Law on the Organization of Public Finance

Repeal of Exemptions.- All exemptions and customs franchises to the importation of merchandise with exemption and local purchases, established in the different general and special laws, including those issued in favor of the Executive, Legislative and Judicial Branches, as well as the Armed Forces of Honduras, Decentralized Institutions and State Enterprises are hereby repealed. Likewise, all exemptions granted to private voluntary organizations of public interest without profit motive are repealed, regardless of the activities they carry out, and which by virtue of special laws and decrees the State has granted them favorable treatment.

Exemptions.- The following customs exemptions and franchises are excepted from the provisions of the preceding Article:

• 1)

  Those granted by mandate of the Constitution of the Republic;

• 2)

  Those granted by International Treaties and Conventions;

• 3)

  Those granted under Decree 185-86 of October 31, 1986 and its amendments, referred to benefits for Hondurans residing abroad;

• 4)

  The Traveler Regime described in the Central American Customs Code (CAUCA) and its Regulation;

• 5)

  Those granted under Decree 26-90-E of February 18, 1992 containing the Special Law of Letter of Naturalization, Article 10;

• 6)

  Those granted under Decree 37-95 to Sports Delegations, published on April 24, 1995, provided they are for exclusive use of sports delegations;

• 7)

  Those granted to churches in accordance with Special Decrees and Laws;

• 8)

  Those granted under Decree 70-2001 dated May 30, 2001 in its Article 8 to the National Coffee Fund, published on July 30, 2001;

• 9)

  Those granted to the Honduran Coffee Institute (IHCAFE), in accordance with Article 47 and amended by Decree No. 213-2000 of November 1, 2000, solely in relation to the importation of fertilizers;

• 10)

  Those granted under Decree 208-2003 of December 12, 2003, Articles 25 and 26 of the Migration and Foreigners Law, published on March 3, 2004;

• 11)

  Those granted under Decree 44-2004 of April 1, 2004, Article 220 of the Electoral Law and Political Organizations, published on May 15, 2004;

• 12)

  Those granted under Decree 160-2005 of May 24, 2005, articles 36, 54, 55 and 56 of the Law of Equity and Comprehensive Development for Persons with Disabilities, published on October 25, 2005;

• 13)

  Those granted under Decree 199-2006 of January 15, 2007, containing the Comprehensive Law for Protection of the Elderly and Retirees, Articles 33 and 36, published on July 21, 2007;

• 14)

  Those granted under Decree 51-2011 of May 3, 2011, containing the Law for Promotion and Protection of Investments, Article 37, published on July 15, 2011;

• 15)

  Those granted under Decree 126-2011 of August 9, 2011, containing the Law for the Promotion of Sustainable Rural Tourism, Article 4, published on October 4, 2011;

• 16)

  Those granted under Decrees and Agreements existing between the Government of Honduras and the Panamerican Agricultural School El Zamorano;

• 17)

  Those granted in accordance with the Law of Citizen Security Decree No. 105-2011 of September 14, 2011 and its amendments, relating to Decree 199-2011 dated November 4, 2011, containing the Law of Trusts for the Administration of the Fund for Protection and Citizen Security, Article 7;

• 18)

  Those granted in the following laws: Temporary Import Regime (RIT), contained in Decree No. 37-84 dated December 20, 1984 and its amendments, Law of Incentives to Tourism (LIT), contained in Decree No. 314-98 dated December 18, 1998 and its amendments, Constitutional Law of Free Trade Zones (ZOLI), contained in Decree No. 35 dated July 19, 1976 and its amendments; Law for Promotion of Generation of Electrical Energy with Renewable Resources contained in Decree No. 70-2007 dated May 31, 2007 and its Amendments; and those granted in contracts for the National Electric Power Company (ENEE) authorized through legislative decrees, without prejudice to the right granted in Article 54 of Decree 51-2003 of April 3, 2003 and acquisitions for equipment and construction of prisons of the National Penitentiary System contained in Decree No. 32-2013 published on April 2, 2013;

• 19)

  Those granted under Decree 212-87, November 29, 1987, containing the Honduras Customs Law, published on December 29, 1987 and its Amendments;

• 20)

  Those Granted by the Law of Emission of Thought contained in Decree No. 6 of July 26, 1958;

• 21)

  Donations to the State and local associations or entities and their dependencies to address priority needs in health, food, education, job creation and those granted to the Permanent Commission of Contingencies (COPECO);

• 22)

  Those granted in Decree No. 143-2013 of July 23, 2013 containing the LAW OF THE NATIONAL FUND FOR THE COMPETITIVENESS OF THE AGRICULTURAL SECTOR and its regulations issued jointly by the State Secretariats in the Departments of Agriculture and Livestock and Finance with the accompaniment of the National Federation of Farmers and Livestock Breeders of Honduras (FENAGH);

• 23)

  Contracts executed by COALIANZA and approved by the National Congress; and, 24. Those granted to the HONDURAN RED CROSS.

