Decree 166-2011 Reforms to the Law on Public Safety

Reform Decree 105-2011, dated June 24, 2011, containing the SPECIAL POPULATION LAW in Articles 1, 2, 3, 5, 6, 8, 9, 10, 11, 12, 13, 14, 17, 18, 19, 20, 21, 22, 23, 38 and 43 as well as the denomination of Title II and Chapters I and III, which shall be read as follows:

PURPOSE. The purpose of this Law is to establish mechanisms to strengthen the State's finances.

NATURE OF THE CONTRIBUTION. The contributions created in this Law are temporary in nature for a period of five (5) years.

EXECUTION. The funds collected from the contributions to strengthen the State's finances must be remitted to the State Secretariat of the Treasury Ministry through the General Treasury of the Republic. TITLE II SPECIAL CONTRIBUTIONS OF THE FINANCIAL SYSTEM CHAPTER 1 LEVY ON OPERATIONS IN FINANCIAL INSTITUTIONS

OBJECT. This Special Contribution levies on the operations described in this article carried out in National and Foreign Currency in institutions of the national banking system, the National Bank for Agricultural Development (BANADESA), Financial Societies, Representative Offices, provided that they are supervised by the National Commission of Banks and Insurance (CNBS), hereafter identified for the purposes of this law as FINANCIAL INSTITUTIONS, except for the exceptions established in Article 9 of this Law:

• a)

  Debits (withdrawals) from sight deposits, in checking accounts, made at Financial Institutions.

• b)

  Debits (withdrawals) from deposits in savings accounts, made by legal entities at Financial Institutions.

• c)

  Loan operations granted by Financial Institutions, which shall be assumed by the lending Financial Entity. This contribution shall only apply to the disbursement made and not to payments received by the financial institution. The National Commission of Banks and Insurance (CNBS) must supervise that this Special Contribution is not transferred to the borrower.

• d)

  Issuance of cashier's checks, certified checks, traveler's checks or other similar financial instruments existing or to be created, at Financial Institutions, which may use the accounts indicated in the preceding subsections a) b).

• e)

  Payments or transfers in favor of third parties on account of principals or clients charged against money collected or received on their behalf, made by Financial Institutions, without using the accounts indicated in subsection a) or b) above, whatever the denomination given to those operations, the mechanisms used to carry them out, including through cash movements, and their legal instrumentation.

• f)

  Transfers or remittances of money, to the exterior or interior of the country, made through a financial entity, without using the accounts indicated in subsection a) or b) above.

• g)

  The renewal of the annual membership of credit cards, applies only to the Cardholder's Card. The Special Contribution shall become effective at the time of the annual renewal of the membership of the credit cardholder, to which the preceding subsection g) refers.

TAXABLE EVENT. The Taxable Event of the Special Contribution for Financial Transactions is produced in the following cases:

• a)

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

• b)

  At the moment of making payment for the instruments referred to in subsection c) of the previous article;

• c)

  Upon making disbursements of loans granted by financial institutions, except for the billing of charges to credit cards;

• d)

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

• e)

  At the moment of ordering the transfer or remittance of money referred to in subsection d) of the previous article.

PASSIVE SUBJECTS: The passive subjects of the Special Contribution for Financial Transactions are:

• a)

  Natural and legal persons, owner holders of sight deposits or checking accounts, whether individually, jointly or in solidarity;

• b)

  Legal entities, owner holders of savings deposits, whether individually, jointly or in solidarity;

• c)

  Natural or legal persons who acquire cashier's checks, certified checks, traveler's checks or other similar financial instruments existing or to be created; and that originate through a debit to a checking or savings account of the legal entity, or that request this service by presenting cash;

• d)

  Natural or legal persons who order payments or transfers in favor of third parties charged against money collected or received on their behalf by financial institutions;

• e)

  Natural or legal persons who make transfers or remittances of money within or outside the country;

• f)

  Natural or legal persons possessing credit cards; and,

• g)

  Financial institutions that grant loans.

