Próspera ZEDE Tax System

Under articles 329 of the Constitution of Honduras and articles 4, 23, 29, 32, and 44 of the ZEDE Organic Law, Próspera ZEDE is subject to a special tax regime that authorizes it to create its own budget, collect and administer its own taxes, to determine the fees it charges for the services it provides, and to enter into all types of agreements or contracts until their objectives are achieved over time, even if it is over several terms of government.

The Próspera ZEDE General Service Provider currently furnishes personnel serving as Tax Commissioner. Contact: gsp@prospera.hn

The tax system is presumptively based on the calendar year. Payment is due to the Próspera Trust on April 1st of each calendar year or as otherwise may be specified for the applicable tax year by notice of assessment from the Tax Commissioner. Significantly, on the latter of January 1, 2030 or the date the population of natural person physical residents exceeds 50,000, all tax revenues will be subject to an aggregate cap of 7.5% of gross domestic product, with any excess refunded to taxpayers pro rata in proportion to their contribution.45 Similarly, to minimize the risk of indirect pressure to tax excessively, beginning on the latter of January 1, 2030 or the achievement of urban population density, Próspera will be subject to a debt limit of the greater of 105% of the nominal amount of the then-outstanding debt or 20% of the 5 year trailing average of annual GDP within Próspera.

Income Taxes in Próspera ZEDE

Próspera’s statutory income tax is designed to be incapable of easy evasion or abuse, and is imposed in lieu of any income taxation otherwise authorized by the Próspera Charter or the Honduran national government. For natural person income, 50% of revenues (what would be called “gross income” under the U.S. Internal Revenue Code) earned within Próspera is deemed “presumed income” subject to the statutory tax rate of 10% (also capped at the same rate by the Próspera Charter). For legal entities, 10% of all revenues earned within Próspera is deemed presumed income subject to the statutory tax rate of 10%.48 The Próspera income tax is thus effectively a 5% gross income tax on natural persons and a 1% gross income tax on legal entities. To avoid double taxation, income tax paid by a legal entity is credited against the income tax that would be owed by that entity’s owner in proportion to that owner’s ownership interest. There is no withholding requirement for Próspera residents. But if income is earned within Próspera by non-residents, the payor must withhold on a monthly basis 10% of 50% of revenues earned within Próspera during the immediately preceding month (effectively 5% of gross income earned within Próspera in the immediately preceding month (effectively 5% of gross income earned within Próspera in the immediately preceding month), and such amount must be deposited with the Próspera Trust within 15 days after the end of each month.

Retail VAT and LVT in Próspera

The Próspera retail value added tax is 5% of the retail value add, which is deemed 50% of the final retail sales price (the rate of any VAT is capped at 5% by the Próspera Charter). This is effectively a 2.5% sales tax on all retail goods and services within Próspera. The land value tax rate is 1% of land value (the rate is capped at 2.5% by the Próspera Charter), which may be fixed by the Tax Commissioner based on the taxpayer’s choice of any of the following methodologies: (1) recent sale of the property in question; (2) a recent professional appraisal supplied by the taxpayer at the taxpayer’s cost; (3) the sales price specified by the taxpayer at the beginning of the relevant tax year in a standing option to sell the property which must be registered publicly in the Próspera property registry at the beginning of the relevant tax year and remain binding capable of acceptance by any third party without rescission for the entire tax year, subject only to a leaseback of improvements for 20 years (on such forms as the Tax Commissioner may provide); and (4) a default valuation based on a reasonable methodology adopted by the Tax Commissioner.

Tax Exemptions and Credits in Próspera

An exemption from any or all of these taxes can be requested if demonstrably necessary (and only to the extent necessary) for Próspera to compete with another tax jurisdiction, as determined either by local rule or the Tax Commissioner and set forth in a legal stability agreement. If granted, the exemption must be written in general and uniform terms to apply and be available to all similarly situated taxpayers. Finally, under a variety of programs which Próspera may offer from time to time, marketable tax credits may be purchased by taxpayers directly from Próspera (or from holders of previously issued marketable tax credits), whereby between $1.1 and $5 of marketable tax credits can be bought for each $1 paid to Próspera to purchase the credit.53 Taken together, the Próspera tax system is fair, efficient and reasonable.