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NATIONAL INVESTMENT COUNCIL (CNI) (PROMOTION AND PROTECTION OF PRIVATE INVESTMENTS)
CONTENT
3.1 3.2 3.3 3.4
NATIONAL INVESTMENT COUNCIL (CNI) MAIN PURPOSE OF NATIONAL INVESTMENT COUNCIL LEGAL SERVICES FOR INVESTORS ECONOMIC-FINANCIAL SERVICES TO THE INVESTOR
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3. 1 NATIONAL INVESTMENT COUNCIL (CNI) Government institution that provides advisory services to facilitate, accelerate, and protect private investment, both foreign and domestic. Its activities are focused on offering relevant information on the legal framework, providing economic and financial advice, as well as assisting investors in facilitating their business processes and operations. The CNI was created by the Legislative Decree (No. 51-2011) the Law for the Promotion and Protection of Investments, for the attraction, promotion, and protection of both foreign and local private investment. Since this is of primary interest of the State, all facilities and guarantees to promote its growth and development will be granted. This Law will be applicable to any natural person or legal entity, whether national or foreign, who acquires tangible or intangible assets in Honduras to obtain a profit by lawful means, except in cases whereby its nature, a provision may only be applicable to foreign investors. 3.1.1 VISION To promote the development and growth of both, local and foreign private investment, as a mechanism to generate economic growth and employment for Hondurans. 3.1.2 MISSION To coordinate public and private efforts to attract, facilitate, accelerate, and protect private investment in Honduras for the improvement of the country’s economy and its inhabitants. 3.1.3 STRATEGIC AXES • Legal Security (Legal Advice). • Economic-Financial Advice (Key Information for Investors). • Promotion and Development of Investments (Facilitation to Productive Sectors and Attraction of Investments with a Territorial Planning approach). • Digitization in Institutional and Governmental Procedures (Institutional Strengthening). • Institutional Administrative Simplification
3.2 MAIN PURPOSE OF NATIONAL INVESTMENT COUNCIL 1. Framing Public Policy Proposals aimed at creating a favorable climate for private investment, both local and foreign. 2. Facilitating procedures and processes for private investors. 3. Promotion, acceleration, and protection of private investment, through efficient, technical, legal, and economic-financial assistance, before, during, and after the establishment of an investment. 4. Promote private investment, by designing and implementating mechanisms for the development of new domestic and foreign investments. 3.2.1 LEGAL MECHANISMS GRANTED BY THE LAW TO THE INVESTOR THROUGH THE NATIONAL COUNCIL OF INVESTMENTS Among the benefits promoted by the National Investment Council are: • Investor Registry. • Fiscal Stability Contracts. • Fast Track for Large-Scale investment. • Conflict Prevention Mechanism. • Guarantee Mechanism for the Completion of Projects on Disputed Real Estate. • Economic-Financial Investor Services. • Investment Attraction Services with a Territorial Focus.
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3.3 LEGAL SERVICES FOR INVESTORS The National Investment Council offers different administrative procedures aimed at supporting investors before, during, and after the establishment of the investment, excluding only the sectors defined in article 3 of the Law for the Promotion and Protection of Investments. The purpose is to provide legal services to facilitate, accelerate, and promote local and foreign private investment, offering relevant information on the legal framework, promoting the facilitation of procedures and support with investment processes. 3.3.1 INVESTOR REGISTRY The Investor Registry is the instrument that allows identification of investments made or to be made in Honduras, registering both the mercantile society, the shareholders, and participating natural persons or foreigners. The Registry provides statistics on investment types and sectors. BENEFITS GRANTED BY THE INVESTOR REGISTRY The registration offers the following benefits to local or foreign investor: • Registration certficate, which in the case of foreigners, facilitates their immigration procedures. • Free legal assistance for investment and business formalization. • Annual submission of updated information on economic-financial, tax and legal issues. • Invitation to training events on business opening and private investment issues. • Attention to complaints aimed at the protection of investors. • Pre and post investment services. • Guidance for obtaining complementary services for the operation of the business.
