Lps 2,055.00

Total monthly payment ICS Lps 6,005.00

Notwithstanding the foregoing, the following taxpayers shall pay as follows: a) Billiard halls shall pay monthly for each gaming table an amount equivalent to one daily minimum wage established for that commercial activity and for the respective region or geographic zone. For better application of this tax, it is understood that the applicable minimum wage is the lesser amount corresponding to the wage for the activity of Wholesale and Retail Commerce, in accordance with the respective geographic zone approved by the executive power, and published in the official journal "La Gaceta". b) Companies engaged in the manufacture and sale of products controlled by the State shall apply the following rate in calculating the tax to be paid: INCOME IN LEMPIRAS TAX PER THOUSAND Up to 30,000,000.00 L. 0.10 From 30,000,000.01 onwards L. 0.01 For purposes of this article, a product shall be considered to be controlled by the State when it has been included as such in the Agreement issued for such purpose by the Ministry of Economy and Commerce.

The establishment or enterprise that maintains its principal office in one municipality and has one or several branch offices or agencies in different municipalities of the Republic shall declare and pay this tax in each municipality, in accordance with the economic activity carried out in each municipal jurisdiction.

In accordance with this Law, industrial enterprises shall pay this tax in the following forms:

• 1)

  When it produces and commercializes the totality of products in the same Municipality, it shall pay on the sales volume.

• 2)

  When it only produces in one municipality and commercializes in others, it shall pay the tax based on production in the Municipality where it originates, and on the value of sales where these are effected.

• 3)

  When it produces and sells a portion of the production in the same municipality, it shall pay on the value of sales realized in the Municipality plus the value of production not commercialized in the Municipality where it produces. In the other municipalities it shall pay on the sales volume.

Exempt from the tax established in Article 78 of the Law are the values of exports of products classified as non-traditional. For these purposes, the Ministry of Economy and Commerce shall issue the Ministerial Agreement wherein the products classified as non-traditional shall be listed. Exporters must indicate in their sworn statement the amount of values corresponding to the class of export mentioned in the preceding paragraph, which shall be deducted from production volumes. All of the foregoing without prejudice to what they must pay by way of extraction tax or exploitation of resources in accordance with Article 80 of the Law.

Taxpayers subject to the tax on industries, commerce, and services shall submit a Sworn Statement of income received from economic activity in the preceding year, during the month of January of each year. Said statement shall serve as the basis for determining the monthly tax to be paid during the year in which the Statement is presented.

Law of Municipalities Association of Municipalities of Honduras The statements of taxpayers engaged in the sale of merchandise shall only contain actual sales, whether for cash or on credit, excluding merchandise on consignment.

Likewise, taxpayers of this tax are obliged to submit a sworn statement prior to performing or executing any of the following acts or facts: a) Transfer or change of business ownership b) Change of business address; and c) Change, modification or expansion of the business economic activity

Any taxpayer who opens or initiates a business must declare an estimated income corresponding to the first quarter of operations, which shall serve as the basis for calculating the tax that shall be paid monthly during the year of commencement. Said declaration shall be made at the time of requesting the Business Operation License.

When closing, shutting down, liquidating or suspending a business, the owner or responsible party, in addition to notifying the respective Municipality of the closure operation, shall present a declaration of income obtained until the date of termination of the commercial activity. This Declaration shall be presented within thirty days of the closure operation being carried out, which shall serve to calculate the tax to be paid.

In the event that a taxpayer subject to the tax on industries, commerce and services fails to file the corresponding sworn declaration or that the declaration filed contains false or incomplete data, the Municipality shall conduct the appropriate investigations in order to obtain the necessary information that permits the corresponding official assessment to be made in order to determine the correct tax to be paid.

Taxpayers of the tax on industries, commerce and services shall pay this tax within the first ten days of each month.

The non-compliance with tax obligations in this tax, such as the untimely filing of the sworn declaration, late payment of the tax, etc., shall be sanctioned in accordance with the provisions established in articles 155 letter a), 161 and other applicable provisions of this Regulation.

Law of Municipalities Association of Municipalities of Honduras

In order for a business or establishment to operate legally within a municipal district, it is mandatory that the owners or their legal representatives previously obtain the Business Operation Permit, which must be authorized by the Municipality for each economic activity that comprises the business and renewed in the month of January of each year.

Taxpayers subject to this tax who shall have disposed of their business by any title shall be jointly and severally liable with the new owner for the unpaid tax and other tax obligations until the date of the business ownership transfer operation.

