Joint Ventures/Licensing

Discusses the legal requirements/options for joint venture/licensing in this market.

Last published date: 2019-10-13

The Law for the Promotion and Protection of Investments (Investment Law; Decree 51-2011) allows foreign investment and joint ventures between national and foreign investors through the execution of contracts whereby the contracting parties may contribute land, capital, services, technology, technical assistance or other assets for the production or marketing of goods and services. Licensing agreements, in which foreign firms are authorized to produce a patented product in exchange for royalty payments, are also guaranteed under the country's regulatory framework for investment. Laws applicable to joint venture and sharing contracts are also contained in Chapter XIII, Title II, and Book IV of the Commercial Code. Joint ventures are commonly established in Honduras to compete for government contracts or in heavily regulated sectors.
Joint venture initiatives offer a wide variety of opportunities for investment and strategic alliances. The Investment Law stipulates that, with few exceptions (some involving special requirements under Public Private Partnership mechanisms), there are no restrictions on the percentage of capital that can be owned by a foreigner. Although no special policy exists to regulate joint ventures, in certain sectors majority control must be in the hands of Honduran nationals. These exceptions include companies that wish to take advantage of the Agrarian Reform Law; wish to obtain commercial fishing rights; are local transportation companies; or seek to operate radio or TV stations.
Under the Honduras 2020 economic development program, the country has prioritized investment promotion in the following industries: tourism, textiles & apparel, light manufacturing, outsourcing services, housing, and agri-business. Power generation, mining, and services are also active sectors.
The Honduran government’s investment promotion arm is coordinated through the Ministry of Economic Development. The Honduran Foundation for Investment and Development of Exports (FIDE) also supports the development of new export and investment sectors, works with local businesses to strengthen their capacity to attract foreign joint venture partners, and locates appropriate manufacturing facilities for investors.
Licensing of foreigners to practice law, medicine, engineering, and other professions is tightly regulated by national professional organizations. Most bodies have developed procedures for the temporary licensing for foreign professional service.
Except for foreign currency earned by companies operating in free-trade zones and industrial parks, Honduran law dictates that all export foreign exchange earnings be repatriated. The liberalization of Honduras' foreign exchange regime in 2011 made it easier for companies operating in the country to remit dividends and royalties, return capital overseas, and make payments on foreign debt. Foreign exchange authorizations by the Central Bank were eliminated and foreign debt authorizations take less than 48 hours to obtain. Remittances of dividends and royalties must still be approved by the Central Bank.
Taxation is an important issue to consider when investing in Honduras. Except for firms operating in the industrial parks, located in the free tourism zones or under the Temporary Import Regime, income tax is payable on income derived from operations within Honduras. The annual period for computing tax on taxable income begins on January 1 and ends on December 31 each calendar year.