Honduras' Tourism Promotion Law: incentives for investors

Honduras' Tourism Promotion Law (Decree 68-2017, published in La Gaceta on 17 August 2017) rewards tourism investment with tax exemptions, fiscal stability and immigration benefits. The benefits aren't automatic: the project must first be qualified by the Honduran Tourism Institute (IHT).

Who qualifies (article 3)

• Lodging and developments: large hotels, hotels, small hotels, condo-hotels, time-share, fractional ownership, mixed-use tourism developments and tourism complexes.
• Tourism infrastructure: convention centres, cruise ports, marinas, golf courses, aquariums, theme parks, zip-lines and dive centres, among others.
• Specific investments: in protected areas, heritage sites, museums, archaeological parks and special tourism zones.
• Inbound tour operators and tourism transport (air, water and land, when set up as single-purpose companies).

Once the IHT qualifies the project, the Finance Ministry (SEFIN) grants the benefits by resolution, with registration in the Registry of Exempt Entities.

What's required (article 4)

• Proof of qualification as a beneficiary for the type of project.
• Proof to the IHT that the financing is in place.
• A feasibility study: impact on the area, direct and indirect jobs, foreign currency and investment, against the fiscal cost. Depending on the category, also a master plan.

Benefits for the project (article 5)

• 15 years without income tax, net assets tax or the solidarity contribution (non-extendable).
• 5 years without income tax or withholding on fees for the project's studies, engineering, construction and installation.
• 10 years without sales tax on local purchases tied to the project's construction, renovation or new investment.
• The Customs Law benefits for importing the project's machinery and equipment.
• Expansions or renovations equal to or above 35% of the net present value of the initial investment can also qualify.
• The benefits are personal: they can't be transferred to someone else.

In return, the beneficiary collects and pays sales tax and the tourism levy, files the fiscal-sacrifice declaration and starts a quality-certification process (article 6).

Fiscal stability (article 7)

Once the project is approved, the State issues a Fiscal Stability Agreement for a term equal to the investment's payback period: the benefits stay on the terms under which they were approved.

Benefits for investors (article 10)

• Deductible interest: buying an apartment, home or time-share with a mortgage or financial lease in areas the State declares tourism priorities lets you deduct the interest paid, on the first 250 average minimum wages of the value.
• Capital contributions: contributing capital, equal to or above 35% of the net present value of the investment, to the company or vehicle of a qualified project can be deducted from taxable income in the year invested.
• Trusts for investing in qualified tourism real estate or infrastructure projects.

Residency for foreign investors (article 11)

Foreigners investing more than US$200,000 directly in a tourism project, or in shares of a tourism company, may apply for residency or a work visa in Honduras, proving it to the immigration authority.

Before you invest

• Confirm with the IHT and SEFIN that the benefit is still in force: exemptions have been subject to fiscal reforms since 2017.
• If the property is on the coast or the islands, also check Article 107 of the Constitution and Decree 90-90.
• Structure the investment (individual, company or trust) with a Honduran lawyer and accountant.