Overview: Honduras

Contributed by Andrés Lacayo Rodríguez, EY Law

The following article contains an overview on Honduras and the impact that COVID-19 has had in different regions country-wide.

Honduras has a population of approximately nine million, and, like most countries, is struggling in many areas due to the pandemic. Honduras has one of the highest rates of COVID-19 infections in the Central American region.

The Honduran government has approved a set of measures that benefit the many affected industries, for example by granting limited economic relief to employees in the tourism and ground transportation sectors.

Regarding tax matters, an extension was granted for the deadline for filing the Annual Transfer Pricing Information Affidavit for the fiscal year 2019, which must be filed no later than 31 July 2020.

All calendar days are declared as non-working days for the period in which the declaration of emergency originated by the COVID-19, except those days that are necessary in order to comply with the obligations.

The deadlines for filing returns and paying sales tax for the months affected by the emergency decreed by the COVID-19 are extended to all taxpayers who have not carried out operations within the same period of the emergency. These will now be filed no later than ten working days after the end of the state of emergency.

Taxpayers who keep all their employees within the period from the declaration of the state of emergency arising from COVID-19 until December 2020, in respect the payment of wages and labor rights and who have not suspended or terminated their employment contracts, will be granted an additional special deduction from their gross income. Such deduction is equivalent to 10% calculated on the payment of wages and salaries in the months during which the state of emergency is decreed, which may be accounted for as a deductible expense for income tax purposes in the 2020 fiscal period. This benefit will not apply in cases where the employer terminates or suspends employment contracts.

On the labor law practices, COVID-19 has changed the normal operations from the government and private entities. As in other regions, ‘the new normal’ is the work from home solution, known as ‘Home Office’. Even though Honduras has no specific laws for Home Office, unlike many other countries, the Honduran Government issued an emergency decree which authorizes Home Office as a possibility to deliver work. This not only applies to private companies, but also to public employees. Honduran Law defines Home Office as the activity that is developed outside the facilities of the employer, using the information and communication technologies for the development of the work. Employees of any public or private entity can perform their work totally or partially at a distance from their workplace.

The obligations of employers and employees remain the same according to the Honduran Labor Code.

The return to work in Honduras has been very slow. An economic and labor reactivation has been established for specific periods of time of 45, 60 and up to 75 days divided into three regions distributed according to the amount of contagion by COVID-19. However, this may vary depending on the amount of contagion in such areas. Every Sunday since mid-March 2020, the Honduran government has issued curfews for one or two weeks, allowing only specific companies to operate normally with the now customary protocols.

Soon, Honduras will – on a provisional basis – apply a model that allows a percentage of employees to work from home and others to continue working from the office to protect the general population and promote savings in the operating expenses of employees, such as office supplies and utilities.

We also expect an increasing number of labor disputes in the Labor Administrative Offices due to the loss of jobs, which will likely generate direct intervention by the Supreme Court. Also, an increasing number of civil procedures is expected in relation to contractual breaches, especially in the real estate sector.

Even though this will be the biggest recession in Honduran history and it will definitely have strong effects on private entities, this will be an opportunity for the country and for foreign investors to navigate into more modern and improved industries and technologies such as telecommunications, digital marketplaces, cybersecurity, programming and technology, education, medical services, product distribution, convenience stores/supermarkets and a more modern agro-business sector. With local or foreign companies investing in these areas, Honduras will generate more job opportunities, and government incentives are expected to this effect.

Work related to debt restructuring has also increased in Honduras due to the resulting economic implications of the current situation. We expect a substantial number of companies to file insolvency and liquidation procedures. We have been advising clients in strategies that can support business continuity at all levels, on an integrated basis, with our other service lines covering all aspects of a business operation.

EY Law has not stopped working amid the devastating impact of the pandemic in Honduras. Our firm has applied Home Office for many years in this country and our timely implementation of the best technology has been a key issue to the success of our business and our clients in this difficult time.

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