Business owners, their legal representatives, as well as third parties linked with the operations subject to this tax, are obligated to provide all information required by personnel authorized by the respective municipality. Non-compliance with this obligation shall be sanctioned according to the provisions of article 160 of this Regulation. SECTION FOUR EXTRACTION TAX OR EXPLOITATION OF RESOURCES

The Extraction or Exploitation of Natural Resources Tax is the tax paid by natural or legal persons for the exploitation or extraction of natural resources, renewable and non-renewable, within the limits of the territory of their municipality, whether the exploitation is temporary or permanent. Consequently, the following operations shall be subject to this tax, regardless of the location of their processing, storage, processing or collection center or any other provision that the State may agree to, as follows: a) The extraction or exploitation of mineral quarries, hydrocarbons, blocks and derivatives. b) The hunting, fishing or extraction of species in seas, lakes, lagoons and rivers. In seas and lakes, the extraction must be within two hundred (200) meters of depth.

The tax rate shall be as follows:

• a)

  One percent (1%) of the commercial value of natural resources exploited and extracted within the corresponding municipal territory;

• b)

  The amount equivalent in Honduran Lempiras to fifty cents (0.50) of United States dollars

  Law of Municipalities Association of Municipalities of Honduras of America, in accordance with the customs valuation factor, for each ton of processable mineral or ore material of metallic minerals. This tax is in addition to the tax on industries, commerce and services; and c) One percent (1%) of the commercial value of common salt and lime. In this case, the tax shall be paid starting from the exploitation of two thousand (2,000) metric tons without regard to the duration of the exploitation. For purposes of applying this article, the commercial value of exploited natural resources shall be understood as the value that prevails in the internal commercial market of the resource as raw material.

When it comes to operations or extractions involving natural resources of two (2) or more Municipalities, these may enter into agreements or cooperation and collaboration accords in order to obtain a better rationalization of their natural resources, an effective administration, and greater control in the collection of taxes that correspond to each of them.

Natural persons or legal entities that engage in the extraction or exploitation of natural resources within a municipal jurisdiction shall comply with the following obligations:

Law of Municipalities Association of Municipalities of Honduras a) Request from the Municipal Corporation a License for extraction or Exploitation of Resources, before commencing their exploitation operations; b) For new exploitations, present together with the aforementioned request, an annual estimate of the quantities and natural resources to be exploited or extracted and an estimate of their commercial value. c) In the month of January of each year present a Sworn Declaration indicating the quantities and types of products extracted and exploited in the Municipality, as well as the amount of this tax paid during the prior calendar year and for which purpose the Municipality shall provide free of charge the respective form. d) Pay the tax for Extraction or Exploitation of Resources within ten days following the month in which the respective extraction or exploitation operations were carried out. The contravention of the provisions established above shall be sanctioned in accordance with the prescriptions set forth in Articles 154, 158, and 160 of this regulation.

Natural or legal persons engaged in the cultivation and exploitation of natural resources, for purposes of collecting this tax, may constitute themselves as withholding agents, with respect to natural or legal persons from whom they obtain raw materials, subject to a prior agreement among the parties involved.

The Institutions that have had the responsibility of controlling and administering the natural resources of the country, such as COHDEFOR, the Ministry of Natural Resources, etc. shall establish agreements of mutual cooperation and responsibility with the Municipalities within whose jurisdiction these natural resources are located, whether on private, communal, national properties, etc. in order to obtain optimal benefits for the Municipality in the application of the Law and its Regulations. For these purposes, the Municipal Corporation may grant permits for the exploitation of renewable and non-renewable natural resources, prior to the preparation of a technical study approved by the corresponding Ministry or institution.

For better control of metallic mining operations, Municipalities may carry out and adopt the most appropriate measures to verify by their own means the quantities of products reported by Companies engaged in these activities.

Law of Municipalities Association of Municipalities of Honduras Consequently, the public offices that directly or indirectly intervene in these operations, such as the General Directorate of Mines and Hydrocarbons, the Central Bank of Honduras, the General Directorate of Customs, etc. shall provide to the personnel authorized by the Municipality the corresponding information that contributes to the control of the exploitation and extraction of these resources and the payment of the respective tax. SECTION FIVE LIVESTOCK TAX

Livestock tax is that paid by natural or juridical persons to the Municipalities for each head of cattle that they slaughter or process within a municipal jurisdiction, whether for private or commercial consumption. For purposes of this tax, the following shall be understood as: a) Large Livestock: bovine, equine, asinine, and mule cattle b) Small Livestock: porcine, caprine, and ovine cattle.

All slaughter or sacrifice of livestock shall be carried out in the corresponding Public Registry or in the place authorized by the Municipality.

The tax that shall be paid per head of livestock slaughtered shall be as follows: a) For large livestock, one daily minimum wage; and, b) For small livestock, half of the daily minimum wage. The daily minimum wage to be applied shall be the lowest scale established in the Executive Decree in effect that corresponds to agricultural activity in the respective zone.

Persons or Companies whose principal activity is livestock slaughter may pay this tax through authorized receipt books duly authorized by the Municipality.

