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Tax Code Reforms: Global Income and the Elimination of Bank Secrecy in Tax Matters
[/vc_column_text][vc_column_text] The tax system based on the principle of global income entails the phenomenon of legal double taxation in its application. Legal double taxation consists of the taxation of the same natural or legal person on the same income in two or more States; for example, an individual living in Spain and whose center of economic interest is Germany can be considered a resident in both countries, so if both countries do not have an agreement to avoid double taxation, the person is fully subject to the tax obligations of each State, consequently; it would not only be enough for the National Congress to reform the articles related to territorial income, but the Tax Administration must negotiate bilateral treaties with other States so that the Legislative Branch signs these treaties to avoid double taxation. Also, the "foreign tax credit" mechanism must be regulated, which prevents double taxation, since it offsets the tax burden for taxes paid abroad; However, within the additional reforms to the Income Tax Law, it is not foreseen that the manner in which the State of Honduras would provide the credit and what would be the procedural mechanism to grant it has been developed. In addition to this, Honduras has signed agreements for the Exchange of Tax Information, Mutual Administrative Assistance Agreements in Tax Matters, and has also adopted commitments through the following projects and treaties: the Base Erosion and Profit Shifting (BEPS) Project in its capacity as a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes, the Agreement between the Government of the United States of America and the Government of the Republic of Honduras to improve international tax compliance and implement the Foreign Account Tax Compliance Act (FATCA) and the East Point Declaration, among other international treaties or agreements, so the reform that is intended to be carried out is to be able to adopt one of the international good practices; These include allowing government authorities access to banking information to enforce certain laws and the exchange of information with other countries. The veil of "banking secrecy" is defined in Article 72, paragraph 4, of the Tax Code. However, the reform does not ensure that the information transferred to the Tax Administration is done expeditiously, efficiently, and securely, and therefore complies with the commitments adopted internationally. This is because it would still be done through the National Banking and Insurance Commission, generating practical difficulties for this intermediation. Furthermore, general requests made to the CNBS jeopardize the security of taxpayers. Therefore, it is mandatory to maintain the individual nature of the requests, since they are directed at a specific and determined person, and it ensures the confidentiality of tax data, reports, and records. Such a sensitive regulation cannot be reformed without mechanisms being included in the Code itself that guarantee the implementation of security components so that the information held by the tax authority is protected, either through a transfer from banking secrecy to tax secrecy or through other mechanisms it deems appropriate. It must primarily have a strong security system that prevents cyberattacks, which occurred in our sister country of Costa Rica. Therefore, it is not enough to comply with the commitments adopted by the Tax Administration with international organizations, conventions, and treaties that recommend the elimination of obstacles that hinder the exchange of information by proposing that States relax their banking secrecy regulations. The Treasury is obliged to protect information that would pass from banking secrecy to tax secrecy, and the Habeas Data Guarantee must be regulated in the Tax Code, and the regulatory framework must be further expanded. In addition, the Treasury must work to ensure that the regulations are consistent with territorial income and that no tax loopholes are found that favor the Tax Administration, as is currently the case. For comprehensive advice on this matter, please contact us at the following email address: nfugon@lexincorp.com. *Legal Notice: The general information contained in this document is provided for informational purposes only and should not be construed as legal advice on any of the topics discussed. You should not act or refrain from acting based on any content included in this document without seeking legal or other professional advice. We disclaim any liability for any actions you take or refrain from taking based on any content in this communication. [/vc_column_text][vc_column_text css_animation=””] Written by: Nicole Fugon[/vc_column_text][/vc_column][/vc_row]