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3.3.2 FISCAL STABILITY CONTRACTS The contract is a commitment signed between the State and one or more private investors, by which both state and municipal taxes remain fixed. These rules will govern a particular investment, for a certain period and they constitute Law between the parties. The fee to apply to this process is 0.25% of the annual sales or services during the term of the agreement. BENEFITS: a. No tax increase in the National and/or Municipal Tax System. b. The non-imposition of new taxes in the same mechanisms. c. Duration of benefit up to fifteen (15) years. REQUIREMENTS: Request addressed to the National Investment Council containing the following information: 1. Investor and Legal Proxy’s data, brief description of the investment made or to be made, investment sector, duration of the project, investment amount, location of the project, job creation projection, sales projection, corporate social responsibility program, community development program. 2. Power of Attorney duly authenticated. 3. National Tax Registry (RTN, for its acronym in Spanish) of the investor, (Merchant or Mercantile Society). 4. Copy of Identity or Passport. 5. Deed of Mercantile Company or Merchant. 6. Technical, economic, and financial feasibility studies. 7. Proof of origin of funds to be invested (Bank Certification). 8. Schedules of activities and investments to be carried out. 9. Study on economic and social impact. 10. Printed Financial economic model in which the amounts to be paid are estimated. 11. Letter of Commitment as AFFIDAVIT, ensuring the veracity of the information.
REQUIREMENTS FOR INVESTORS REGISTRATION A Request addressed to the National Investment Council, containing investor and legal proxy’s data, brief description of the investment planned or established, and amount to be invested. a. Power of Attorney duly authenticated. b. National Tax Registry (RTN, for its acronym in Spanish) of the investor, (Merchant or Mercantile Society). c. Balance Sheet (Financial) of the last year. d. Current Business Operation Permit issued by the Municipality where the business is located. e. Duly authenticated affidavit certifying that the documents and the amount of investment are reliable. f. Copy of Corporate Articles of Incorporation or Declaration as Merchant. g. Copy of current Legal Proxy Bar Association number. h. Lps. 200 deposit to Account #11102-02-00002-7 of the Central Bank of Honduras in the name of the National Investment Council, upon admission of the Certificate. In case of making a wire transfer, include the additional amount corresponding to the bank commission. Notas: • All documents in copy must be duly authenticated. The signature of the Power of Attorney and the Affidavit must be made on a separate certificate of authenticity. • In addition to physical presentation of the application, it is required to register the investment at:
https://docs.google.com/forms/d/e/1FAIpQLSePwEiGk_lPdNP4AMa26G 0Hw7h8hECF-dTAYCMz_mwrHOl7Ow/viewform
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
a. The nature of the investor, his identification and his legal capacity to act. b. The investor must present a detailed description of the investment project, of the activity of the company in which the capital will be integrated, or of the project as the case may be. Investment projects must be submitted with feasibility, economic and financial studies and related documentation. c. The minimum investment amount of (US $ 2,000,000.00), the schedule of activities and investments to be made for the execution of the project. d. The origin of the investment funds. and. Study of the economic and social impact of the investment. F. Financial Economic Model (MEF) in which the amounts to be paid to the Treasury for the duration of the project are estimated. g. Sworn declaration of the information. h. Scope of the Request submitted by the investor. i. Other information, documentation or studies required by the National Investment Council. Notes: The process flow can be found on the CNI website www.cni.hn
3.3.3MANAGEMENTOF INVESTMENT-RELATEDTAXBENEFITS The Fiscal Benefits mechanism is granted by the Executive Branch to natural persons or legal entities that implement or develop projects in regions of priority interest. This mechanism grants tax benefits related to pre-operative expenses and accelerated depreciation. BENEFITS: Amortization of pre-operative expenses for a period of up to five (5) years in accordance with the Income Tax Law and its regulations such as: a. The expenses carried out in research and development of merchandisable and/or patentable products for commercial purposes at national and international level. b. The amounts granted in donations to universities, educational institutions, and research centers in Honduras. c. Expenses for trademark and patent registrations in Honduras. d. The expenses incurred in the research and opening of new markets at local and foreign level and in promoting the products during the first five (5) years, including market and promotion studies, and expenses for participation in trade fairs and exhibitions of products and services. Accelerated depreciation such as decreasing balances or double decreasing balances which will allow the investor to replenish the machinery and equipment in the first years of use. Depreciation shall only be granted to the assets intended to produce or retain the sources of income, which are shown in their accounts and at the value at which they are recorded. No revaluation is accepted for these purposes; except in cases where revaluation has been verified as capital gains and taxed.