Reform to Decree 90-2012.- To reform Article 5 numeral 1 of Decree 90-2012 of June 14, 2012 containing the Law for the Promotion of Call Centers and Business Services Outsourcing, published on July 18, 2012, which shall henceforth read as follows: "Article 5. Tax Benefits and Incentives... 1) Complete exemption from the payment of tariff taxes, charges, surcharges, consular rights, internal taxes, consumption taxes and any other taxes that levy on the importation of equipment, tools, spare parts, accessories, furniture and office equipment and other goods that have direct relationship with the operations and execution of the incentivized activity; and, 2) ..."

Reform of the Contribution for Social Programs and Road Heritage Conservation.- To reform Article 40 of Decree No. 13-98 of April 1998, containing the Law of Stimulus to Production, Competitiveness and Human Development and its amendments, in the sense of reforming only the tax denominated CONTRIBUTION FOR THE CARE OF SOCIAL PROGRAMS AND ROAD HERITAGE CONSERVATION, in the following manner: PRODUCT CONTRIBUTION IN DOLLARS Super Gasoline 1.4089 Regular Gasoline 1.2416 Diesel 0.6606 Fuel Oil (Bunker C) 0.4267 Kerosine 0.1500 LPG: Up to 25 Pounds 0.1500 Over 25 Pounds 0.1500 AvJet 0.0300

Exemptions in Income Tax.- All exemptions in concept of Income Tax established by Decrees and Special Laws are hereby repealed, except those granted by:

• 1)

  Constitution of the Republic;

• 2)

  International Conventions or Treaties;

• 3)

  The Convention of the Central American Bank for Economic Integration (CABEI);

• 4)

  The Convention of the Panamerican Agricultural School;

• 5)

  The Vienna Convention to members of the Diplomatic and Consular Corps accredited in the country, solely as to income derived from remuneration or honoraries that for their services they receive from the respective country, without prejudice to the principle of international reciprocity; as well as to International Organizations and Agencies in accordance with their respective convention;

• 6)

  The State, Municipalities and other decentralized and autonomous institutions except Public Enterprises referred to in Article 53 of the General Law of Public Administration;

• 7)

  Contracts executed with the State that grant the exemption and are approved by the National Congress;

• 8)

  The Law and companies operating in the Regime contained in the Law of Free Trade Zones (ZOLI), Industrial Processing Zones (ZIP), without prejudice to the right granted in Article 54 of Decree 51-2003 of April 3, 2003;

• 9)

  Decrees and Special Laws to recognized Churches;

• 10)

  The laws to Retirees or Pensioners for the amount of the pension received;

• 11)

  The laws to the elderly as to the deductions granted for the benefits granted;

• 12)

  The Law to Trade Associations, Employer Associations, Non-profit Associations and properly legalized Trade Union Organizations recognized by the State, only as to the legal entity in regard to their non-profit activities; said non-profit activities must be qualified by the Executive Revenue Department (DEI) in accordance with the provisions of Article 28 of Decree No. 113-2011 dated June 24, 2011 containing the Law of Efficiency in Revenue and Public Spending;

• 13)

  The Law and legally constituted Political Parties;

• 14)

  The Law for Promotion and Protection of Investments contained in Decree 51-2011 published on June 15, 2011 to the beneficiaries covered thereunder;

• 15)

  Decree No. 70-2007 of May 30, 2007 containing the Law for Promotion of Generation of Electrical Energy with Renewable Resources and its amendments;

• 16)

  The contract of the Patuca III Hydroelectric Project approved by the National Congress; and, 17. Decree 90-2012 of June 14, 2012 containing the Law for the Promotion of Call Centers and Business Services Outsourcing, published on July 18, 2012, in article 5 numeral 2. In the Fast Food and Beverages Sector, legal entities and other companies benefited by the Law of Tourism Incentives and its amendments must pay Income Tax in accordance with the expiration of the benefits granted by the same.

