Law for the Economic Recovery and Reactivation of Micro and Small Enterprises

PURPOSE. The purpose of this Law is to grant benefits and fiscal incentives that promote the creation, development, strengthening and formalization of Micro and Small Enterprises (MYPE), to contribute to the improvement of the economy and the capacity for entrepreneurship and innovation, as well as the generation of new employment opportunities for the population.

DEFINITIONS. For purposes of this Law, the following definitions shall apply: MICRO ENTERPRISE: It is any economic unit with a minimum of one remunerated person working in it, who may be its owner, and a maximum of ten (10) remunerated employees. SMALL ENTERPRISE: These are those with a better combination of productive factors and commercial positioning, which allow the business unit to accumulate certain surplus margins. They have a more defined business organization and greater formalization in their management and registration, having a minimum of eleven (11) and a maximum of fifty (50) remunerated employees.

PERIOD TO BENEFIT FROM THE BENEFITS. The deadline to avail oneself of the benefits of this Law shall be twelve (12) months counted from its entry into force.

BENEFICIARIES. The beneficiaries of this Law are:

• 1)

  Micro and Small Enterprises (MYPE) that are established under the provisions of this Law;

• 2)

  Micro and Small Enterprises (MYPE) that have been operating informally and decide to establish themselves legally; and,

• 3)

  Micro and Small Enterprises (MYPE) that have been legally established and have operated within the five (5) years prior to the entry into force of this Law, must meet the conditions established in Article 8 of this Law.

CERTIFICATION OF BENEFIT. Companies wishing to obtain the benefits of this Law must obtain the "Beneficiary Certificate" from the National Service for Entrepreneurship and Small Business (SENPRENDE). After obtaining this certificate, the beneficiary must register in the Registry of Exempted Taxpayers of the Ministry of State in the Office of Finance. The Beneficiary Certificate shall be necessary for obtaining operating permits, national and municipal licenses.

BENEFITS FOR MICRO AND SMALL ENTERPRISES LEGALLY ESTABLISHED UNDER THE EFFECTS OF THIS LAW. The beneficiaries mentioned in numerals 1) and 2) of Article 4 of this Law, who are established and registered in any Commercial Registry and Chamber of Commerce of the country and who meet the legal requirements to be considered as a micro or small enterprise, shall enjoy the following benefits:

• 1)

  Percentage exemption from Income Tax, for a period of five (5) years which shall be detailed as follows: a) Exemption from payment of one hundred percent (100%) in Income Tax for the first three (3) fiscal periods from its establishment and registration in the Commercial Registry and Chamber of Commerce; and, b) Exemption from payment of fifty percent (50%) in Income Tax corresponding to the following two (2) fiscal periods.

• 2)

  Exemption from Net Asset Tax and Temporary Solidarity Contribution, Advances of one percent (1%) and twelve point five percent (12.5%) as concept of Income Tax for five (5) years, from its establishment and registration;

• 3)

  Depreciation and amortization of the first three (3) years of operation shall begin to be recorded from the fourth year;

• 4)

  Exemption from Tax on Industry, Commerce and Services of any Municipality for the first three (3) fiscal periods from its establishment and registration;

• 5)

  Exemption from payment of non-tax rates, surtaxes and rights, for operating permits, construction, authorizations and environmental licenses, likewise exemption from charges for registration of any kind that are processed before the Central Government and municipalities for the first three (3) fiscal periods from its establishment and registration;

• 6)

  Exemption from payment for renewal of rates and permits that must be requested during the period of validity of the benefit, established in the "Beneficiary Certificate" that shall be issued by the National Service for Entrepreneurship and Small Business (SENPRENDE); and,

• 7)

  Exemption from payment for registry rates related to the act of business establishment, municipal rates, charges for issuance of administrative acts, licenses or other necessary concepts for its operation, that must be carried out before public institutions.

FISCAL EXEMPTIONS NOT INCLUDED IN THIS LAW. The following are not included in this exemption: Capital Gains Tax, Dividend Tax or any other form of profit participation, the Flat Tax of ten percent (10%), Interest on Income; the obligation of withholding of one percent (1%) as concept of Advance on Income Tax, which must be withheld from national and foreign suppliers and contractors, in accordance with what is established in Article number 19 of the "LAW FOR STRENGTHENING INCOME, SOCIAL EQUITY AND RATIONALIZATION OF PUBLIC SPENDING", approved by Legislative Decree No. 17-2010 dated March 28, 2010, published in the Official Gazette "La Gaceta" on April 22, 2010, the withholding rates of 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 the declared gross income contained in Article 22-A of the Income Tax Law and its amendments.