EXEMPTIONS: The following are exempt from this Contribution:

• 1)

  Accounts in financial institutions corresponding to the Public Administration;

• 2)

  Trust accounts created by the Public Administration;

• 3)

  Loan operations of the National Bank for Agricultural Development (BANADESA) to the agricultural sector up to the amount of Six Hundred Thousand Lempiras (L.600,000.00), being prohibited, under the responsibility of the receiving entity, the division of loans for the purpose of evading the contribution;

• 4)

  Subject to reciprocity duly certified by the State Secretariat of Foreign Affairs, debits (withdrawals) from accounts in Financial Institutions and renewal of credit cards, corresponding to diplomatic missions, consular offices, international organizations and personnel 15) Electronic transfers or by check made between accounts of the same natural or legal person within the country; whether in the same financial institution or another institution; 16) Religious institutions accredited before the State Secretariat of Interior and Population; 17) Organizations of humanitarian and development character approved by the State Secretariat of Interior and Population, prior qualification by the State Secretariat of Finance through the General Directorate of Exemptions and Customs Franchises; 18) The purchase and sale of foreign currency; and the transfers that these imply; 19) Restructuring of loans that do not involve payments or disbursements of funds; 20) Private Organizations of Financial Development (OPDF); 21) Social Security Institutes duly accredited by the National Commission of Banks and Insurance; 22) Savings accounts on sight of legal entities whose average is less than one hundred twenty thousand Lempiras (L.120,000.00) applies to sight accounts of natural persons. 23) Financial operations generated as a product of the sale or marketing of products regulated by the State, such as fuels; 24) Any payment, transfer, withdrawal or deposit for the concept of fees or taxes. The exemptions established in this Article must be implemented in accordance with the requirements and procedures established for this purpose by the Executive Income Directorate (DEI).

TARIFF. The tariff of the Special Contribution for Financial Transactions established by Article 5 of this Law is:

• 1)

  For subsections a), b), c), and d) of Article 5 is Two Lempiras (L.2.00) per thousand; or fraction of thousand.

• 2)

  For subsection d) is one point five (1.5) per thousand or its fraction; and,

• 3)

  For subsection g) it applies according to the brackets of credit lines according to the following table: Credit Line From Lempiras | Credit Line To Lempiras | Tariff Lempiras 40,000.01 | 50,000.00 | 500 50,000.01 | 100,000.00 | 600 100,000.01 | 200,000.00 | 700 200,000.01 | 500,000.00 | 800 500,000.01 | 1,000,000.00 | 900 1,000,000.01 | Forward | 1,000

DECLARATION, LIQUIDATION AND PAYMENT. Financial entities must act as Withholding or Collection Agents of this Special Contribution in each taxable operation, compliance with this obligation shall give rise to the sanctions established in Articles 18 and 29 of the Tax Code. The declaration, liquidation and payment must be made in the form and conditions established by the Executive Income Directorate (DEI). The amounts withheld or collected must be remitted to the Treasury according to the following detail: Amounts withheld or collected between the 1st and 15th of each month must be credited no later than the 20th of the same month. Amounts withheld or collected between the 16th and the last day of each month, must be credited no later than the 5th of the following month. If the deadline for crediting falls on a non-business day, it shall be transferred to the first business day following.

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

OBJECT. A Special Contribution with temporary character is created that levies on mobile voice activities and services (airtime).

TAXABLE BASE. The taxable base is the total monthly income of the mobile telephone line (airtime) by companies engaged in this business.

DECLARATION, LIQUIDATION AND PAYMENT. The declaration, liquidation and payment of the Special Contribution for Mobile Telephony has monthly periodicity and must be presented and paid within the first ten days of the month following the generation of income, in accordance with the form and conditions established in the regulation issued by the Executive Income Directorate (DEI). CHAPTER III SPECIAL CONTRIBUTION OF THE MINING SECTOR

OBJECT. A Special Contribution with temporary character is created, from the Mining Sector that levies on the exploitation and marketing of minerals in the country carried out by natural and legal persons.

