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Honduras: investment protection and promotion

Wednesday, July 4, 2012


The law for the promotion and protection of Investments, in force since last year, aims to protect investors, provide tax incentives, and promote domestic and foreign investment.

As far as the protection of investments is concerned, law recognizes arbitration as the basic means of resolving conflicts, such that the parties need not include an arbitration agreement, in order to benefit from this process. Arbitration can eliminate dependence on the judicial system, which tends to take time to reach a decision. However, if the parties agree, may waive this right and go to the regular courts.

Another aspect of the law is the so-called "conflict-prevention regime", which allows the investor to registered as the owner of a property, the possession of which no one else can claim, once 30 days have passed after publication of the registration notice (another person may only claim compensation for the economic value of the property). Previously, it was possible for someone to claim restitution of the property.

Regarding incentives for investments over US$2 million, an investor can request a stability contract, which guarantees no tax increases for the term of its validity.

Also, such projects may get a partial exemption of income tax - from 50% to 70% -depending on the degree of benefit that they create, in areas considered as priorities by the State.

With regard to promotion, in the case of an investment equal to or greater than US$50 million, described as a "mega project" by the Planning Ministry, or the Commission for the Promotion of Public-Private Partnerships, an investor can request an expedited procedure, which allows all national and municipal permits to be processed in within 30 days.

Finally, the law amends the Commercial Code, simplifying the process of starting a Honduran branch of a company incorporated under foreign laws. In this case, the investor can have the new company incorporated in no more than four working days, by filing with the local commercial register a certified copy of registration certificate of the parent, the articles of incorporation of the new society, and the agreement appointing a Honduran permanent resident as its representative.

Previously, it was necessary to obtain approval of the Secretary of State in the Ministry of Industry and Trade, a process which took as much as a month and a half.

For more information, please contact Adrian Padilla Burgos at [email protected] or (504) 2221-1002