LEGAL SERVICES FOR INVESTORS
1. Contracts for Fiscal Stability 2. Management of Tax Benefits for Investment FACILITATION
1. Declaration of Projects of National Interest. ACCELERATION
1. Conflict-Prevention Mechanisms. 2. Guarantee Procedure for Projects with Litigation in Real Estate. PROTECTION
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3.3.4 FASTTRACKFOR LARGE-SCALE INVESTMENTS DECLARATIONOFNATIONAL INTERESTPROJECTS The mechanism by which the Cabinet or Congress declares a private investment project as a National Interest Project, when it meets the criteria set out in the regulations of the Law for the Promotion and Protection of Investments. This process is free of charge. BENEFITS a. Issuance by Executive Decree of a Certificate of Incorporation and Operational Viability. This Certificate includes all permits required for the type of investment by the applicable legislation. (Fast Track). b. Upon obtaining the Certificate, the competent state authorities will not request any other legal requirement or accreditation and the beneficiary becomes eligible to start operations. CRITERIATOBECONSIDERED A National Interest Project may be declared by any one the following circumstances: a. Project aimed at the rational and sustainable exploitation of idle assets owned by the State, including renewable and non-renewable natural resources that otherwise would not generate revenue for the State. b. Project including a commitment to invest no less than five percent (5%) of its gross income in surrounding communities’ development, or corporate social responsibility programs. For this purpose, such investments must be detailed in the proposal, including the Economic and Financial Model (MEF, for its acronym in Spanish) of the project so it can be validated by the relevant authorities.
c. The project to be developed, located in an area of low level of human development according to the information provided by the National Institute of Statistics (INE, for its acronym in Spanish). d. When, according to duly validated income projections, the project has the potential to generate revenues for the State of more than ten million dollars (US$10,000,000.00) per year. e. When, without a declaration of emergency, the projects concerned include the reconstruction of infrastructure damaged by a natural disaster. f. Projects that cause substantial social impact in areas such as social housing, health, education, safety, or others. PROCEDURETOFOLLOW a. Request presentation to the National Investment Council with all the required documentation. b. The National Investment Council will analyze and issue a resolution recommending qualifying/not qualifying the investment as a Mega-Project of National Interest. If the project requires further analysis, this process may take up to 90 days. c. If the project qualifies, as a Mega-Project of National Interest, the National Investment Council will proceed within two (2) business days to submit its recommendation to the Secretariat of the Cabinet. d. Upon receipt of the project documentation with the recommendation of the Cabinet, within fifteen (15) business days, the President of the Republic shall issue an executive decree, containing a Certificate of Incorporation and Viability of Operation that includes all the required permits for the respective type of investment. e. There is no appeal against the decision denying the qualification of the investment as a Mega-Project of National Interest.
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3.3.5CONFLICTPREVENTIONREGIMES The procedure that allows natural persons or legal entities interested in developing projects or investment activities, to prevent real estate conflicts, related to property rights disputes of persons who are not currently in possession of said real estate. This process is free of charge. BENEFITS i. Two years of protection to establish the investment. ii. There is no size limit of land or building to be granted with protection. iii. The prevention of conflicts under the extinction of possible property rights that non-owners have over a property. iv. Once the property rights are extinguished, no third party claiming to have property rights may file claims for ownership of the property or acquire any right over it. Claims on the property will be resolved by arbitration from any local Chambers of Commerce arbitration center, and under its rules and regulations. PROCEDURE a. The Investor must have carried out the insurance contract in accordance with the parameters established in Articles 4 and 5 of the Regulations of the Law for the Promotion and Protection of Investments. b. Submission of the Application for Benefit to the Executive Secretary of the National Investment Council. The Requirements are found in Article 3 of the Regulations of the Law for the Promotion and Protection of Investments.
