Law in Support of My SMEs

The purpose of this Law is to promote micro and small enterprises through incentives that foster economic growth, by generating new employment opportunities, well-being, development, and human fulfillment; as well as an opportunity to reaffirm the capacity for entrepreneurship and determination of Hondurans.

For the purposes of this Law, the terms referenced herein shall be understood in the manner in which they are defined in the current legislation governing the micro, small, and medium enterprise sector.

The beneficiaries of this Law are micro and small enterprises that are newly established, or those that have been operating informally and are formalized, complying with the provisions of this Law; within a period of twelve (12) months counted from the effective date of this Decree. Said registration or formalization may be carried out through any of the following mechanisms:

• 1)

  Registration in accordance with the provisions of Decree No. 318-2013 dated January 15, 2014, containing the LAW FOR THE PROTECTION, BENEFITS, AND REGULARIZATION OF INFORMAL ACTIVITY and its Regulations;

• 2)

  Registration through the portal "MI EMPRESA EN LÍNEA", in accordance with the provisions of Decree No. 284-2013 dated January 8, 2014, containing the LAW FOR EMPLOYMENT GENERATION, PROMOTION OF BUSINESS INITIATIVE, FORMALIZATION OF BUSINESSES, AND PROTECTION OF THE RIGHTS OF INVESTORS and its Regulations; and,

• 3)

  Any other mechanism contained in the Commercial Code, other applicable laws, or this Law.

Merchants formalized under this Law, or those who avail themselves of its benefits, must obtain a special certificate generated through the portal "MI EMPRESA EN LÍNEA" authorized by the State Secretary in the Office of Economic Development, and may delegate this function to third parties. The certificate is valid for a maximum period of twelve (12) months and substitutes, for that period, the operating permits extended by municipalities. In the same constitutional or formalization document, the intent to subject oneself to the regime of this Law must be declared. During this period, the beneficiaries of this Law must process their corresponding national and municipal permits and licenses for operation, with the warning that if they fail to do so, they shall not enjoy the benefits granted by this Law. It is understood that during this period of time, any damages or harm that may occur of any kind caused by the operation of a micro or small enterprise shall be the responsibility of the beneficiary of this Law. The special certificate is the sole document proving eligibility to enjoy the benefits of this Law.

Merchants who are formally established and registered in any Public Registry of Commerce and Chamber of Commerce of the country, regardless of their initial capital stock, and who are considered a micro or small enterprise and who, for a period of five (5) years, shall be exempt from the payment of Income Tax, Net Asset Tax, and Temporary Solidarity Contribution. Advances of one percent (1%) and twelve point five percent (12.5%) in concept of Income Tax; provided that they must be registered in a Registry of Exempted Entities in charge of the State Secretary in the Office of Finance in accordance with the Fiscal Responsibility Law. The following are not included in this exemption: Capital Gains Tax, Tax on Dividends or any other form of profit distribution, the Unique Tax of ten percent (10%) on Interest on Income; one percent (1%) in concept of Advance on Income Tax, which must be retained from national and foreign suppliers and contractors, in accordance with Article 19 of Decree No. 17-2010 dated March 28, 2010, containing the LAW FOR STRENGTHENING INCOME, SOCIAL EQUITY, AND RATIONALIZATION OF PUBLIC SPENDING; the withholding rates on Income Tax for payments made to resident and non-resident natural and legal persons, and the modality of Income Tax corresponding to one point five percent (1.5%) of declared gross income contained in Article 22-A of the Income Tax Law and its amendments.

Merchants who are formally established and registered in any Public Registry of Commerce and Chamber of Commerce of the country, regardless of their initial capital stock, and who are considered a micro or small enterprise, shall be exempt from Personal Tax and Tax on Industry, Commerce and Services of the Municipalities. Likewise, they shall be exempt from the payment of non-tax fees, surcharges, and rights for operating permits, construction authorizations, environmental work authorizations, and are also exempted from charges for registration of any kind processed before the Central Government and municipalities. This exemption of fees shall be extended and applied to the renewal or expansion of permits that must be requested during the period of validity of the benefit established in the preceding Article.

The beneficiaries of this Law for a period of three (3) years, which may be extended for two (2) additional years at the request of the State Secretary in the Office of Economic Development, shall be exempt from the payment of registry fees related to the act of business establishment, municipal fees, charges for the issuance of administrative acts, licenses, or other concepts necessary for its operation, which must be paid to public institutions, in addition to the benefits described in Articles 5 and 6 of this Law.

The incentives of this Law do not apply to services provided by independent professionals and Tertiary Economic Activities regulated by the State of Honduras. Independent professionals such as: physicians, dentists, lawyers, public accountants, shall be exempt from payments and any type of fee in the processing of health licenses and operating permits in the municipalities.

Beneficiaries under this Law must present annually the Fiscal Sacrifice Declaration, according to the form approved by the State Secretary in the Office of Finance and the Tax and Customs Administrations as applicable.