For reasons of quality control and health and safety, municipalities may issue municipal ordinances prohibiting the introduction of processed meat in other municipalities whose quality control is not known. However, municipalities may enter into agreements or mutual cooperation accords on this matter or may also celebrate agreements with other public and private institutions. SIXTH SECTION CONTRIBUTION FOR IMPROVEMENTS

The contribution for improvements is that which shall be paid to the Municipalities by the owners of real property and other beneficiaries, by virtue of the execution of municipal public works or services. These may consist of: construction of urban roads, paving, installation of electrical networks, telephone services, water supply services, sewerage, environmental sanitation and in general any work executed for the benefit of the community.

Municipalities shall collect the contribution for improvements while these recover in whole or in part the investment in the following cases:

• a)

  When the investment and execution of the work shall have been financed with the Municipality's own funds;

• b)

  When the work shall have been financed with national or external funds derived from loans or credits contracted by the Municipality;

• c)

  When a decentralized institution is unable to recover the investment made in the execution of a work and agrees with the municipality so that it acts as collection agent; and d) When the State, through a centralized office or Decentralized Institution, carries out a work within a municipal territory and transfers and authorizes the respective municipality for the recovery of the value of the work.

For the establishment of cost recovery quotas for the value of investment, the Municipalities shall approve a special regulation for the distribution of collection of investments, for each case, which shall govern the following: a) The procedure or method for fixing the amount to be recovered from each of the benefits shall take into account the nature of the work, the degree or percentage of direct benefits received by the properties benefited by the work, the economic and social conditions of the benefited community of the taxpayer primarily obligated, the total amount of the investment and the commitments acquired by the Municipality to execute such projects; and b) The general conditions regarding interest, the term of recovery, surcharges and legal actions for recovery in cases of default and any other economic and social factor that intervenes in the execution of the work.

The collections derived from the special assessment contribution shall be allocated exclusively to amortize the financing obligations incurred for such purpose, as well as for the execution of new works of benefit to the citizenry.

The payment of the contribution for improvements shall fall upon all real property benefited within the area of influence and shall be collected from the owners, their heirs, or third parties who acquire them under any title.

In accordance with the emergencies or necessities of the works under construction, the Municipalities by mutual agreement with the majority of the members of the community may initiate the collection of the contribution for improvements even before the completion of the respective work.

Law of Municipalities Association of Municipalities of Honduras

In matters not provided for in these provisions, the provisions established in the Law on Contributions for Improvements shall apply. SECTION SEVEN MUNICIPAL SERVICE RATES

The collection of fees by Municipalities originates from the effective provision of municipal public services to the taxpayer or user.

The Tax Revenue Plan is a local Law of mandatory compliance for all residents or passersby of the Municipality, wherein annually are established the rates, levies, norms and procedures relating to the tax system of each Municipality.

The Municipal Mayor shall prepare the Draft Annual Tax Plan, which shall be submitted for consideration and approval by the Municipal Corporation during the first fortnight of September. The new Tax Plan shall take effect on the first (1) day of January of the following year and shall be approved jointly with the budget. When a Municipal Corporation does not approve a new Tax Plan for the following year, in so far as the new Plan is not approved, the Tax Plan in effect during the previous year shall continue to govern.

To the extent that other services are rendered to the community not specified in the approved Tax Plan, the respective fees shall be regulated by Municipal Agreements, which shall form an additional part of the corresponding Tax Plan.

The Plans of Municipal Taxes and their corresponding Municipal Agreements shall be made known to the taxpaying population through their publication prior to their effectiveness in the Official Gazette "La Gaceta" or in the written newspapers of the locality or by any other means that proves effective for their dissemination. Without such publicity being made, the Plan of Municipal Taxes may not enter into effect.

Municipalities are authorized to establish rates for:

• a)

  Municipal services rendered directly and indirectly by Municipalities and indirectly by private parties duly authorized by the Municipality.

• b)

  The use of municipal or ejidal property; and,

• c)

  Administrative services that affect or benefit the inhabitant of the municipal jurisdiction. Municipal services are determined based on the basic needs of the population with respect to sanitation, health, environment, education, culture, sports, urban planning and in general those required for the performance of civil and commercial acts.

The public services that Municipalities provide to the community may be:

• a)

  Regular;

• b)

  Permanent; and c) Eventual. a) Regular services are: 1) Garbage collection; 2) Fire department service 3) Public lighting 4) Supply of residential, commercial, industrial electrical energy, etc. 5) Drinking water 6) Storm and sanitary sewerage, telephones, and 7) Other similar services.

  Law of Municipalities Association of Municipalities of Honduras b) Among the permanent services that Municipalities offer to the public, through approved facilities are: 1) Premises and facilities in public markets and commercial centers 2) Use of public cemeteries 3) Vehicle parking in conditioned spaces and use of parking meters 4) Use of premises for livestock slaughtering; and 5) Other similar services. c) Among the eventual services that Municipalities provide to the public are:

  • 1)

    Authorization of accounting books and others;

  • 2)

    Business operation permits and their renewals, building construction, subdivisions and others;

  • 3)

    The planning, organization and administration of municipal public services. Extension of permits for public spectacles, exhibitions, expositions, etc.