TAXABLE BASE. The taxable base is the FOB (Free On Board) value of the export registered in the Merchandise Declaration.

PASSIVE SUBJECTS. Passive subjects of the Special Contribution for Environmental Protection are natural and legal persons who carry out activities of exploitation and/or commercialization of minerals.

TARIFF. The special tariff with a transitional character of the Mining Sector is two percent (2%).

DECLARATION, SETTLEMENT AND PAYMENT. The declaration, settlement and payment of the Special Contribution for Environmental Protection shall be made in conjunction with the settlement operations of the Merchandise Declaration. CHAPTER IV SPECIAL CONTRIBUTION OF THE FOOD AND BEVERAGE SECTOR

PURPOSE. A Special Contribution is established with a transitional character arising from the commercialization of food and beverages that fall under any special regime. TITLE V GENERAL PROVISIONS

INSPECTION AND COLLECTION. The collection, inspection and collection of the Special Contributions of Title II of this Law are the responsibility of the Executive Direction of Revenue (DEI). The National Commission of Banking and Insurance (CNBS) must ensure that the Special Contribution for Financial Transactions for Population Security is not transferred to account holders and that these operations are properly itemized in the accounting records of Financial Entities. Upon evidence of violation, the National Commission of Banking and Insurance (CNBS) proceeds to impose a penalty equivalent to two hundred percent (200%) of the affected amount.

The collection arising from the Special Contribution for Financial Transactions shall be collected as other taxes administered by the Executive Direction of Revenue (DEI), and the collection thereof through the National Financial System does not cause the payment of collection commissions to such institutions that act as withholding or collection agents; the water commission shall be the responsibility of the Financial Institution liable for administrative sanctions imposed by the Executive Direction of Revenue (DEI) or the National Commission of Banks and Insurance (CNBS) without prejudice to legal actions that may apply. For accounting purposes, the other special contributions are considered as other taxes administered by the Executive Direction of Revenue (DEI).

Article 44-A is added to Decree 105-2011, dated June 24, containing the LAW OF POPULATION SECURITY, which shall read as follows:

SPECIAL CONTRIBUTION OF THE COOPERATIVE SECTOR. The cooperative sector is exempt from the Special Contribution for Financial Transactions established in Title II of this Law, with the Cooperative obligated to pay a Special Contribution equivalent to Three Point Six Percent (3.6%) on the net annual surpluses (income less expenses) of its cooperative activity.

Each year during the validity of this Law, the total income generated by this Decree shall be included when approving the General Budget of Income and Expenses of the Republic, which shall be assigned in its entirety for population security programs and social prevention purposes. The Ministry of State in the Office of Finance, under the Direction of the Presidency of the Republic with the participation of the private sector and civil society, shall establish a trust fund to address these population security and social prevention programs.

TRANSITIONAL. The provisions contained in Chapter III Special Contribution of the Mining Sector, contained in the LAW OF POPULATION SECURITY, have a transitional character until the National Congress approves the new Mining Law.

REPEALED PROVISIONS. Articles 30, 31, 32, 33, 39, 40, 41 and 42 of Decree No. 105-2011 dated June 24, 2011, containing the LAW OF POPULATION SECURITY are hereby repealed.

EFFECTIVE DATE. This Decree shall take effect on the date of its publication in the Official Gazette "La Gaceta". Given in the city of Tegucigalpa, municipality of the Central District, in the Chamber of the National Congress, on the fourteenth day of the month of September of two thousand eleven. JUAN ORLANDO HERNÁNDEZ ALVARADO PRESIDENT RIGOBERTO CHANG CASTILLO SECRETARY ELISEO NOEL MEJÍA CASTILLO SECRETARY To the Executive Branch In Witness Thereof: Let It Be Executed. Tegucigalpa, M.D.C., September 23, 2011. PORFIRIO LOBO SOSA PRESIDENT OF THE REPUBLIC. POMPELLO BONILLA SECRETARY OF STATE IN THE OFFICE OF SECURITY. MARLÓN PASCUA SECRETARY OF STATE IN THE OFFICE OF DEFENSE.