Settlement and Payment of Withholding on Capital Gains Tax.- The taxpayer shall present the settlement of the withholding of Capital Gains Tax described in the preceding Article, through a declaration in accordance with the provisions of Article 14 of the Law of Efficiency of Revenue and Public Spending contained in Decree No. 113-2011 issued on June 24, 2011. The payment of the tax must be made by the withholding institution to the General Treasury of the Republic no later than within ten (10) business days following, counted from the moment the withholding was made for the concepts mentioned above, issuing the respective receipts for control and audit purposes by the Executive Revenue Department (DEI). The Property Institute shall not proceed to register the real property without first being credited with the payment of taxes.

Air and Maritime Transport Companies.- To add to Article 22 of the Income Tax Law contained in Decree No. 25 of December 20, 1963 and its amendments, literal c) and a penultimate paragraph, which shall henceforth read as follows: "ARTICLE 22. The tax... a) ... b) ... c) In the case of Air, Land and Maritime Transport companies incorporated abroad and operating in the country, for purposes of calculating the tax, a taxable net income equivalent to ten percent (10%) of the total annual gross income from Honduran source shall be taken. To which only the rate of the Income Tax described in literal a) of this Article shall be applied. The representatives of these companies shall be considered as their agents or agencies constituted in the country. The value ..."

Addition to the Income Tax Law.- To reform the Income Tax Law contained in Decree No. 25 of December 20, 1963 and its amendments, in the sense of adding Article 22-A, which shall read as follows: "ARTICLE 22-A. Individuals or legal entities domiciled in Honduras shall pay a pure tax of one point five percent (1.5%) on gross income equal to or exceeding TEN MILLION LEMPIRAS (L10,000,000.00) of the tax period when the application of the rates stated in literals a) and b) of Article 22 of this Law results in less than one point five percent (1.5%) of the declared gross income. The rate shall be reduced to zero point seventy-five percent (0.75%) in the case of income obtained by individuals or legal entities that produce or market the following products and services:

• a)

  Production and distribution of Cement;

• b)

  Public services rendered by state enterprises;

• c)

  Pharmaceutical products and medicines for human use, at the producer or importer level;

• d)

  Income from production, sale and distribution of Petroleum and its derivatives; and, e) The bakery sector or industry. The following individuals or legal entities shall not be subject to the payment of the one point five percent (1.5%) mentioned:

  • a)

    Individuals who obtain income derived from salaries and wages;

  • b)

    Taxpayers whose annual gross income is less than TEN MILLION LEMPIRAS (L10,000,000.00), who nonetheless in their case must comply with the declaration and payment established in Article 22 of the Income Tax Law and the Tax on Net Assets created by the Tax Equity Law, Decree No. 51-2003, of April 3, 2003;

  • c)

    Companies that during the first two (2) years of their incorporation or in pre-operative period after the effective date of this Law, that is until they begin their first commercial sales transaction; and,

  • d)

    Individuals or legal entities that incur losses due to fortuitous event or force majeure, derived from natural disasters, catastrophes, wars, state of exception, duly accredited to the Executive Revenue Department (DEI), for up to two (2) fiscal periods from when they occur. Such loss must be certified by an audit firm duly registered in the respective Professional College, being subject to subsequent audit. For purposes of this literal, gross income shall be understood as total income less discounts, rebates and returns, without prejudice to the subsequent unloading regulated by the State Secretariat in the Department of Finance in coordination with the Executive Revenue Department (DEI), specifying in its case by sectors. The tax resulting from the application of the one point five percent (1.5%) shall be the basis for determining Payment Account Quotas for the 2014 fiscal period. Companies that declare operating losses shall be subject to the provisions of Decree No. 96-2012 of June 20, 2012."

Tax on Increase in Value of Real Property or Appreciation.- A tax of ten percent (10%) is hereby established on the increase in value, location or appreciation of real property, which shall be applied each time registration operations are conducted at the Property Institute on real property subject to this tax. The Regulation issued by the State Secretariat in the Department of Finance must determine the manner of payment of this tax. Individuals or legal entities that fail to comply with the obligation to pay this tax within the legal deadline shall be subject to the provisions of Article 120 of the Tax Code and the corresponding sanctions.

Withholding at Source on Payments Made by the State.- To add a final paragraph to Article 50 of the Income Tax Law contained in Decree No. 25 of December 20, 1963 and its amendments, which shall henceforth read as follows: "Article 50. When the taxpayer… It is authorized… Likewise… Legal entities… Withholdings… The State is authorized to make the withholding of Twelve Point Five Percent (12.5%) on payments it makes for the concept of easements, rights of way and similar to individuals or legal entities. This withholding shall be subject to the same provisions established by the Income Tax Law."