  • 4)

    Processing and solemnization of civil marriages 5) Vehicle registrations, firearms, etc. 6) Licenses for farmers, ranchers, slaughterers and others;

    Law of Municipalities Association of Municipalities of Honduras 7) Preparation of topographical surveys and subdivisions for marginal areas and colonies intervened and recovered by the Municipality. 8) Preparation of plans and designs of constructive elements 9) Inspection of constructions referred to in numeral 2 of this section; 10) Extension of certifications, statements and transcriptions of acts proper to the Municipality; 11) Cleaning of vacant lots. 12) Occupation, opening, and repair of sidewalks and public roads 13) Placement of signs and advertising billboards; 14) Extension of permits for street vendors, sales stands; 15) License for exploitation of natural products; 16) Authorization of livestock sale documents; 17) Registries of livestock branding irons. 18) Transfer guides for livestock between Departments or Municipalities; and 19) Other similar services.

Municipalities shall collect fees for the concept of public service rates using the procedures and controls that they deem convenient and that conform to conventional methods of such practices.

Law of Municipalities Association of Municipalities of Honduras EIGHTH SECTION SANCTIONS AND FINES

The Municipalities shall apply a fine of ten percent (10%) of the tax to be paid, as applicable, for non-compliance with the following provisions:

• a)

  Filing of sworn declarations of Personal Tax after the month of April;

• b)

  Filing of sworn declarations of Tax on extraction or exploitation of resources after the month of January, if the activity is permanent and after one (1) month from the commencement of exploitation if the activity is of an eventual nature.

A fine equivalent to the tax corresponding to one month shall be applied for non-compliance with:

• a)

  Filing of sworn statements of the tax on industries, commerce and services after the month of January;

• b)

  For failure to timely file the sworn statement upon transfer, change of address, modification or expansion of the economic activity of a business;

• c)

  For late submission of the estimated income for the first quarter in the case of opening of a business; and d) For failure to file the sworn statement of income within thirty (30) days following the closure, closing, liquidation or suspension of a business.

The submission of an affidavit with false information and data, for the purpose of evading the correct payment of municipal tax, shall be sanctioned with a fine equal to one hundred percent (100%) of the tax to be paid, without prejudice to the payment of the corresponding tax.

A fine of between fifty Lempiras (L.50.00) to five hundred Lempiras (L.500.00) shall be imposed upon the owner or person responsible for a business that operates without the corresponding Business Operation permit. If, after one month has elapsed since the aforementioned sanction has been imposed, the respective permit has not been acquired, double the fine imposed shall be applied to such person. In the event that non-compliance persists, the business shall be subject to closure and definitive suspension of operations.

The natural or legal person who does not obtain from the Municipality their respective license for extraction or exploitation of resources shall not be able to develop their exploitation activity. In the event that such person exercises said activity without the respective license, they shall be fined, for the first time, with an amount between Five Hundred Lempiras (L. 500.00) to ten thousand Lempiras (L. 10,000.00), according to the importance of the resources to be exploited as well as the total confiscation of the resources exploited illegally. In case of recidivism, they shall be sanctioned each time with double the fine imposed for the first time.

Taxpayers subject to the tax on Real Property who fail to submit in a timely manner the sworn statement established in this Regulation shall be sanctioned with a fine of ten percent (10%) of the tax to be paid, for the first month and one percent (1%) monthly as from the 2nd month.

The persons referred to in Article 126 of this Regulation who fail to provide the information required in writing by authorized personnel shall be subject to a fine of Fifty Lempiras (L.50.00) for each day that the respective information is delayed. The request for information must be made in writing with the formalities established by the Municipality.

The untimely payment of taxes and fees for municipal services established by the Law to which this regulation refers shall be sanctioned with a surcharge of interest of one percent (1%) per month on the amount of the tax or fee pending payment. In the case of the tax on Real Property, in addition to this percentage of interest, a two percent (2%) per month surcharge for late payment shall be applied in accordance with the provisions of Article 76 of the Law.

The employer who without justified cause fails to retain the respective tax to which the taxpayer is obligated shall pay a fine equivalent to twenty-five percent (25%) of the tax not retained.

When the employer, without any justification, fails to deposit the amounts withheld for income tax and fees within the legally established deadlines, the Municipality shall impose a fine equivalent to three percent (3%) monthly on the withheld amounts not remitted within the specified deadline.

In their respective Tax Ordinances, the municipalities shall establish the other sanctions and fines that must be applied for false statements or non-compliance with the mandatory acts, orders or procedures established in said Tax Ordinances.

Taxpayers subject to municipal taxes and fees may pay said levies in advance. Provided that such payment is made in full four or more months in advance of the legal deadline, taxpayers shall have the right for the Municipality to grant them a discount of ten percent (10%) of the total levy paid in advance. Consequently, in order to be entitled to this discount, taxes must be paid no later than:

• a)

  The tax on real property, in the month of April or before;

• b)

  The personal tax, in the month of January or before;

• c)

  The tax on industries, commerce, and services, in the month of September of the preceding year or before, when paid for the entire year, and proportionally, when payment is made after this date.

