xport Processing

Industrial Zones Law

Material of Interest to Investors

EXPORT PROCESSING INDUSTRIAL ZONES LAW

THE NATIONAL CONGRESS.

WHEREAS: It is the responsibility of the Government of the Republic to

propitiate, through proper legislation, the creation of employment.

WHEREAS: Export Processing Industrial Zones (EPZ), under private

management in countries having economic conditions similar to those existing
in Honduras have proven to be an effective mechanism in the creation of mass
employment, contributing to the diversification of the industrial base by
generating rapid growth and greater indirect employment in the economy.

WHEREAS: Honduras must urgently join together with this group of countries,
by developing Export Processing Industrial Zones (EPZ), in order to achieve the
creation of permanent large scale employment, for which purpose it must
compete efficiently with other countries, by offering the services and incentives
required by foreign manufacturers and investors and taking advantage of its
geographic position in the area of Central America and the Caribbean and the
experience obtained by other countries.

WHEREAS: There exists a consensus among the most representative

organizations of the entrepreneurial sector, organized under the Honduran
Council for Private Enterprise (COHEP), and of

organized labor, under the General Workers Union (CGT), as regards the
benefits which would accrue in favor of national development as a result of the
creation of the Export Processing Industrial Zones (EPZ). The profits obtained
from their operations by the user firms established in the Export Processing
Industrial Zones (EPZ) will be exempt from the payment of income tax. This
benefit shall not accrue to foreign natural of juridical persons when the
legislation of their respective countries allows them to deduct or take as a credit
the income tax paid in Honduras against the taxes payable in their country of
origin.

Income from salaries and other similar personal income for persons working in
the Export Processing Industrial Zones (EPZ) will be subject to income tax and
municipal taxes in accordance with the corresponding laws.

Therefore.

Decrees:
The following:

CHARTER LAW FOR THE EXPORT PROCESSING INDUSTRIAL ZONES

(EPZ)

CHAPTER I. Creation, Definition and Applicable regulatory system

ARTICLE 1. Created hereby are the Export Processing Industrial Zones (EPZ),
of private ownership and management, the organization, operation and control
of which are regulated by this law, its implementing regulations and other laws
as applicable.

ARTICLE 2. The Export Processing Industrial Zones (EPZ), of private

ownership and management, are geographic areas within the national territory
approved and delimited by the Executive Branch through the Secretary of State
in the Ministry of Economy and Commerce, subject to the fiscal supervision of
the State and with no resident population, created for the purpose of promoting,
through the use of local labor, the manufacturing and service industries oriented
exclusively toward exports, by promoting primarily export-oriented industrial
enterprises and commercial firms providing support to the industrial activities
and whose purpose is that of supplying goods or services within the Zone under
the regulatory system established hereby.

ARTICLE 3. The goods and merchandise which are imported and/or exported
on the basis of this law shall enjoy total exemption from the payment of customs
duties, consular fees, charges and surcharges, internal consumption,
production, and sales taxes as well as other taxes, encumbrances, fees and
surcharges.

Likewise, the sales and production generated within the Export Processing
Industrial Zones and the industrial and commercial buildings and establishments
located therein, shall be exempt from the payment of national and municipal
taxes.

CHAPTER II. On The Management Company, Requirements, Authorization

and Faculties

ARTICLE 4. In order to operate and Export Processing Industrial Zone, the

following will be required:

a. To be legally chartered as an Anonymous Fixed Capital

Corporation, with subscribed and paid-in capital in an amount
not less than TWO MILLION LEMPIRAS (2,000,000.00)
b. To have as its exclusive purpose the exploitation of Export
Processing Industrial Zones (EPZ)
c. To show proof of the availability of the real property required for
the purposes of the Export Processing Industrial Zones; and
d. To show proof of the availability of the technical and financial
resources required for promotion, for offering the services and
for generating a minimum of five thousand new jobs within a
 period of five years.

ARTICLE 5. The authorization to establish the management company for the

Export Processing Industrial Zone and the approval and delimitation thereof,
must be requested of the Executive Branch, through the Secretary of State in
the Ministry of Economy and Commerce, by its promoters or organizers.

ARTICLE 6. The application referred to in the proceeding article which must

contain the name, nationality and domicile of each of the organizers or
promoters, shall be accompanied by:

a. A draft of the Public Charter Deed and By Laws

b. The financial and administrative structure and
projections for the development of the firm over a
period of ten (10) years.
c. An economic study which justifies the establishment of
the Export Processing Industrial Zone being proposed
and
d. Drawings of the zone and the projected installations,
with an indication of the capacity and the relevant
specifications.

ARTICLE 7. The Executive Branch, through the Secretary of State in the

Ministry of Economy and Commerce and the Ministry of Finance and Public
Credit, in matters relevant, must receive assurance by means of investigations
which it deems proper:

a. That the public interest and the general and local

circumstances justify the authorization
b. That the based for the financing, organization,
management and administration rationally guarantee
the security of the fiscal interests of the State;
c. That sufficient capacity is available to provide to the
users of the Export Processing Industrial Zone the
services required by the industrial transformation
process for export, including promotional services and
contracting of labor and,
d. That the project installations offer sufficient guarantees
for fiscal control.

If authorization is justified, the Executive Branch, through the Secretary of State

in the Ministry of Economy and Commerce, shall so grant, for the purposes of
issuance and formalization of the Deed in accordance with the project
presented and shall delimit the zone.

ARTICLE 8. The Executive Branch, through the Secretary of State in the

Ministry of Economy and Commerce, upon presentation of the Carter Deed,
duly authorized and registered, shall authorize the Export Processing Industrial
Zone by adjudicating to the chartered Management Company the rights of
exploitation, development and management in the area delimited.
ARTICLE 9. The rights conferred unto the Management Company shall be
transferable only with the authorization of the State, in which case the purchaser
shall satisfy the same requirements as the owner, as established in article 4,
and following, of this Decree.

ARTICLE 10. The authorized Management Company is directly responsible for

the management, administration and operation of the export Processing
Industrial Zones and may:

a. Construct all types of industrial and service installations

as well as the required infrastructure;
b. Carry out all types of contracts for legal trade, such as
purchase-sale, lease, barter or exchange, or deposit,
as well as establish any obligation with respect to
goods of his property;
c. Provide all types of services as required in the Export
Processing Industrial Zones, by installing them,
controlling them, administering them and offering them
to the natural or juridical persons operating in the area
as users and laborers, in accordance with the
respective laws;
d. Promote the Export Processing Industrial Zones.

ARTICLE 11. The company which has been authorized to operate the Export
Processing Industrial Zone shall enjoy the following fiscal benefits:

a. Importation, free of encumbrances, customs, duties,

charges, surcharges, consular fees, internal
consumption and sale taxes and other taxes, fees and
encumbrances having to do directly or indirectly with
customs import operations, of all goods imported which
are exclusively applied to, or incorporated into the
development and exploitation of the Export Processing
Industrial Zone, including construction materials,
equipment, spare parts, machinery, and office
equipment, providing these goods are not produced in
the country and with the prior authorization of the
Secretary of State in the Ministry of Economy and
Commerce;
b. Exemption from income tax for 20 years and from
municipal taxes for 10 years.

ARTICLE 12. A single company may be authorized to operate more than one
Export Processing Industrial Zone. When a company authorized to operate an
Export Processing Industrial Zone requests authorization to operate new zones,
it will be exempt from compliance with the requirements regarding social
constitution, but will be subject to compliance with the remaining requirements
established hereby, including the investment of two million Lempiras in paid-in
capital for each industrial zone.