BENEFITS FOR MICRO AND SMALL ENTERPRISES ESTABLISHED AND IN OPERATION. Micro and Small Enterprises (MYPE) mentioned in Article 4 numeral 3) of this Law, which are established and in operation prior to the effective date of this Law, may avail themselves of and enjoy the benefits contained in numerals 1), subsection b) 2), 2), 4), 5) and 6) of Article 6 of this Law, for a period of two (2) years, provided they accredit the following requirements:

• 1)

  The investment or reinvestment of capital, expansion of operations or any increase in industrial, productive, commercial or service activity, which is conclusively proven before the Ministry of State in the Office of Economic Development, that after the entry into force of this Law has increased by a minimum of twenty percent (20%) the generation of new remunerated jobs, comparable against the payroll of remunerated employees in effect as of December 31, 2021;

• 2)

  For the application of this benefit the company must prove the last payroll registered with the Honduran Institute of Social Security (IHSS); and,

• 3)

  Accredit before the Ministry of State in the Office of Economic Development, within three (3) months counted from the granting of the beneficiary certificate, the increase in job positions in accordance with the payroll registered with the Honduran Institute of Social Security (IHSS), in accordance with numeral 1 of this Article.

EXCEPTIONS TO BENEFICIARIES. The following shall not enjoy the benefits and incentives of this Law:

• 1)

  Services provided by independent professionals and economic activities of a tertiary nature regulated by the State of Honduras;

• 2)

  Legal entities that have partners, shareholders or social participants, or natural persons who already form part of another business entity engaged in the same activity, or who have been part of another entity engaged in a similar activity, within the three (3) years prior to the entry into force of this Law; and,

• 3)

  Micro or Small Enterprises (MYPE) that include within their social participation legal entities indistinctly of their category and legal entities that integrate within their social organization in the capacity of partner, shareholder or social participant natural persons who have been partners, shareholders or social participants of a legal entity that engages in a similar activity and is dissolved, liquidated or closes its operations from the effective date of this Law;

• 4)

  Micro or Small Enterprises (MYPE) that obtain a gross annual income greater than Twelve Million Lempiras in the previous fiscal year; and,

• 5)

  Micro or Small Enterprises (MYPE), that are already enjoying the benefits of Legislative Decree No. 145-2018 dated November 7, 2018, published in the Official Gazette "La Gaceta" on November 28, 2018, Edition No. 34,806.

REQUEST FOR INFORMATION AND CONTROL. The Ministry of State in the Office of Finance (SEFIN) and the Revenue Administration Service (SAR), must provide to the National Service for Entrepreneurship and Small Business (SENPRENDRE), all necessary information to facilitate verification of requirements, prior to authorization of the Beneficiary Certificate. In accordance with the Tax Code, the Ministry of State in the Office of Finance (SEFIN), by itself or with the assistance of the Tax Administration and 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 verified, abuses in the fiscal benefits granted, proceedings must be initiated for sanctions established in the Tax Code.

ACCOUNTABILITY REPORT. To verify the generation of employment by the fiscal incentive, the Ministry of State in the Offices of Labor and Social Security, must present an annual report to the Ministry of State in the Office of Finance (SEFIN), the Revenue Administration Service (SAR) and the National Service for Entrepreneurship and Small Business (SENPRENDRE) in order to measure fiscal returns from tax expenditures.

OBLIGATIONS OF BENEFICIARIES.

• 1)

  Process their corresponding national and municipal permits and licenses for their operation, as a condition to enjoy the benefits granted by this Law, presenting the beneficiary certificate;

• 2)

  Comply with all formal obligations in tax and municipal matters in accordance with Law; and,

• 3)

  Accredit before the National Service for Entrepreneurship and Small Business (SENPRENDRE), the number of jobs generated during the time in which they enjoy the benefits of this Law, through an annual report that shall be accompanied by supporting documentation.

REGULATIONS. The Ministry of State in the Office of Finance (SEFIN), in coordination with the National Service for Entrepreneurship and Small Business (SENPRENDRE) and the Revenue Administration Service (SAR), must issue the Regulations of this Law within a period not exceeding thirty (30) calendar days after the entry into force of this Law.

EFFECTIVE DATE. This Decree enters into force on the day of its publication in the Official Gazette "La Gaceta". Given in the city of Tegucigalpa, municipality of the Central District, in the Hall of Sessions of the National Congress, on the twelfth day of the month of May in the year two thousand twenty-two. LUIS ROLANDO REDONDO GUIFARRO PRESIDENT CARLOS ARMANDO ZELAYA ROSALES SECRETARY LUZ ANGÉLICA SMITH MEJÍA SECRETARY To the Executive Power Therefore: Execute it. Tegucigalpa, M.D.C., May 24, 2022 IRIS XIOMARA CASTRO SARMIENTO PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE OFFICE OF ECONOMIC DEVELOPMENT PEDRO JOSÉ BARQUERO TERCERO