17 February 2017 Global Tax Alert News from Americas Tax Center Honduras enacts new Tax Code EY Global Tax Alert Library The EY Americas Tax Center brings together the experience and perspectives of over 10,000 tax professionals across the region to help clients address administrative, legislative and regulatory opportunities and challenges in the 33 countries that comprise the Americas region of the global EY organization. Copy into your web browser: http://www.ey.com/us/en/services/ Tax/Americas-Tax-Center---borderlessclient-service Honduras enacted Decree No. 170-2016 (the Tax Code), 1 which entirely replaces the previous tax code published in 1997 and its amendments. The Tax Code was enacted and published in the Official Gazette on 28 December 2016. The Tax Code is effective 1 January 2017. One of the key changes introduced by the new Tax Code is the shift from a tax system based on worldwide taxation to one based on territoriality. It includes a chapter on the rights of taxpayers, new penalties, new statutes of limitations and an amnesty program. The Tax Code requires the Executive Branch, through the Ministry of Finance and with the assistance of the Tax and Customs Authorities, to submit to Congress bills to reform the Income Tax Law and Sales Tax Law by year-end. Territoriality principle The Tax Code adopts the territoriality principle and eliminates the worldwide taxation system. As a result, Honduran-source income only will be subject to local taxation.
2 Global Tax Alert Americas Tax Center Rights of taxpayers The Tax Code incorporates a chapter on rights of taxpayers, which includes: The secrecy of information filed with the tax authorities The right to file requests with the tax authorities The right to due process during audits or other proceedings Electronic mailbox The Tax Code establishes the use of an Electronic Mailbox, 2 which will replace the tax domicile as the means to receive notifications from the tax authorities. Taxpayers also should use the Electronic Mailbox to file requests or to submit documents to the tax authorities. In addition, the Tax Code requires an executive decree regulating the Electronic Mailbox to be prepared and submitted to the President for approval. Transfer pricing The tax authorities now have the obligation to verify that transactions between Honduran companies with related non-honduran resident companies or Honduran companies operating under a special regime (e.g., Free Trade Zone) comply with current transfer pricing regulations. The Tax Code expressly states that Honduran companies are not required to provide a transfer pricing study regarding their transactions with related Honduran companies that are not established under a special regime. Limit to the amendment of tax returns The Tax Code limits the number of amendments to returns as follows: Annual tax returns: Up to two amendments within the corresponding statute of limitations Monthly returns and other returns: Up to two amendments within 12 months of the return filing date Statutes of limitations The new statutes of limitations are as follows: Four years for obligations related to customs operations Five years for obligations of taxpayers registered with the tax authorities Seven years in any other case, e.g., tax fraud New penalties Income tax returns The Tax Code imposes the following penalties for the late filing of income tax returns: 5% of the unpaid tax if the return is filed during the first 10% of the unpaid tax if the return is filed during the second 15% of the unpaid tax if the return is filed during the third 20% of the unpaid tax if the return is filed during the fourth 25% of the unpaid tax if the return is filed during the fifth and thereafter Sales tax returns Late filing of sales tax returns will be subject to a penalty of 1% of the unreported tax if a taxpayer files a sales tax return within five days of the filing and payment deadline. If the taxpayer fails to file the sales tax return within that period, the penalty will be 2% of the unreported tax for each late month or fraction of a month, but will not exceed 24%. Other formal obligations The Tax Code imposes a penalty on the failure to satisfy taxrelated obligations (e.g., reporting or registering obligations). The penalty will equal the payment of a number of minimum wages 3 or a fraction thereof based on the taxpayer s annual gross income. Non-payment of taxes The Tax Code imposes the following penalties on the nonpayment of taxes: Non-payment of taxes: 3% surcharge for each or fraction of a month, not to exceed 36% Non-payment of withheld taxes: 5% surcharge for each late month or fraction of a month, not to exceed 60% Customs infractions Customs infractions, provided in customs laws, will be subject to a penalty of 25% of the unpaid tax. For taxpayers who fail to provide a customs classification, the penalty will be 10% of the unpaid tax.
Global Tax Alert Americas Tax Center 3 Amnesty program The Tax Code includes an amnesty program to file tax returns (e.g., monthly, quarterly, annual) and information returns. Filing and payment can be made free of penalties, surcharges and interest for taxes incurred up to 31 October 2016. Additionally, for tax years 2012, 2013, 2014, 2015 and up to 31 October 2016 (the Amnesty Period), taxpayers can obtain a certificate or final stamp from the tax authorities by making a payment of 1.5% of the gross income for the year that registered the highest revenues at the end of its tax year according to the annual income tax returns for the years included in the Amnesty Period. Taxpayers must file a request with the tax authorities to make this 1.5% payment and obtain the certificate or final stamp. Once the taxpayer pays the 1.5%, the tax authorities can no longer carry out an audit for the tax years included in the Amnesty Period. The amnesty program ends on 30 June 2017. Other relevant provisions The Tax Code incorporates the Protection Agency, 4 which is in charge of protecting a taxpayer s fundamental rights. It also incorporates the Customs Authorities 5 as an entity independent from the tax authorities. Additionally, the Tax Code gives the Executive Branch one year as of 1 January 2017, to submit to Congress the necessary tax bills to consolidate the Income Tax Law and Sales Tax Law with other existing taxes. The bills should be consistent with the provisions set forth in the Tax Code. Endnotes 1. In Spanish: Código Tributario. 2. In Spanish: Buzón Electrónico. 3. This minimum wage is used as a reference to compute tax-related penalties. The amount is approximately US$355 as of January 2017. 4. In Spanish: Defensoría Especial de Protección Al Obligado Tributario. 5. In Spanish: Superintendencia Tributaria Aduanera.
4 Global Tax Alert Americas Tax Center For additional information with respect to this Alert, please contact the following: Ernst & Young S.A. de CV, San Pedro Sula, Honduras Karem Marquez +504 557 7921 karem.marquez@cr.ey.com Ernst & Young, S.A., San José, Costa Rica Rafael Sayagues +506 2208 9880 rafael.sayagues@ey.com Alexandre Barbellion +506 2208 9841 alexandre.barbellion@cr.ey.com Ernst & Young LLP, Latin American Business Center, New York Ana Mingramm +1 212 773 9190 ana.mingramm@ey.com Enrique Perez Grovas +1 212 773 1594 enrique.perezgrovas@ey.com Pablo Wejcman +1 212 773 5129 pablo.wejcman@ey.com Ernst & Young LLP (United Kingdom), Latin American Business Center, London Jose Padilla +44 20 7760 9253 jpadilla@uk.ey.com
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