Micro and Small enterprises established and in operation prior to the effective date of this Decree may avail themselves of and enjoy the benefits of this Law, provided they prove within a period of twelve (12) months from its effective date, the following requirements:

• 1)

  The investment or reinvestment of capital, expansion of operations, or any increase in industrial, production, commercial, or service activity, which is reliably demonstrated before the State Secretary in the Office of Economic Development that between the effective date of this Decree and December 31, 2019, has increased by thirty percent (30%) the generation of new paid employment, compared to the payroll of paid employees in effect as of September 30, 2018;

• 2)

  For the application of this benefit, authorization must be obtained from the State Secretary in the Offices of Labor and Social Security, prior to verification of what is provided in numeral 1) of this Article; and,

• 3)

  Not have annual gross income exceeding Five Million (L. 5,000,000) lempiras in the previous Fiscal Year. After obtaining the special certificate, the beneficiary must register in the Registry of Exempted Entities of the State Secretary in the Office of Finance. Micro and Small Enterprises that avail themselves of the benefit of this Article are excepted from the payment of fees for services provided by the municipalities.

In accordance with the Tax Code, the State Secretary in the Office of Finance, by itself or with the assistance of the Tax Administration and the Customs Administration, must ensure the proper use and compliance with the purposes contained in this Law. In case false or inaccurate data and information is proven, or abuses of the tax benefits granted, proceedings must be initiated in accordance with what is established in the same Code.

The following are not beneficiaries of this Law: legal entities that have partners, shareholders, or social participants or natural persons who have already been part of another commercial company engaged in an equal activity or who have been part of another company engaged in a similar activity. Likewise, micro or small enterprises that include within their social participation legal entities, regardless of their category, and legal entities that include within their social organization as partners, shareholders, or social participants natural persons who have been partners, shareholders, or social participants of a legal entity dedicated to a similar activity and that closed its operations as of the effective date of this Law shall not enjoy the benefits of this Law. To ensure compliance with this provision, the Revenue Administration Service (SAR) must verify this in its databases.

Credit access programs or financial inclusion may allocate risk capital funds that, by their nature, have differentiated default levels, in order to rebuild their credit history and provide access to financing to persons or enterprises that do not have access to the traditional financial system. Credit access programs may contribute to mutual loan guarantee fund management companies and request their services.

To verify the generation of employment by the tax incentive, the State Secretary in the Office of Labor and Social Security must present an annual report to the State Secretary in the Office of Finance and to the Revenue Administration Service (SAR), in order to measure tax returns on tax expenditures.

The State Secretary in the Office of Finance, in coordination with the State Secretary in the Office of Economic Development and the Revenue Administration Service (SAR), must issue the Regulations of this Law within a period not exceeding thirty (30) days after its effective date.

Authorize the Honduran Bank for Production and Housing (BANHPROVI) in its capacity as Fiduciary of the Trust for Administration and Investment executed with the Central Bank of Honduras (BCH) to be able, through the secondary market, to negotiate the discounted sale of financial instruments that, under the modality of bonds of the Secretariat of State in the Office of Finance, are invested with funds of the Trust of the Central Bank of Honduras (BCH).

The provisions contained in Decree No. 284-2013, dated January 8, 2014, relating to the registration procedure, payment of registry fees, authorization of books, issuance of permits, licenses, and other matters related to the operation of the business, are extended to Individual Merchants.

The Secretariat of State in the Office of Finance is instructed to transfer the necessary resources from the National Budget of Income and Expenditures of each year for the financing of the Executive and Managing Unit of the electronic platform "MY BUSINESS ONLINE" which is managed through the National Program for Employment Generation and Economic Growth Honduras 2020. The National Program for Employment Generation and Economic Growth Honduras 2020, contained in Decree No. 36-2016 dated April 14, 2016, must develop and manage other self-sustaining electronic or technological platforms that promote innovation, entrepreneurship, access to credit, as well as other digital services that contribute to administrative simplification, cost reduction and time savings in the procedures managed by natural and legal persons, giving priority to factors that impact compliance with sustainable development objectives and the improvement of the country's competitiveness; and allowing citizens timely and decentralized access to information.

Authorize the Honduran Bank for Production and Housing (BANHPROVI) in its capacity as Fiduciary of the Trust for Administration and Investment executed with the Central Bank of Honduras (BCH) to be able, through the secondary market, to negotiate the discounted sale of financial instruments that, under the modality of bonds of the Secretariat of State in the Office of Finance, are invested with funds of the Trust of the Central Bank of Honduras (BCH).

This Decree shall enter into force as of the date of its 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 seventh day of the month of November of two thousand eighteen. MAURICIO OLIVA HERRERA PRESIDENT JOSÉ TOMÁS ZAMBRANO MOLINA SECRETARY ROSSEL RENÁN INESTRÓZ SECRETARY To the Executive Branch For Execution: Execute. Tegucigalpa, M.D.C., November 28, 2018. JUAN ORLANDO HERNÁNDEZ ALVARADO PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE OFFICE OF FINANCE ROCIO IZABEL TABORA