Withholding at Source on Payments Made to Non-Residents.- To reform Article 6 paragraph 6 of the Law of Efficiency in Revenue and Public Spending contained in Decree No. 113-2011 dated June 24, 2011 and its amendments, which shall read as follows: "Article 14. Capital Gains… Payment… Constitute… In Operations… For the calculation… When the alienation of real property or rights and securities is conducted by a non-resident, the acquirer must proceed to withhold four percent (4%) of the value of the transfer of ownership as payment on account of this tax. Said amount must be paid within ten (10) calendar days following the transaction by means established by the Executive Revenue Department (DEI). It is excepted… It is excepted… It is not considered… 1) … 2)… and, 3)…"

Fines, Surcharges and Interest.- In case of application of fines, surcharges and interest derived from audits applied to taxpayers or withholding agents by the Executive Revenue Department (DEI), their application shall be made in accordance with the provisions of the Tax Code.

Sales Tax Rates.- To reform Article 6 of the Sales Tax Law contained in Decree No. 24 of December 20, 1963 and its Reforms, in the sense of modifying its general rate to Fifteen Percent (15%), and Eighteen Percent (18%) the rate applied to alcoholic beverages, beer and cigarettes as well as executive class airline tickets.

Basic Basket.- To reform Article 15 of the Sales Tax Law contained in Decree Law No. 24 of December 20, 1963 and its reforms, in the sense of modifying the list of goods exempt under subsection a) as detailed in Annex I of this Decree. In the same manner in subsection d) of Article 15 of the Sales Tax Law, to clarify the text by eliminating in the fourth line the word "industrial".

Exempt Services.- To reform subsection d) of Article 15 of the Sales Tax Law contained in Decree Law No. 24 of December 20, 1963 and its reforms, which shall hereinafter read as follows: "Article 15. The following are exempt... a) ... b) ... c) ... d) The following services: electrical energy; drinking water and sewerage; construction services; professional fees obtained by natural persons; teaching; hospitalization services and ambulance transportation; clinical laboratory and human clinical analysis services; radiological services and other medical, diagnostic and surgical services, excepting aesthetic beauty treatment services such as spa, laser liposuction and similar; land passenger transport; banking and financial services; except the leasing of personal property with option to purchase those related to personal insurance premiums and reinsurance in general. Sales or services of food prepared for consumption within or outside the establishment shall be subject to this Tax; e) ...; f) ...; and g) ..."

Simplified Regime.- To reform Article 11-A of the Sales Tax Law contained in Decree No. 24 of December 20, 1963 and its reforms, in the sense that natural or legal persons covered under the Simplified Regime shall not be responsible for tax collection, being obligated only to submit an Annual Sales Declaration no later than January 31 of the following fiscal year. The presentation of the Annual Sales Declaration of the Simplified Regime shall be applicable as of Fiscal Period 2014.

Suspension of the Refund of Sales Tax.- To suspend for a maximum period of six (6) months from the date this Decree enters into effect, the application of Article 3 of the Law of Efficiency in Income and Public Spending contained in Decree No. 113-2011 dated June 24, 2011, containing the refund of eight percent (8%) of Sales Tax from purchases with Debit or Credit Cards actually paid, with the objective that the Card Transaction Service Operators and Concessionaires (OTCD) adjust their systems to make enforceable in each transaction conducted by affiliated establishments, the discrimination of the amount of Sales Tax incurred, even when the same is equal to zero (0). This is by virtue of the fact that to date the implementation of said refund has not been possible. If within the cited term the objective is not met, the penalty established in Article 179 of the Tax Code shall be imposed.

Withholding of Sales Tax from Credit Card Issuers and Service Concessionaires (OTCD).- To reform numerals 3) and 4) of Article 4 of the Law of Efficiency in Income and Public Spending contained in Decree No. 113-2011 dated June 24, 2011, which shall read as follows: "Article 4. Complementation... 1) ... 2) ... 3) Merchants or affiliated establishments must register the value incurred for Sales Tax, even when the same is equal to zero (0) or the sale is made to the final consumer, under notice that in case of failure to do so the OTCD shall do so automatically in accordance with the instructions issued by the Executive Directorate of Income (DEI); 4) The OTCD must automatically withhold fifty percent (50%) on the total amount of Sales Tax incurred in transactions of taxable goods and services registered by their affiliates;"

Regulation of Exemptions.- Every exemption or tax benefit shall be granted in accordance with the Tax Code and the Special Law that granted the benefit.

