Every developing nation must seek suitable mechanisms to attract national and foreign investment. However, in an aggressive business world, it must be clear what investment opportunities can be successful. In Honduras, the tourism and energy sectors have great potential.
In the tourism sector, the country offers different types of tourism: colonial, archaeological, natural, etc. Honduras has pristine white-sand beaches and crystal-clear water, coral reefs, Mayan archaeology, historic colonial cities, indigenous ethnic groups that have preserved their culture, among others. Nonetheless, few investors have identified these opportunities, despite publicity campaigns about the national tourism richness.
On the other hand, in the energy sector, Honduras has had an energy matrix dominated by thermal generation, despite the great potential in renewable energy resources. These resources could counteract the cost of thermal energy, which increases day by day. This increase comes from the high fuel prices that Honduras feels more harshly because it is not an oil producer.
Tax Benefits for Investments in the Tourism Sector.
In the tourism sector, the Law for the Promotion of Tourism, contained in Legislative Decree Number 58-2017, is currently in force. As stated in Article 1, the law aims to incentivize and promote the tourism industry in Honduras, in line with the expected impacts and projected indicators of the National Program for Job Creation and Economic Growth Honduras 2020, contained in Decree No. 36-2016, and with regional competition through the application of second-generation incentives.
Both individuals and legal entities can avail themselves of the Tourism Promotion Law. The beneficiary companies can be those related to (Article 3):
- Services of the tourism industry (hotels, resorts, time-shares, among others).
- Related infrastructure that enables tourism (convention centers, cruise ship facilities, land transport terminals, golf courses, theme parks, among others).
- Specific investments in tourism (biological reserves, national parks, monuments of tourist interest, among others).
- Related tourism activities (filming of tourist/cultural movies, artistic events, sporting events, among others).
- Tourism services (receptive tourism operators).
- Tourism transport services (air, water, land).
Companies that are qualified as beneficiaries of the Tourism Promotion Law by the Honduran Tourism Institute (IHT) will enjoy tax incentives such as the exemption from the payment of:
- Income Tax, Net Asset Tax, and Solidarity Contribution and related taxes, for a period of fifteen (15) years.
- Withholding of Income Tax on payments for services or fees contracted with national and foreign individuals or legal entities, which are essential for the studies, installation, construction, and monitoring of the project for a period of up to five (5) years.
- Sales Tax on local purchases of goods and services directly linked to the construction, renovation or restoration, new infrastructure, complementary investments, or new investments in the tourism activity for a period of ten (10) years.
Likewise, projects enjoy tax benefits on imports of machinery and equipment necessary for the construction and maintenance of the project. These benefits include the exemption from the payment of Customs Import Duties (DAI), Selective Consumption Tax, and other customs duties on the import of supplies, goods, materials, and equipment directly related to the tourism project for a period of ten (10) years.
As a general principle, the benefits of the Tourism Promotion Law are aimed at individuals or legal entities dedicated to tourism services and activities. However, the law also creates benefits for investors. That is, individuals or legal entities who are not dedicated to the tourism sector but who decide to channel resources to it (Article 7, Article 10).
Furthermore, the Tourism Promotion Law is applicable to new tourism investments or those tourism investments already made after December 21, 2013 (the effective date of Decree No. 278-2013), or those that are improvements, expansions, renovations, or others for an amount equal to or greater than 35% of the value of the initial investment of the tourism project.
Once the qualification as a beneficiary has been recognized by the Honduran Tourism Institute, the beneficiaries of the Tourism Promotion Law must process the exemptions with the Ministry of Finance, in accordance with the provisions of Article 21 of the Tax Code.
Tax Benefits for Investments in the Energy Sector.
By virtue of the creation by the National Congress of the Law for the Promotion of Energy Generation with Renewable Resources, contained in Decree No. 70-2007, Decree No. 128-2013, and the General Law of the Electric Industry of Decree 404-2013, different renewable energy generation projects have been developed with the Government of Honduras. However, in addition to selling energy to the Government, there is the possibility of generating and consuming energy among private parties, in accordance with the cited regulatory framework.
In reality, there has not been a total liberalization of the Honduran energy market, even though the regulatory framework already contemplates the possibility of other energy distribution companies, as is the case in Guatemala. The foregoing has not been an impediment, given that renewable generation projects are being developed under the self-consumption modality.
Under the self-consumption scheme, specialized companies can sell, install, and operate a renewable energy generation equipment within a project for their own consumption and with the right to make future injections into the national grid.
In accordance with Article 2 of Decree No. 138-2013, electricity generation projects using national renewable resources will enjoy an exemption from:
- Sales Tax (ISV). For all equipment, materials, spare parts, parts, accessories, services, and any goods and services intended for or directly related to the necessary infrastructure for the generation of electricity with renewable resources, including but not limited to systems, materials, machinery, and equipment, for turbining, generating, controlling, regulating, transforming and/or transmitting energy, as well as equipment and machinery for construction (excluding motor vehicles whose main function is transport), that are used for the development, design, engineering, construction, installation, administration, operation, and maintenance of the renewable electricity generation plant.
- Taxes, tariffs, and import duties on equipment, materials, spare parts, and others, for turbining, generating, controlling, regulating, transforming and/or transmitting energy and the development, design, engineering, construction, installation, administration, operation, and maintenance of the renewable electricity generation plant.
Similarly, exemptions from Income Tax and its withholdings that could be applicable to a renewable energy generation project between private parties are contemplated, such as:
- Exemption from the payment of Income Tax (ISR), Solidarity Contribution, Net Asset Tax, Capital Gains Tax, and all related income taxes for ten years.
- Withholding of Income Tax on payments for services or fees contracted with foreign individuals or legal entities, which are necessary for the studies, development, design, engineering, construction, installation, administration, and monitoring of the renewable energy project.
Of course, the results that the country expects from the granting of these tax benefits in the tourism and energy sectors are the generation of employment and the dynamization of the economy through foreign and local investment that allows for the economic and social development of the nation through private enterprise.