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6.1 Fair Tax Regime
6.2 Professional Services
6.3 Capital Markets
In-Country Assessment Information

6. Appropriate Regulation

Goal – A comprehensive regulatory regime that is transparent, efficient, simple in its implementation and that leads to accurate reporting of property values and prudent protection from market risks

  

6.1 Fair Tax Regime (Weak)

Core Question: Do market participants feel the overall tax rate is fair and participate in formal transactions?

Although the capital gains on foreign investor’s profits are relatively low, the overall tax burden and transfer taxes are high. With high transfer tax and no independent valuation system, buyers and sellers may report incorrect sales prices and thus distort public data which discourages credit lending.

Transfer Tax (Weak)

6.1.1   What is the total property transfer tax including all duties and payments?

Relatively high at 5.7% property transfer tax.

Overall Tax (Very Weak)

6.1.2   What is the overall tax rate on entrepreneurs(as a percentage of profits)?

39.2%

Ranked 144 out of 188; Trend ↑

Source: Doing Business 2014 – Paying Taxes & Registering Property, World Bank
http://www.doingbusiness.org

6.1.3 Divestment (Very Strong)

Survey Question

SQ 24  What is the tax on profits for foreign investors when divesting property?

Capital gains for foreign investors are subject to 10% tax. The Law on Administrative Simplification, passed in 2000, requires companies to have a minimum of two shareholders. The Honduran chambers of commerce have proposed a reduction in the number of bureaucratic steps required to notarize powers of attorney granted from abroad, thus reducing the transaction costs borne by foreign investors. Steps have not been taken, however, to reduce or simplify these procedures.

Source: International Tax Honduras Highlights 2014 – Deloitte.
http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-hondurashighlights-2014.pdf

Source: TRADE AND COMMERCIAL LAW ASSESSMENT – HONDURAS, USAID
http://egateg.usaid.gov/sites/default/files/Honduras.pdf

 

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6.2 Professional Services (Weak)

Core Question:  Are the professional services necessary for efficient and transparent property markets available and appropriately regulated and supervised?

The government provides licensing to brokers and agents and the license must be renewed annually but there are no requirements set by the government. The government provides very little to no regulation and supervision to the mortgage and appraisal professions, which opens up more room for corruption and ineffective allocation of capital.

6.2.1 Asset Valuers (Very Weak)

Survey Questions

SQ 25  Are property valuers licensed and/or certified by the government?

There are no licenses or certifications provided by the government.

SQ 26   How effective are mechanisms in place to discipline valuers who engage in misconduct?

There is no separate profession for valuation of real property.

6.2.2 Brokers & Agents (Weak)

Survey Questions

SQ 27  Are real estate brokers and agents licensed and/or certified by the government?

There are licensing requirement for local practitioners and brokers facilitate apprenticeship programs. Brokers and agents must be licensed and must be renewed annually, but the government loosely enforces these regulations and there is no requirement continued education.

SQ 28  How effective are mechanisms in place to discipline brokers or agents who engage in misconduct?

A code of ethics exists but is only enforced internally within the real estate associations, unless it becomes a legal matter.

Source: Honduras – Market Situation – National Association of Realtors.
http://www.realtor.org/intlprof.nsf/All/Honduras

6.2.3 Mortgage Professionals (Unknown)

Survey Questions

SQ 29  Are mortgage professionals licensed and/or certified by the government? 

No data on mortgage lender/broker licenses, but Honduras lacks provisions that would permit securitization arrangements, or loans secured by a set of debt or title instruments (such as mortgages, to cite a common example).

Source: TRADE AND COMMERCIAL LAW ASSESSMENT – HONDURAS, USAID
http://egateg.usaid.gov/sites/default/files/Honduras.pdf

SQ 30  How effective are mechanisms in place to discipline mortgage professionals who engage in misconduct?

Unknown

 

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6.3 Capital Markets (Weak)

Core Question: Are capital markets well-regulated and diversified enough to provide financial resources to private-sector entrepreneurs and innovators?

There are a limited number of credit instruments available in the local market. The only security exchange operating in the country is the Central American Securities Exchange (BCV) in Tegucigalpa. The local banking system generally extends only limited amounts of credit. Local banks should not be considered a significant source for start-up capital for new foreign ventures unless they use specific business development credit lines made available by bilateral or multilateral financial institutions, such as the Central American Bank for Economic Integration.

Source: 2013 Investment Climate Statement – Honduras, U.S. Department of State.
http://www.state.gov/e/eb/rls/othr/ics/2013/204655.htm

Capital Flows (Very Weak)

6.3.1  How restricted is the flow of capital into and out of the country?

Ranked 119 out of 148; Score 3.6 out of 7.

Source: The Global Competitiveness Report 2013-2014, World Economic Forum
http://www.weforum.org/issues/global-competitiveness

Security Exchanges (Weak)

6.3.2  Is the regulation of securities exchanges transparent, effective and free of influence from government and industry?

Ranked 104 out of 148; Score 3.6 out of 7.

Source: The Global Competitiveness Report 2013-2014, World Economic Forum
http://www.weforum.org/issues/global-competitiveness

Securitization (Strong)

6.3.3   What is the depth of asset-backed securities, mortgage-backed securities, high-yield bonds and highly leveraged loans?

Data is not available in the Financial Development Report issued by World Economic Forum. However, legislation has created a secondary mortgage market. Mortgages are not standardized.

Source: Tegucigalpa, Honduras – Global Housing Policy Indicators
http://globalhousingindicators.org/en/content/tegucigalpa-honduras

 

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