• d)

  Other municipal taxes and fees must comply with the four-month advance notice as a minimum.

The amounts granted to taxpayers by reason of discounts for advance payments shall be recorded in the respective account of municipal accounting.

Law of Municipalities Association of Municipalities of Honduras

In special circumstances, such as in the case of earthquakes, floods, strikes, armed conflict, and other fortuitous events or force majeure, the municipalities may extend the tax and fee payment period for up to sixty (60) days or until the causes that generated the calamity or emergency have ceased. In such circumstances, the municipality shall issue the corresponding Municipal Agreement and shall make it known to the population through the most effective means of communication. CHAPTER ON THE BUDGET

In order to achieve correct, sound and efficient administration, municipalities shall necessarily adopt the technique of Budget by Programs. This budget must correspond to the financial plan determined and defined for the respective Municipal Corporations in order to achieve the overall and sectoral development of the Municipality. Furthermore, norms and procedures must be established for the collection of revenues and for the execution of expenditures and investments.

The structuring of the budget by programs of the Municipalities shall be done in accordance with what is established in the Law and the present Regulation, applying the methodology, techniques, and conventional principles specific to the matter.

Pursuant to the Law of Municipalities, it is incumbent upon the Municipal Mayor to administer the general patrimony of the municipality and to invest the income or available funds for the direct benefit of the community. Consequently, in order to achieve these objectives, the following stages of the budgetary process shall be observed: a) Preparation or formulation b) Approval c) Execution d) Administration and e) Evaluation

The Municipal Mayor, through administrative personnel, shall be responsible for the formulation and preparation of the annual program-based budget. For this purpose, annual operational plans shall be prepared, as well as the estimation or projection of income and expenses for the period. In addition to agreeing upon the work methodology that shall be utilized, respective instructions, manuals, forms, and activity schedules shall be issued to carry out the budget formulation.

Law of Municipalities Association of Municipalities of Honduras

The draft budget of revenue shall be presented structured and classified in such a way as to facilitate the appropriate fiscal economic analyses. Furthermore, it shall show the origin of the different sources of income.

In the estimation of revenues, the principle of universality shall be adopted, and all revenues referred to in article 94 of the Act must be included in such estimation. This projection must contain the gross yield of revenues without deducting collection costs.

Extraordinary revenues may only be allocated to capital investments. This class of revenue may only be made available through budgetary increases duly approved by the Corporation.

Goods, funds or income derived from donations or transfers for specific purposes may not be used for purposes other than those previously assigned.

The budget of expenditures is a reflection of the municipal organization whose structure must contain a complete and clear description of the programs, sub-programs, activities and tasks of the expenses and investments of the Municipality. In this document the following must be included:

• 1)

  The financial plan or Execution Program for the respective fiscal year. This plan constitutes an instrument of municipal development and reflects the work goals, the executing units of the programs and the financial needs required during the fiscal period.

• 2)

  A general summary of annual current expenses, such as the payment of remuneration for personal services, salaries, wages, daily wages, etc. The purchase of materials and equipment and payments for contracting non-personal services.

• 3)

  The payments of mandatory contributions to public institutions, such as the Honduran Institute of Social Security (IHSS), Honduran Institute of Professional Training (INFOP), Autonomous Municipal Bank (BANMA), National Institute of Pensions and Retirements of Employees and Officials of the Executive Branch (INJUPEMP). Likewise, payments shall be recorded for public services to the respective institutions, such as the National Autonomous Service of Aqueducts and Sewers (SANAA), National Electric Energy Company (ENEE), Honduran Telecommunications Company (HONDUTEL), etc.

• 4)

  The expenses to which the municipality is legally obligated by virtue of contracts entered into with natural or juridical persons.

• 5)

  The expenditures resulting from investments or execution of projects carried out within the municipal jurisdiction.

• 6)

  The amount corresponding to transfers to the Fire Department, when such service is provided in the municipality.

• 7)

  The expenses resulting from obligations incurred by the Municipality and other operating expenses. ARTICLE 177 The necessary expenses for the proper functioning of the Municipalities shall not exceed fifty percent (50%) of the total current revenues of the period. Likewise, ordinary fixed expenses may only be financed with the ordinary revenues of the Municipality. For these purposes, operating expenses are those that have constant behavior during the period and that are financed with current revenues, corresponding to the following expense objects: (

  • 1)

    Personal Services, (

  • 2)

    Non-personal services, (

  • 3)

    Materials and supplies, (

  • 4)

    Machinery and Equipment, including their ordinary repair and (

  • 5)

    Current transfers related to municipal operations, the remainder of the groups correspond to capital expenses. When it comes to investment programs, the expense objects mentioned above shall not be considered as operating expenses.