c. The CNI will receive the application and verify the compliance of the requirements, and determine whether the application is “appropriate”, "to correct" or "not appropriate". • The Executive Secretary will determine whether the application meets the requirements. • In case of failure to comply with the requirements, the Executive Secretary of the CNI shall request the applicant provide documents or meet requirements to complete the reception. • If the application does not meet all the requirements, nor provides documentation to legally fulfill the indispensable steps for the continuation of the process, a notification related to the non completion within the deadline of ten (10) days, will trigger in the expiration of the application (Correction). d. Once the application has been approved, the CNI will issue a notice of publication within three (3) days of its admission, which must be published by the applicant, as follows: • The notice shall be published in at least two daily newspapers of national circulation, with separate intervals of 10 days between each publication (using the text issued by the CNI Executive Secretary). The notice must clearly indicate the procedure completion initiated with the National Investment Council. • The notice must be announced on a radio station with national coverage and one with coverage in the locality where the real estate subject to protection is located. It must be broadcast at the hour with the most audience (using the text issued by the CNI Executive Secretary). The notice must clearly indicate the procedure completion initiated with the National Investment Council.
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
• The notice must be placed on posters on the property in questions with the dimensions and text provided by that the National Investment Council. The notice must clearly indicate the procedure completion initiated with the National Investment Council. e. The investor must submit documentary evidence of publications within thirty (30) business days, following the day of last publication to the CNI Executive Secretary. f. The procedure established in articles 11 to 13 of the LPPI and article 32 of legislative decree No. 284-2013, should be followed during the process when the term to formulate opposition to the application by the local or foreign investor arises. g. Once the previous mentioned procedure has been resolved, in the absence of any opposition, or, where such opposition has arisen and rejected by the competent authorities, the National Investment Council will issue the Certificate of Compliance registry (within thirty (30) calendar days counted from the day following the last publication of the notice referred to in Article 9). h. Once the certification has been obtained, the investor must register it in the Property Institute Registry Office, and the corresponding entries must be made at the bottom of the original Deed. The registrator of property cannot refuse to register such certification.
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3.3.6 GUARANTEE REGIME FOR THE COMPLETION OF PROJECTS ON REAL ESTATE IN DISPUTE The mechanism by which the State guarantees the completion of a project carried out on real estate in dispute. This process is free of charge. To benefit from this mechanism, the following circumstances must apply: a. The Developer of the project must have the permits and licenses required for said project; b. The Developer must have received funding for the project; c. The Developer must have started the related construction work; and once the construction of the Project has begun, if a third party not in possession of the property, initiates a judicial or administrative action to claim ownership of the property, the provisions for the regularization of buildings for public need contained in the Law for Property will not apply to them. BENEFITS i. Assurance of project continuity through the constitution of a Management Trust. ii. The recovery of investments made. iii. The sale or lease of units built or in construction. iv. The judicial or administrative action filed by third parties to solve the claim on the property is resolved by arbitration from a local arbitration center of the Chambers of Commerce, and under its rules and regulations. PROCEDURE a. The Affected Party presents the application of the Guarantee Regime for the Completion of Projects on Buildings in Dispute to the National Investment Council, with documents attesting the circumstances referred to in article 17 of the Law for the Promotion and Protection of Investments. b. The admissibility of the application must consider: • Once the request has been received, the National Investment Council must approve it, within a period of no more than forty-eight (48) hours.
• Once the request has been received and approved by the National Investment Council, it must inform by the Institution to the relevant court of the existence of the application, as well as the mechanism requested for the resolution selected (Trust or Judicial/Administrative Action). c. Once the CNI informs the relevant court of the existence of the application, said court shall suspend the claim proceedings for a period of fifteen (15) calendar days for the requested trust to be established, and to proceed with the respective registration where appropriate. Once this period has expired, the actions will continue their legal course. d. Constitution of the Trust must be done within 15 days, in which the administration of the Project according to the Trust itself will be determined, as well as any relevant circumstances affecting the project. Administrative costs, including the trusteeship commission, shall be deducted from the revenue generated by the project, or where applicable, covered by the applicant. The duration of the Trust shall be such as to guarantee the completion of the project, and it may be cancelled in advance if the dispute is resolved. e. Judicial or administrative action filed by the third party to resolve its claim on the property is resolved by arbitration from a local arbitration center of the Chambers of Commerce, and under its rules and regulations; it should consider two scenarios: • The Dispute shall be submitted to Arbitration in accordance with the provisions of the Law for Conciliation and Arbitration, as well as its rules and regulations (Legislative Decree No. 161-2000 and its Regulations). • With the "Arbitration Award", the CNI shall be notified if: a. If the resolution results favorable for applicant, the project must be closed following the agreements of the Arbitral Award. b. The decision results not favorable, she/he must compensate the investor for the damages caused to her/him.