Term of Benefit.- A term of up to twelve (12) years is established to enjoy fiscal benefits when the Law that grants the benefit does not provide for the duration term thereof.

Presentation of Exemption Application.- The beneficiaries of any exemption, franchise exemption, internal or customs tax benefits must register with the General Directorate of Customs Franchise Control (Customs) dependent on the Ministry of Finance. To make effective the benefits that have been granted to them, they must present a detailed and scheduled request for goods and services to be imported or acquired locally, which must be related to the nature of the activity in which they will use the exempt goods and services, prior to an opinion from institutions specialized in the matter, said opinion shall not be binding. For the implementation of the Beneficiary Registry, the Executive Directorate of Income (DEI) shall provide the General Directorate of Customs Franchise Control with the Registry that is maintained in its files.

Control and Rationalization of Exemptions.- Regarding the control and rationalization of exemptions to determine the procedure in granting the quantities and type of goods to make effective the benefit, the Ministry of Finance through the General Directorate of Customs Franchise Control, must issue a Regulation that allows modifications in the detailed and scheduled request for goods to be imported or acquired locally, taking into consideration market behavior. For the preparation of the Regulation, a period of thirty (30) business days is established, starting from the effective date of this Decree.

Restriction of Beneficiaries.- Natural or legal persons who have enjoyed tax exemptions granted through Decrees or Special Laws may not avail themselves of another Special Tax Regime upon the expiration of the period of time for which the State granted them such benefits.

Penalties.- Natural or legal persons who perceive any tax on an exempt good shall be sanctioned in accordance with Article 121 of the Tax Code, plus an administrative penalty of four (4) minimum wages. CHAPTER VII ON CONTROL OF EXEMPTIONS AND ANTI-EVASION MEASURES

Regulation of Exemptions.- Every exemption or tax benefit shall be granted in accordance with the Tax Code and the Special Law that granted the benefit.

Term of Benefit.- A term of up to twelve (12) years is established to enjoy fiscal benefits when the Law that grants the benefit does not provide for the duration term thereof.

Presentation of Exemption Application.- The beneficiaries of any exemption, franchise exemption, internal or customs tax benefits must register with the General Directorate of Customs Franchise Control (Customs) dependent on the Ministry of Finance. To make effective the benefits that have been granted to them, they must present a detailed and scheduled request for goods and services to be imported or acquired locally, which must be related to the nature of the activity in which they will use the exempt goods and services, prior to an opinion from institutions specialized in the matter, said opinion shall not be binding. For the implementation of the Beneficiary Registry, the Executive Directorate of Income (DEI) shall provide the General Directorate of Customs Franchise Control with the Registry that is maintained in its files.

Control and Rationalization of Exemptions. With respect to the control and rationalization of exemptions to determine the procedure in the granting of quantities and type of goods to make effective the benefit, the Secretary of State in the Office of Finance through the General Directorate of Customs Franchise Control, shall issue a Regulation that permits modifications in the detailed and scheduled request of goods to import or acquire locally, taking into consideration market behavior, for the elaboration of the Regulation a term of thirty (30) business days is established, effective from the date this Decree takes effect.

Restriction of Beneficiaries. Natural or Legal Persons that have enjoyed fiscal exemptions granted through Special Decrees or Laws may not avail themselves of another Special Fiscal Regime upon termination of the period of time for which the State granted them such benefits.

Sanctions. Natural or legal persons who collect any tax on an exempted good shall be sanctioned in accordance with Article 121 of the Tax Code, plus an administrative sanction of four (4) minimum wages. CHAPTER VIII OF OTHER TAXES, FEES, RIGHTS AND TARIFFS

Freeze on Transfers. The budgetary allocations contemplated in the General Budget of Income and Expenses of the Republic for the fiscal year 2013 under the concept of transfer to each of the Secretaries of State, Deconcentrated Bodies, Deconcentrated Institutions and Municipal Governments, as well as to the Powers of the State and those stipulated by the Constitution of the Republic, are fixed at the same nominal values for the fiscal year 2014. In the case of transfers to other Powers of the State and those set by the Constitution of the Republic and Special Laws, they may be reviewed in proportion to the income received from tax collection or provision of services and subject to results indicators. And at the same time, adjusted in accordance with the availability of public finances, preserving financial balance.