The budget of expenditures shall be based on the budget of revenues and between both shall be maintained the strictest balance. Consequently, no commitment may be incurred nor shall any payments be made outside of the allocations contained in the Budget or in contravention of the budgetary provisions thereof.

No municipal authority shall make any appointment of personnel nor acquire economic commitments without the existence of the respective budgetary allocation or if such allocation is exhausted or proves insufficient. The contravention of this provision shall be grounds for suspension of the official or employee responsible for the action; recidivism shall be cause for removal from office, without prejudice to the annulment of the act and the deduction of the criminal, civil, and administrative liabilities that correspond.

The Municipal Mayor shall submit the Budget Project to the consideration and approval of the Municipal Corporation no later than September 15 of each year. This budget must be approved no later than November 30 by affirmative vote of more than half of the members of the municipal corporation. If for force majeure or other causes the Budget is not approved by December 31, the budget of the fiscal year ending shall remain in effect.

The Municipal Mayor, at any time after the budget has been approved, may submit to the consideration and approval of the Municipal Corporation the modifications to the allocations of expenditures that are of urgent necessity, and that require additional revenues not budgeted. The Municipal Corporation, in the approval of these modifications, must observe the formalities established for the approval of the budget.

At the end of each fiscal period (January-December), the Mayor shall make the settlement of the executed budget. Said settlement shall be approved by the Municipal Corporation in the month of January of the following year.

Law of Municipalities Association of Municipalities of Honduras

On January 10 of each year, the Municipal Mayoralties shall remit to the Secretariat of State in the Offices of Governance and Justice a copy of the budget approved for the fiscal year, as well as a copy of the final settlement of the preceding budget. They shall also report on the modifications introduced to the approved Budget.

The financial monitoring, control and execution of the approved budget shall be the direct responsibility of the Municipal Mayor, for which he shall observe and comply with all applicable legal provisions in force.

The Municipal Corporation may establish reimbursable or revolving funds in the amounts and with the requirements that the respective agreement determines and shall be under the specific responsibility of a designated official or project manager, for which purpose the respective bond shall be rendered, fixed and approved by the Office of the Comptroller General of the Republic. CHAPTER VI OF CREDITS

The Municipalities, in order to attend to the programs or investment plans for municipal works, may contract loans and/or carry out other financial operations with national credit institutions, preferably of a state nature. When loans are entered into with foreign entities, the procedures, requirements, and other provisions of Legislative Decree No. 111-90 of September 20, 1990, which contains the Public Credit Law, shall be observed.

Municipalities may also issue bonds for the financing of works and services. These bonds are securities authorized by Law, to be placed in capital markets, as a supplementary source of income. For the issuance of these bonds, prior authorization from the Executive Power is required, through the Secretariat of Finance and Public Credit and a favorable opinion from the Board of Directors of the Central Bank of Honduras.

The formalization of the issuance of the bonds shall be effectuated by means of a deed executed by the Mayor or the municipal official exercising legal representation and by the Comptroller General of the Republic.

Both for the contracting of loans and for the issuance of bonds, the majority approval of the members of the Municipal Corporation is required. In addition to the foregoing, the respective Municipal Agreement shall be issued, which must be attached to the corresponding file.

The economic funds derived from loans or bonds shall not be allocated or utilized for purposes other than those authorized.

In the event that the Municipality contracts loans or issues bonds to finance works whose investment is not recoverable, it shall not be able to allocate more than twenty percent (20%) of its ordinary annual income to amortize the payment of such debts.

The Municipalities shall incorporate into their annual budgets of revenues and expenditures, the funds derived from loans or bond issuances, the scheduled investment projects, the amounts of capital amortization and the value of interest to be paid in the period.

The municipalities that have entered into commitments due to the contracting of loans or issuance of bonds shall remit monthly to the Directorate of Public Credit reporting to the Secretariat of Finance and Public Credit, a detailed report of the movement and status of each of their credit obligations.

The request for authorization of bond issuance to the Executive Power shall be accompanied by a technical and economic feasibility study of the Project to be financed under such modality, together with the file containing the approval agreements issued by the Municipal Corporation. For each type of project, the Municipality shall issue a special regulation that governs the management, the form of investment and recovery, under the modality of direction and administration of projects by executing units, directed by highly qualified personnel for each type of project. CHAPTER VII OF TRANSFERS

With respect to the allocation of transfers referred to in article 91 of the Law, the following shall be understood: a) Ten percent (10%) of the Transfer shall serve to strengthen the operating expenses of the Municipality; and b) The remaining ninety percent (90%) shall be allocated solely and exclusively to cover investment expenses in projects of positive benefit to the community.

The Ministry of Finance and Public Credit shall transfer to each Municipality, through the Secretariat of State in the Offices of Internal Governance and Justice, the amount of transfers on a quarterly basis.