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3.4 ECONOMIC-FINANCIAL SERVICES TO THE INVESTOR The National Investment Council assists investors with economic and financial advice before, during and after establishing an investment, both to the local and foreign investor. 3.4.1 GUARANTEE IN THE TREATMENT TO THE FOREIGN INVESTOR Foreign investors are guaranteed a series of benefits that create b. The non-application of market access limitations to natural persons and legal entities who establish their investments in Honduras. c. The right to make foreign transfers in national currency or stocks, as preferred, of the proceeds of the capital, dividends, royalties, and remuneration for the use and transfer of technology owned, or the total investments. d. The right to access credit in the National Financial System on an equal basis with local natural persons or legal entities. confidence to operate successfully: a. The principle of national treatment. e. The free participation of foreign investment in the shareholding structure of the companies, except for the requirements established in the Law for Promotion of Public Private Partnerships. 3.4.2 PRE, DURING AND POST-INVESTMENT STAGES To ensure the permanence of existing investments, the CNI provides services before, during and after the investment by enabling the investor to make its financial and market planning accurately and to solve problems during the operation, receiving post-investment services to facilitate the timely solution of problems.
ECONOMIC-FINANCIAL SERVICES TO THE INVESTOR
1. National Treatment of Foreign Investors
2. Investment Sectors and Regions Advisory
3. Pre-investment, investment, and operations information and advisory services
4. Country Macroeconomic and Trade Conditions
5. Information on Local Investors and Exporters
3. NATIONAL INVESTMENT COUNCIL
INVESTOR'S GUIDE HONDURAS 2020 - 2021
3.4.4 PROVISION OF INFORMATION ON INVESTORS AND EXPORTERS It provides investors with information about the main exporters from different productive sectors. 3.4.5 INVESTMENT ATTRACTION SERVICES WITH A TERRITORIAL APPROACH To offer investors information on sectors prioritized by the territorial planning approach, to facilitate the knowledge of the potentialities of each region of Honduras from diverse perspectives: hydrologic, topographic, socio-demographic, logistic, economic, financial, and productive. a. Support and attention to current and potential investors, to facilitate the design and establishment of investment projects for financing request. b. Promote the investment through the preparation and provision of country economic information, country measurement indicators, investment statistics and information on ongoing investment projects with potential for key investment actors in the country. c. Identification of the economic, financial, and social potential to promote investment, following the parameters of the national planning and the state regional development strategy; as well as the management of information for the development of cross-cutting or regional strategic proposals that promote economic growth. d. To communicate with public and private institutions, and the international cooperation for the promotion of partnerships, projects, and activities for the improvement of the business climate, competitiveness of the country, technical support and market opening to productive sectors.
Pre-Investment: a. Guidance on the selection of potential regions for investment with a territorial approach. b. Guidance on the different sources of financing in the National Financial System (SFN, for its acronym in Spanish). c. Analysis of Financial Statements. d. Information on the structure of the National Financial System. e. Guidance in tax matters. During Investment: a. Assistance in tax matters. b. Procedures, regulations – financing. Post-Investment: a. Procedural guidance in investment processes. b. Facilitation of relationship between government entities and investors. c. Guidance on conflicts arising from changes in existing tax and other legislation. 3.4.3 ANALYSIS OF COUNTRY’S MACROECONOMIC AND TRADE CONDITIONS The investor is provided with information and analysis of the appropriate macroeconomic conditions for investment, to ensure successful business operations in a competitive, stable, and constantly growing environment: • Economic growth • Fiscal deficit • Trade deficit from the payments balance • Exchange rate • Interest rate • Trade agreements • Banking and financial regulations • Taxation (Tax System) • Monetary policy
PRIORIZED SECTORS OF INVESTMENT
INTERMEDIATE MANUFACTURING
AGRO-INDUSTRY
TOURISM
BUSINESS SERVICES
HOUSING
TEXTILES
LOGISTIC
MINING
CONSTRUCTION
ENERGY
FORESTRY
OTHER PRIORIZED SECTORS
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