Calculation of Transfers. For the calculation of transfers to institutions that by constitutional or legal mandate the Central Government must make, income from public credit and donations should not be considered, likewise the costs incurred in tax collection shall be deducted from income.

Targeting of Subsidies. Executive Branch institutions are authorized to organize subsidies to implement the necessary mechanisms for their targeting to beneficiaries.

Subsidy to Electric Energy Consumers. A monthly voucher of one hundred twenty Lempiras (L120.00) shall be subsidized to those consumers of electric energy who until the effectiveness of this law have been receiving subsidies and whose monthly consumption does not exceed 75 kWh. New consumers of low income whose monthly consumption does not exceed 75 kWh may be eligible to enjoy this privilege. The National Electric Energy Company (ENEE) shall provide the Secretary of State in the Office of Finance with the list of consumers who will receive the subsidy, the latter shall make the necessary provisions with the banking system in order to deliver the said monthly amount. The subsidy shall be delivered only to the holder of the electric service, who must identify himself as such at the bank branch. Prior to obtaining this benefit the consumer must register in the beneficiary control system which shall be administered by the corresponding unit, as determined by the Regulation of this Law.

Current Transfers to the Private Sector. Transfers that the State makes in favor of civil associations, foundations and non-governmental organizations must be liquidated. To continue enjoying said benefit they must present to the Secretary of State in the Office of Finance the information of a properly licensed audit firm, which must be paid by the one who receives the transfer.

Distribution of Income from Adjustments. In relation to income recovered from judicial actions executed by the Office of the Attorney General of the Republic (PGR), or adjustments made, as well as judicial actions executed directly by the Superior Court of Accounts (TSC), it shall be distributed between both institutions up to ten percent (10%) of the total received. For the purpose of determining the calculation basis of the ten percent (10%), the expenses incurred in the management of collection or those amounts that must be recognized to third parties or tax credits shall be deducted. The recovered income shall be deposited in the General Treasury of the Republic which shall make the transfer to the corresponding institution of the respective percentage, through the Integrated Financial Administration System (SIAFI). The application of this provision shall be effective as of January 1, 2014.

Prohibition on Legalization of Extra-budgetary Expenses. It is strictly prohibited for public sector institutions to incur extra-budgetary commitments. These shall not be recognized as public debt nor registered in the Integrated Financial Administration System (SIAFI). The Secretary of State in the Office of Finance shall not process any request for budget modification on this account and is authorized to establish the pertinent regulations for automatic rejection in the Integrated Financial Administration System (SIAFI). Likewise, it must notify this situation to the controlling bodies and the Public Ministry so that the corresponding administrative, civil and criminal liability may be deduced.

Sanction for Excess of Expenses Over Budgetary Allocation. Excess expenditure over the budgetary allocations administered by public officials shall be sufficient cause for the President of the Republic to proceed with their dismissal, and the responsible person shall be disqualified from holding public office for a term of ten (10) years, without prejudice to the administrative, civil and criminal actions that may proceed.

Deduction for Payment of Services. The Secretary of State in the Office of Finance is authorized to apply the necessary administrative procedures to deduct from the transfers established in the Constitution of the Republic, Law of Municipalities and other Laws, the debts held by Public Sector Institutions and Municipalities for services provided by the different Public Companies.

Incorporation of External Resources into the Budget. Notwithstanding what is established in Article 36 of the Organic Budget Law contained in No. 83-2004 of May 28, 2004 and its Amendments, prior to the incorporation of external resources from loans into the General Budget of Income and Expenses of the Republic, favorable authorization from a Commission must be obtained, which shall be integrated by the Secretary of State in the Office of Finance, the President of the Central Bank of Honduras and the President of the National Commission of Banks and Insurance (CNBS), and others that the Commission deems pertinent.

Payment of Final and Ancillary Judgments. When the State or its entities is condemned to recognize liquid amounts through final judgments, the calculation of commercial and moratory interests established in Article 100 of the Law of Contentious Administrative Jurisdiction, shall be made in accordance with the passive rate, applying the weighted average rates of savings deposits and certificates of deposit of the national banking system. With respect to the calculation of moratory interests, the rate of two percent (2%) per annum shall be applied. All payment derived from final judgments issued by the competent Courts of Justice, must be notified to the Superior Court of Accounts so that it may determine whether there is liability of public officials for negligence or omission in the principles of legality, transparency, efficacy and efficiency that must be observed in Public Administration.

