The National Congress of Honduras passed a law to promote micro and small enterprises on 6 November. The hope is to support this kind of undertaking with incentives that promote economic growth, welfare and free-market enterprise by creating new employment opportunities.

The regulation, amending the legislation on promoting and developing the competitiveness of micro, small and medium-sized companies*, covers the following areas:

Recipients of the incentives

Both micro and small enterprises that have just been set up can be beneficiaries, as well as micro and small companies that already exist that have been operating in the informal sector before the passing of the law, provided that they come into the formal sector within 12 months of the law's passing. So that those in this second category can receive the tax breaks provided for in the law, they must meet the following requirements:

• Demonstrate by 31 December 2019 that they have invested or reinvested capital, expanded their operations or any expansion in activity that has involved an increase of at least 30% in their payroll since September 2018
• Be authorized by the Work & Social Security Department
• Have gross annual income of less than 3 million lempiras** in the previous tax period
• Be filed on the Exemption Register

Tax advantages

The tax advantages offered by the law for micro and small enterprises meeting the legal requirements are as follows:

• Exemption from paying income tax, net asset tax and temporary solidarity contribution, as well as the 1% advance income tax payment
• Exemption from paying registry and municipal stamp duties when setting up their enterprise, the charges for issuing administrative deeds, licenses and other paperwork needed in order to do business, for a 3-year period
• Exemption from the personal tax and also from the municipal corporations' industry, trade & services tax

The law also includes the transfer of 13 billion lempiras to the sector by amending the Financial Support law for Honduras' productive sectors***. 40% of this sum will be spent on financing the housing sector; 20%, on supporting the productive units affected by natural phenomena or crises that have had a negative impact on the national economy; while the remaining 40% will be targeted on microlending and other productive sectors.