For better control and administration, the Municipalities shall manage transfer funds in special accounts, and shall include in the quarterly report that the Mayor presents to the Municipal Corporation referred to in article 46 of the Law, the manner in which said funds were utilized. Likewise, they shall be included in the semi-annual report that shall be presented to the Executive Power, through the Secretariat of State in the Offices of Governance and Justice.

The non-compliance with the foregoing provisions shall give rise to the Comptroller General of the Republic making the respective objections against the municipal officials who are responsible for the violation.

Law of Municipalities Association of Municipalities of Honduras CHAPTER VII OF THE PROCEDURE FOR THE EXECUTION OF MUNICIPAL DEBT

The payment obligations contracted by private parties for the concept of tax on immovable property, industries, commerce and services, and contribution for improvements constitute a preferential credit in favor of the Municipality.

In order for the Municipal Treasury to legally demand payment of the debts indicated in article 111 of the Law, it shall be necessary that they be liquidated, past due, and, therefore, currently collectible.

For the execution of the debt, the municipal administration shall have the following procedures available: a) Written extrajudicial demand. Such demands shall be made to the debtor up to two times, at intervals of one month each. b) Enforcement proceedings, to execute the declaratory resolution of non-payment in favor of the municipal administration, subject to the provisions established in Articles 94 to 106, Title II, Chapter VIII, First Section of the Administrative Procedures Law; and,

Law of Municipalities Association of Municipalities of Honduras c) The executive judgment regulated in Article 447 et seq. of Title I, Chapter I, First Section of the Code of Civil Procedures.

For the purpose of executing municipal debt through the extrajudicial demand procedure, the issuance of a declarative resolution of non-payment shall not be an indispensable requirement, being sufficient for its collection that it be signed by the competent municipal official, in which the debtor shall be notified of his account status and shall be required to effect immediate payment or through an arrangement that may be agreed upon with the municipal departments authorized for such purposes; this shall grant a period of thirty days for its compliance. If the taxpayer does not comply with this demand, a second demand shall be made, warning him that if he does not pay the debt, collection shall proceed through the enforcement procedure or through executive proceedings.

In order to proceed by means of attachment proceedings and executive judgment as indicated in subsections b) and c) of the preceding article, it shall be necessary to first exhaust the extrajudicial demand procedure.

In no case shall the enforcement proceedings and the executive proceedings be used simultaneously.

Law of Municipalities Association of Municipalities of Honduras

Should the executive or compulsory collection procedure be chosen, the Municipal Mayor shall issue the Certificate of Non-Payment, in which he shall declare the existence of a liquid and certain credit in favor of the Municipality and shall proceed in accordance with the provisions set forth in subsections b) and c) of article 201 of this regulation.

The Municipal Mayor and the officials responsible for enforcing the collection of municipal debt through the procedures previously described shall incur civil and administrative liability when, through negligence, they allow the five-year period established in Article 106 of the Law to elapse. TITLE V CONCERNING EXPROPRIATION

Grounds of public utility or social interest for decreeing the expropriation of urban properties shall be: the execution of works of ornamentation, beautification, safety, sanitation, construction, reconstruction or modernization of cities, villages, hamlets, neighborhoods and colonies, opening or widening of streets, buildings for markets, public slaughterhouses, plazas, parks, recreational gardens, sports facilities, public buildings, delimitation and conservation of green areas, urban development plans, the establishment of reserves for future extensions of cities or for the protection of the ecological system and, in general, any other cause that has as its object public utility or social interest.

When the Municipality requires executing any of the works mentioned in the preceding article, it shall be necessary for the Municipal Corporation to issue an Agreement declaring the utility or social interest of the work and shall proceed to gather the following documentation and information: a) Identification of the owner b) Public Deed of ownership c) Encumbrances burdening the property d) Cadastral value and/or declared value e) Amount of the Real Property Tax paid in the last three years.

The Mayor shall summon the owner or his legal representative to present, within a period of ten (10) business days, the documents and information mentioned in the preceding article.

With regard to all matters referred to in expropriation proceedings, the provisions established by Decree No. 113 of April 9, 1914, Law of Forced Expropriation shall be followed insofar as applicable.

Law of Municipalities Association of Municipalities of Honduras TITLE VI OF PRESCRIPTION

For the purposes of Article 106 of the Law, natural and legal persons are understood to be all those who have entered into contractual or quasi-contractual obligations with the Municipality, or those who by operation of law are obligated to give, do, or refrain from doing something. The prescriptive period shall be five (5) years and shall commence to run: 1. In cases where there is no special provision determining otherwise, it shall be counted from the day on which collection could be exercised. 2. Those whose object is to claim the fulfillment of obligations of capital with interest or income, from the last payment of the income or interest. 3. Actions to demand the fulfillment of obligations declared by judgment, from the date on which it became final. 4. Those which have the purpose of demanding the rendering of accounts from the day on which those obligated to render them ceased in their offices. TITLE VII OF LEGAL REMEDIES SOLE CHAPTER

Law of Municipalities Association of Municipalities of Honduras

The agreements, resolutions, ordinances, regulations, tax assessment plans, and other acts of municipal administration may be challenged through the remedies provided for in the Administrative Procedure Act. When the challenge arises from the assessment or collection of any tax, fine, and other municipal sales or credits, payment of the respective amount or corresponding payment arrangement must first be made and proceeded with in the manner provided in the first section, chapter IV, title IV of the Administrative Contentious Jurisdiction Act.