Authorization to the Secretary of State in the Office of Finance.- In the operations of Purchase of Securities that the Central Bank of Honduras performs with the Institutions of Retirement and Pensions in the secondary market and that immediately afterwards the institutions reinvest such amounts in bonds of the Government of Honduras, the Secretary of State in the Office of Finance is authorized to absorb the losses that such operations may cause during the first year, through transfer to the respective retirement and pension institutions. TITLE III CONTROL AND MANAGEMENT OF PUBLIC DEBT

Municipal Indebtedness. For the purposes of compliance with Article 78 of the Organic Budget Law for the granting of endorsements and guarantees by the Central Government for the purpose of internal and external indebtedness of Municipal Governments, prior favorable opinion from the General Directorate of Public Credit, a dependency of the Secretary of State in the Office of Finance, shall be required. For such purposes, municipalities shall present the Financial Statements of at least two (2) prior years, audited by a duly registered firm. If municipalities do not have audited Financial Statements, they must at least formally accredit that the audit process is in progress.

Management of Financing. In accordance with Articles 71, 72, 73 and 78 of Decree No. 83-2004, containing the Organic Budget Law of May 28, 2004 and its amendments, and with Articles 81, 84, 85 and 86 of the General Law of Public Administration and its amendments, the Central, Decentralized, and Deconcentrated Administration is prohibited from managing reimbursable financial resources without the approval and risk evaluation by the Secretary of State in the Office of Finance, through the General Directorate of Public Credit, considering the requirements established in the aforementioned Law.

Internal Indebtedness. The Secretary of State in the Office of Finance is authorized for the fiscal period 2014 to contract indebtedness with the Central Bank of Honduras (BCH) in accordance with the provisions of Article 40 of the Law of such institution and its amendments, and to cancel such indebtedness plus the interest generated by it, through the issuance of "Honduras Government Bonds (GDH)," whose characteristics of term, amortization and interest rate shall be defined in the Regulation created for such purpose. TITLE IV OF TAX ADMINISTRATION

AUTHORIZATION FOR THE HIRING OF PRIVATE SERVICES. The President of the Republic in Council of Ministers may hire the services of private law institutions to support the Public Administration specifically the Executive Directorate of Income (DEI) in its tasks of combating tax evasion, smuggling and fraud in the area of taxes collected in the National Customs System. These services shall have to comply with the following:

• 1)

  Support the Customs Service of the Country, through a process of improvements that generates efficient internal procedures, implements audit systems and quality processes, reorganizes functional structures employing an organizational culture oriented to results, in order to generate substantial increases in collection;

• 2)

  Modernize the Executive Directorate of Income (DEI), through the incorporation of new technology, providing expert advice and specialized human resources in order to improve collection in the Customs Service: taxes, contributions, tariffs, rights and other customs tax obligations, providing new payment channels, increasing the quality of attention to taxpayers, promoting actions to prevent evasion, smuggling and fraud, enabling a greater amount of voluntary payment by taxpayers;

• 3)

  Incorporate methodologies to improve the management of overdue accounts receivable not barred by statute of limitations, capable of identifying delinquent taxpayers, conducting their appropriate follow-up and achieving effective collection of taxes, reducing the general rate of delinquency;

• 4)

  Review the current Computer System and provide improvements to it and/or implement state-of-the-art computer systems, with database architectures and WEB environments, capable of managing an economical, efficient and integrated Customs Administration System with other tax systems, with access possibilities for digital tax applications and telephone tax management, fully integrated to a Control System for Tax and Customs Imputations and Income, whose reform and implementation is also required;

• 5)

  Update, purge and maintain customs databases, generating synergy with other national public databases and from the private sector, in order to contribute to tax intelligence to provide better management and prospecting tools to fiscalization dependencies based on higher quality and updated information;

• 6)

  Comprehensively train officials with decision-making levels and customs operational personnel, in such a way as to achieve better work environments and motivated human resources equipped with modern management and customs area knowledge; and,

• 7)

  Achieve the full transfer of systems, knowledge and technology to the Tax Administration. TITLE V OF SOLIDARITY FUNDS AND SOCIAL PROTECTION FOR THE REDUCTION OF EXTREME POVERTY

SOLIDARITY FUNDS AND SOCIAL PROTECTION FOR THE REDUCTION OF EXTREME POVERTY.- The Secretary of State in the Office of Finance is instructed to proceed with the establishment of a Solidarity Fund and Social Protection for the Reduction of Extreme Poverty in the amount of FOUR THOUSAND FIVE HUNDRED MILLION LEMPIRAS (L. 4,500,000,000.00). Such funds shall be deposited in the Central Bank of Honduras, or in one or more banks of the National Financial System, through a trust in order to ensure that economic resources collected in the aforementioned Fund are exclusively destined to guarantee the continuity and expansion of beneficiaries of the 10,000 Bonus Program, and other social projects and programs promoted by the Presidency of the Republic or the Secretary of State designated by the Council of Ministers. The Executing Unit of the funds contained in this fund shall have social oversight integrated by representatives of non-governmental organizations designated by the Presidency of the Republic.

