Month: February 2022

Offshore Banking, Privacy, Wealth Protection

Banking Secrecy Laws: Honduras Strengthens Financial Privacy for Users (2021)

Feb 17, 2022 by Jorge Constantino Colindres 0 Comments , , ,

The Honduran Congress recently amended its Penal Code, Criminal Procedure Code, and its Special Law Against Money Laundering to strengthen the financial privacy and due process rights of financial users by requiring judicial authorization for public authorities to access a person’s financial records.

The amendments, enacted during the first week of October 2021, enable the Public Ministry (Prosecutor’s Office) and the Financial Intelligence Unit (FIU) to require financial entities to provide them with the financial records of users, only by obtaining a previous court order. Further, the amendments state that the financial users’ right to Banking Secrecy can only be suspended after a judicial warrant has been secured and the exclusive purpose of investigating crimes related to money laundering, financing of terrorism, and civil asset forfeiture cases.

Background

The Honduran Constitution recognizes the right to privacy in articles 76 and 100, as do articles 21 of the Universal Declaration of Human Rights, 17 of the International Covenant on Civil and Political Rights, 11.2 of the American Convention on Human Rights, and 10 of the American Declaration of the Rights and Duties of Man. Specifically, the Commercial Code of Honduras (1950) recognizes the right to bank secrecy in article 956 by stating:

“The institutions will not be able to give news of the deposits and other operations except to the depositor, debtor or beneficiary, to their legal representatives or to whoever has the power to dispose of the account or to intervene in the operation; except when requested by the judicial authority by virtue of an order issued in a trial in which the depositor is a party, and the banking authorities for tax purposes. The officers of the credit institutions will be liable under the terms of the law for the violation of the secrecy established and the institutions will be obliged, in case of disclosure of secrecy, to repair the damages caused“.

The Commercial Code followed constitutional and international human rights law standards for due process, according to which a human right such as privacy can only be invaded under strict necessity, as authorized by law and in a proportional manner, as qualified by a competent judge through the issuance of a judicial warrant.

However, in the context of the Global War on Drugs and Terror, the Republic of Honduras was pressured to adopt constitutionally dubious invasions into the human right to financial privacy. In 2010 and 2014, Honduras enacted the Law Against the Financing of Terrorism (Decree No. 241-2010) and the Special Law Against Money Laundering (Decree No. 144-2014), respectively, both of which stated that:

“For purposes of the application of this Law, and always safeguarding the fundamental rights of the individual, the professional banking or tax the professional, banking or tax secrecy may not be invoked”.

Article 47 of Decree 144-2014 and article 53 of Decree 241-2010

These laws left financial users without any sort of privacy, as the FIU or any prosecutor could access a person’s financial records by requesting it in writing to the financial institution that held them. However, recent amendments have made Honduras one of the countries with the highest protection for banking secrecy and financial privacy.

Recent Amendments

After the amendments made in late 2021, the review of the financial records of a natural or corporate person for criminal investigations or judicial procedures can only be performed by obtaining a judicial warrant. The judge will receive the request from the prosecutor and will issue a resolution within 15 days, which will then be sent to the FIU for it to obtain the information and provide it to the court. Financial institutions are obligated to provide the requested financial information only if the request is accompanied by a warrant signed by a competent judge.

The Criminal Procedure Code was also interpreted by Congress to more clearly state that financial institutions can only provide financial information to an authority if a judicial warrant is accompanied in the request.

Interpretation of Article 274, third paragraph of the CRIMINAL PROCEDURAL CODE contained in Decree No.9-99-E, dated December 19, 1999 and its amendments, in the sense that when said paragraph states that “The officials of the institutions that are part of the of the National Financial System, must provide the corresponding authority with the information that has been requested, prior judicial order”, means that the officials of the institutions that are part of the National Financial System may only provide financial information to authorities or private persons other than the owner, if there is a a court order expressly ordering it.

