On November 28, 2018, the Law of Support for Micro and Small Enterprises entered into force, a law that seeks to promote the formalization of small and micro enterprises, in turn, providing benefits for their operation and functioning that favors them to achieve the desired economic growth.
It is important to mention that prior to the entry into force of this law, related laws already existed as early as 2014, such as the Law for the Protection of Benefits and Regularization of Informal Activity, the Law for the Generation of Employment, Promotion of Entrepreneurship, Formalization of Businesses, and Protection of the Rights of Investors.
All these legal bodies have been used to give life to a new way of setting up companies through the modern digital tool “My Company Online”, through which microentrepreneurs can set up companies under the modalities of a limited company or as a limited liability company.
It should be noted that (1) currently, this new system is only available to micro and small entrepreneurs who develop their activities in the departments of Francisco Morazán and Cortés; (2) in the future the constitution of individual merchants will be enabled once the corresponding form is approved by the Property Institute.
To set up companies requires that following steps be taken:
- Enter the website http://www.miempresaenlinea.org/index.html
- Register a user, for which the only requirement is to have an email address in order to receive the notifications of the process of the creation of the company.
- Fill out the application to include the following :
- Social denomination
- Trade name
- Municipality in which the user operates
- Address and map of the location of the company
- The primary purpose of the company
- Description of the activities to be developed
- Option to generate the form for the subsequent obtaining of the National Tax Registry
- Option to generate the form of the corresponding mayoralty.
Capital and start of activities and duration:
- Duration of the company
- Annual sales projection
- Activity start date
- Declaration of the capital and nominal value of the shares/social shares
- Percentage of the annual reserve on net profits.
- Name, address, telephone, email, profession, and identity number
- Percentage of participation (shares/social shares)
Administration and legal representation:
- Choice of type of administration (for limited companies, the board of directors or sole administrator)
- And the selection of the powers to grant to the legal representative
- Incorporation of the name(s) of the company’s organizers
- Selection of the arbitration or the judicial process as a method of resolution of conflicts, in case of selecting arbitration, designate one of the following centers for the same:
- Conciliation and Arbitration Center of the Chamber of Commerce and Industry of Tegucigalpa;
- Conciliation and Arbitration Center of the Chamber of Commerce and Industry of Cortés; or,
- Bar Association of Honduras.
- Once the form is completed, the Mercantile Registry reviews the information recorded therein and subsequently generates a contract that must be signed in person at the offices of the Chamber of Commerce and Industry of Tegucigalpa or Chamber of Commerce, Trade and Industry of Cortes. Notification of the contact’s availability is by email. Also, the corresponding registration fee must be paid. At the time of signing the contract, the shareholders must present a copy of their identity cards.
- Subsequently, the Mercantile Registry proceeds to register the company.
- Finally, the National Tax Registry must be obtained before the Tax Authority, which will also provide the entity with a certificate that will serve to obtain the benefits established by law.
Who are the beneficiaries of the Law of Support for Micro and Small Enterprises?
- The Micro and Small companies that have been operating informally and are formalized within a period of twelve (12) months counted from November 28, 2018;
- Merchants who formally form and register in any Public Registry of Commerce and Chamber of Commerce of the Country, regardless of their founding social capital, within a term of twelve (12) months counted from November 28, 2018;
- The Micro and Small companies constituted and in operation prior to the validity of the Law, provided that they:
- Verify reliably to the Secretary of State in the Economic Development Office, between November 28, 2018 and December 31, 2019, has increased by 30% the generation of new paid jobs, comparable against the payroll of current employees as of September 30, 2018, derived from investment or reinvestment of capital, expansion of operations or any increase in industrial, production, commercial or service activities;
- Confirm within a period of twelve (12) months counted as of November 28, 2018, the authorization of the Secretary of State in the Labor and Social Security Dispatches related to the previous paragraph.
- Confirm within a term of twelve (12) months counted from November 28, 2018, not to have a gross annual income greater than Five Million Lempiras (L 5,000,000.00) in the previous fiscal year.
Legal persons are not considered as beneficiaries, who have as partners, shareholders or social participants natural persons that already form part of another mercantile company dedicated to an equal activity or that have formed part of another company dedicated to a similar activity. Likewise, exempt from the benefits of this Law are the micro or small companies that include within their social participation legal entities, regardless of their category and legal persons that integrate within their social organization as a partner, shareholder or social participant natural persons who has been have been partners, shareholders or social participants of a legal entity that is dedicated to a similar activity and is dissolved, liquidated or closed its operations as of November 28, 2018, the date in which the Law of Support for Micro and Small Enterprise came into force.
What benefits does the Law of Support for Micro and Small Enterprises?
In addition to the facility for the constitution and formalization, the Law of Support for Micro and Small Enterprises and its regulations provide the following tax benefits:
- Exemption from payment of Income Tax;
- Exemption from the payment of the Net Assets Tax;
- Exemption from the payment of the Solidarity Contribution;
- Exemption from payment of 12.5% for income tax;
- Exemption from registration fees related to the act of incorporation of the company;
- Exemption from municipal taxes for the provision of municipal services, use of municipal or communal assets, and administrative services that affect or benefit the inhabitants of the municipality;
- Exemption of the Personal Tax of the Municipalities, in the case of the beneficiaries described in numeral 2 in the description of the previous beneficiaries;
- Exemption from the Tax on Industry, Commerce and Services of the Municipalities in the case of the beneficiaries described in numeral 2 in the description of the previous beneficiaries; and,
- Exemption from collection charges for the issuance of administrative acts, licenses or other items necessary for the operation of the enterprise, which must be performed in public institutions.
In order to enjoy these benefits, beneficiaries must register in the Exempt Registry of the Ministry of Finance.
What is the period for which the tax benefits described above are granted?
- FIVE (5) YEARS UNEXTENDABLE: Tax benefits described in numerals 1, 2, 3, 4 and 5 above.
- THREE (3) YEARS: Tax benefits described in numerals 6, 7 and 8 above. This term may be extended for two (2) additional years at the duly motivated request of the Secretary of State in the Economic Development Office.
According to the data provided by the Chamber of Commerce and Industry of Tegucigalpa:
- 2,498 applications have been processed.
- 1,547 companies have been set up.
- 702 companies have a National Tax Registry.
- 90 applications are in process, that is, under review for approval by the Mercantile Registry.
We can conclude that the legislation that supports the creation of this innovative portal is effectively encouraging the formal establishment of micro and small businesses, in turn, allowing them to enjoy tax benefits that encourage their positive economic development, and in broad terms, contribute to the generation of employment in Honduras.