POPULAR HOUSING AND SELF-CONSTRUCTION FUND. A Fund for Popular Housing and Self-Construction is created to address the needs of popular housing and self-construction, as well as the regulation of real property. The Presidency of the Republic shall establish the legal mechanism to make this provision effective through a regulation approved in Council of Ministers, being able to delegate its administration to the Honduran Bank for Production and Housing (BANPROVH), or an Associated Center in accordance with what is established in the General Administration of Public Administration. This Fund shall be constituted with at least fifty percent (50%) of the annual collection of the tax on the Increase in Value of Real Property or Capital Gains established in this Decree. TITLE VI FINAL PROVISIONS

Property Administration System. The COMMISSION FOR THE PROMOTION OF PUBLIC-PRIVATE PARTNERSHIP (COALIANZA) is authorized to proceed with the establishment of a trust with the fees collected by the Property Institute in order to operate and maintain a property administration system.

Savings in Transfers. The Secretary of State in the Office of Finance is authorized to make the necessary cuts in the General Budget of Income and Expenditure of the Republic 2014 to obtain savings of at least ONE HUNDRED MILLION LEMPIRAS (L. 100,000,000.00), in current transfers to the Private Sector.

Repeals.- The following legal provisions are hereby repealed:

• 1)

  Article 5, paragraph 1) amended of Decree No. 314-98 containing the Law of Incentives to Tourism (LIT) of November 18, 1998;

• 2)

  Article 48 of the Law of Financial Balance and Social Protection contained in Decree No. 194-2002 of May 15, 2002;

• 3)

  Article 40 of Decree No. 17-2010 containing the Law of Strengthening of Income, Social Equity and Rationalization of Public Spending of March 28, 2010;

• 4)

  Decree No. 18-2007 of March 20, 2007;

• 5)

  Decree No. 159-2011 approved on September 13, 2011;

• 6)

  Article 464 of Decree No. 189-59 containing the Labor Code, dated May 19, 1959;

• 7)

  Article 63 amended of Decree No. 17-2010 dated March 28, 2010; and, 8. All Decrees and Laws that oppose the provisions established in this Law are hereby repealed.

Regulation. The Regulation of this Law must be prepared jointly by the Secretary of State in the Office of Finance and the Executive Directorate of Income (DEI), within a period not exceeding thirty (30) calendar days from the entry into force of this Decree.

Effective Date. This Decree shall enter into force as of January 1, 2014, prior to publication in the Official Newspaper "La Gaceta." Given in the city of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the twenty-first day of the month of December of two thousand thirteen. MAURICIO OLIVA HERRERA PRESIDENT, BY THE LAW GLADIS AURORA LÓPEZ CALDERÓN SECRETARY ELISEO NOEL MEJÍA CASTILLO SECRETARY To the Executive Branch. Therefore: Let it be executed. Tegucigalpa, M.D.C., December 26, 2013. PORFIRIO LOBO SOSA PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE OFFICE OF FINANCE. WILFREDO CERRATO RODRÍGUEZ Legislative Branch DECREE No. 245-2013 THE NATIONAL CONGRESS. WHEREAS: The State of Honduras respects International Law, promoting State-to-State relations and among citizens both in the field of interpersonal relations and commerce. WHEREAS: The Embassy of Australia in Mexico and concurrent before our country requested the State of Honduras through the Secretary of State in the Office of Foreign Relations the approval of the appointment of the candidacy of Mr. Miguel Antonio Nasser of Honduran nationality, as Honorary Consul of that country in Honduras. WHEREAS: In accordance with Attribution 17 of Article 205 of the Constitution of the Republic, it is the responsibility of the National Congress to grant or deny permission to Hondurans to accept positions or decorations from another State. THEREFORE, IT DECREES:

Grant permission to the citizen MIGUEL ANTONIO DE LA SOLEDAD NASSER