Acts of municipal administration may be reviewed ex officio by the organs that issued them in the manner, time periods, requirements and limits established in the Administrative Procedure Law.

For the purposes of the motion for reconsideration indicated in Article 25, numerals 11 and 14 of the Law of Municipalities, this shall be filed against the resolutions issued by the Municipal Corporation, the Mayor, or another immediately subordinate authority, within the term of ten (10) days following the notification of the contested act. The decision rendered by the Corporation concerning the motion for reconsideration shall be notified ten (10) days after notification of the last order. Upon the expiration of said term without the Corporation ruling on the motion, it shall be understood as dismissed and the appropriate remedy shall remain available to the appellant.

The appeal shall be filed before the authority that issued the resolution, which shall forward it to the Municipal Corporation within the period of five (5) business days following its filing, together with the file and report.

The appeal resource referred to in Article 7, numeral 4 of the Law of Municipalities shall be presented before the Municipal Corporation, which shall remit the file and the respective report to the Departmental Governorship within five business days following the presentation of the resource. The time limit for filing this resource shall be fifteen business days counted from the notification. If one month should elapse from the filing of the resource and the appellant is not notified of the admission or denial of the resource, it shall be understood as withdrawn.

When the Departmental Governorship or other authority issues resolutions, agreements, dispositions, minutes, or orders that injure municipal interests, the Municipal Corporation through the Municipality may appeal against the same, for which purpose it shall present the remedy before the Departmental Governorship, within fifteen (15) days of the transcription of the act.

The appeal petition shall contain at least the following requirements:

• a)

  A summary indicating its contents;

• b)

  The indication of the authority to which it is directed (Departmental Governorship);

• c)

  Names, surnames, status, profession or occupation and domicile of the Mayor or his representative, in which case he shall present the document that accredits his representation.

• d)

  Facts according to which it is deemed injurious to the interests of the Municipality with precise indication of the minutes being appealed and their grounds. NOTE: ARTICLE 219 does not appear published in the Official Gazette.

Within the period of five (5) days from its presentation, the Departmental Governor shall remit the file and his report to the Secretariat of State in the Offices of Internal Affairs and Justice.

Law of Municipalities Association of Municipalities of Honduras

The Secretariat of State in the Office of Governance and Justice, once it has received the file and if there is evidence to be presented, shall open the case to evidence for a period of fifteen days, within which it may order of its own motion such evidence as may be relevant for the most appropriate resolution of the matter.

Once the evidence referred to in the preceding article has been conducted, the parties shall be provided with a copy of the proceedings so that within the common period of ten (10) days, they may present arguments regarding all actions taken and the value and scope of the evidence produced.

Upon expiration of the term referred to in the preceding article, the Secretariat of State in the Offices of Interior and Justice shall issue the corresponding agreement, confirming, annulling, or modifying the challenged resolution. TITLE VIII GENERAL PROVISIONS SINGLE CHAPTER

Prior to the planning and execution of a public works project within the municipal territory that any state institution, including decentralized ones, must carry out, it shall be required to obtain from the Municipal Corporation its opinion regarding the advisability of the Project.

When consultation with the Municipal Corporation is omitted or, having been provided, is disregarded by the executing agency, the municipality shall bring this to the knowledge of the Departmental Governor so that he may immediately report to the State Secretariat in the Offices of Governance and Justice for appropriate intervention.

When the Law indicates that the Mayor has the power to appoint, promote, transfer, and remove personnel, it shall be understood that their hiring, or recruitment and removal is made by the exclusive decision of the Mayor, that is to say without the intervention of the Corporation, but for all the aforementioned actions, the Mayor shall be subject to the procedure prescribed by the Civil Service Law and its Regulations as applicable.

The Municipalities shall collect taxes, service fees, contributions and other local levies through the use of vouchers or payment receipts. The Municipalities that have sufficient capacity to order the printing of their own vouchers and do not require the use of the municipal forms distributed by the General Directorate of Municipal Advisory and Technical Assistance may prepare the corresponding models or forms, submitting them for review by the General Comptroller's Office of the Republic. Each time the Municipality orders the printing of these vouchers, it shall notify the General Comptroller's Office of the Republic and shall also send it a copy of the Issuance Record that is prepared when they are received from the printing company.

The present General Regulation shall enter into force on the day following its Publication in the Official Gazette "La Gaceta". Rafael Leonardo Callejas José Francisco Cardona Arguelles Secretary of State in the Office of Governance and Justice (Published in La Gaceta on February 18, 1993)