Legislative Decree No. 93-2021
1-DE-NOVIEMBRE-DE-2021-GACETA-No.-35760-Decreto No. 93-2021Download
Foreign Direct Investment, Special Tax Regimes, Tourism

Promotion of Tourism Law

Feb 17, 2022 by Jorge Constantino Colindres 0 Comments , ,

The Law for the Promotion of Tourism replaced the traditional ZOLITUR Law which had provided ample tax benefits to tourism projects for over a decade. This special regime is specifically targeted at tourism projects and is granted and administered by the Honduran Institute of Tourism (IHT).

Duration:

Up to 15 years of tax benefits.

Beneficiaries:

Services and infrastructure associated with the tourism industry, such as Hotels, Condos, Time-Shares, Tourism Complexes, Convention Centers, Cruise Ports, Transport Terminals, Recreational Offers (aquariums, golf camps, theme parks, canopy tours, diving centers, rafting, trekking, extreme sports, etc.), special developments in protected areas, films, sports events, receptive tourism operators, transport services, leasing of vehicles, real estate projects with tourism focus, among others. To validate if the proposed project may obtain the benefits offered by this tax regime, specialized counsel is required. The list of beneficiaries is broad and more could be included.

Benefits: The Law for the Promotion of Tourism offers the following benefits:

  • Exemption on Income Tax, Solidarity Tax, and Net Asset Tax. This special regime provides tourism projects with a 15-year exemption on the regular 25% Income Tax, the 5% Solidarity Tax, and the 1% Net Asset Tax.
  • Exemption on Dividends Tax, Interests Tax, and Capital Gains Tax. The regime also offers a 15-year exemption on the 10% dividend tax (with regards to dividends received by the company from investments in other companies, not regarding the dividends it pays to its shareholders), the 10% interest tax, and the 10% capital gains tax.
  • Exemption from Withholding Taxes. For a 5-year period, beneficiaries of this regime can make payments to non-domiciled service providers without applying the 25% withholding tax on their payments.
  • Sales Tax Exemption. Tourism projects under this regime will enjoy a 10-year tax exemption on the 15% sales tax applied on the sale of goods and services. A benefitted company may import and make local purchases without having to pay the sales tax if such acquisitions are related to tourism investments.
  • Import Tax Exemption. The special regime provides benefitted companies with a 10-year exemption on import taxes, tariffs, rates, surcharges, and duties, including the Selective Consumption Tax.
  • Special Tourism Residency. Any person investing US$200,000.00 or more in a tourism project, or in shares of a company operating in the tourism industry, is eligible for a residency or a work visa in Honduras.  

The regime’s beneficiaries are still subject to municipal taxes and fees, tax on dividends distributed to its shareholders (10%), as well as special taxes such as the land transfer tax (1.5%). Beneficiaries are still required to charge their customers the 15% and 18% sales tax, plus the 4% tourism services fee. Beneficiaries are still subject to supervision from the National Commission of Banks and Insurances (CNBS) under the Regulation of Non-Financial Designated Activities and Professions (APNFDs), which requires 24 economic sectors, including hotels, rentals, real estate, leasing, transport, among other tourism-related activities, to establish very strict Anti-Money Laundering and Financing of Terrorism (AMLFT) compliance programs.

Procedure:

The procedure involves the qualification of the tourism project by the Honduran Tourism Institute, which should be provided in no more than 15 business days. The tax exemptions are then requested to the Secretary of Finance and, once granted, the beneficiary must register before the Exonerations Registry, which is also administered by the Secretary of Finance. The project must then secure its municipal operating permit, construction permits, and environmental licenses.

Among the required documents for the qualification of projects is a feasibility study, project valuation, property surveys, designs, evidence of financial capacity, environmental license (issued or in process of being issued), quality seal (ISO or others), and registration before the National Chamber of Tourism. The beneficiary has 12 months to initiate its investment and must comply with charging its customers the 15% sales tax plus the 4% Tourism Services Fee.

Ley-de-Fomento-al-Turismo-decreto-68-2017Download
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