1. Origins in International Taxation and Regulatory Framework

Honduras has formalized its commitment to global fiscal transparency through the ratification of the Country-by-Country (CbC) Report adopted under Agreement SAR-653-2023. This decision aligns with the policies of the Organisation for Economic Co-operation and Development (OECD) and the guidelines of the Base Erosion and Profit Shifting (BEPS) project, emphasizing a concerted international effort to promote fiscal openness. This framework aims to provide tax authorities with a comprehensive view of multinational operations, covering various aspects such as the nature of business activities, the number of employees, total income both domestic and intergroup, pre-tax profits, taxes owed and paid, and accumulated results.

This report sets a minimum standard of transparency within the BEPS Inclusive Framework, seen as a global political commitment. It is interesting to note that in Europe, the disclosure of these reports is mandatory, providing key financial information access to all relevant stakeholders.

Unlike regulations on the ultimate beneficial owner, which focus on identifying the natural controllers of companies, the CbC Report focuses on the structure and corporate operations at a global level. This approach provides a more holistic view of how multinationals distribute and manage their economic activities in different jurisdictions, contrasting with beneficial owner regulations designed to prevent anonymity of effective owners.

It is also relevant to mention that while Agreement SAR-653-2023 marks an important step, it is not the first time Honduras has addressed the structuring of the CbC Report. Previously, the configuration of this report had been explicitly outlined through Agreement SAR-007-2017, which established the formats of the forms required by the Tax Administration, including the "Country-by-Country Report CBC."

2. Recent Developments and Challenges in Information Exchange

Although significant progress has been made, Honduras still faces important challenges to effectively integrate into the global network of fiscal information exchange. The lack of ratification of the Multilateral Competent Authority Agreement (MAAC) and the absence of adherence to the Multilateral Competent Authority Agreement (MCAA) to exchange CbC Reports restricts the country's ability to carry out automatic exchange. These documents are crucial to achieving transparency that allows adequate oversight of the economic activities of multinationals within Honduran territory. Especially with the absence of the MCAA signature, several Honduran subsidiaries of multinational companies may fall under the obligation to submit the CbC Report in the country.

In this regard, Agreement SAR-653-2023 defines the conditions under which resident entities must submit the CbC Report in Honduras:

1. Parent Company Responsibility: If the parent company abroad is not required to submit the report in its country of origin, subsidiaries in Honduras must assume this responsibility
2. Existence of an Eligible Agreement between Competent Authorities specific to the submission of the CbC Report: The existence of other types of agreements, such as those for information exchange or to avoid double taxation, is not sufficient without an explicit commitment that facilitates this type of report.
3. Compliance with information exchange standards in other jurisdictions: Honduras can take measures against countries that systematically do not comply with information exchange standards, ensuring that multinationals meet their tax obligations.

Considering the above, condition (a) is based on the regulations of a different nation, while condition (c) depends on specific intervention by the Honduran government in response to non-compliance with the pre-established requirements by its information exchange partners. On the other hand, condition (b) will remain in effect until Honduras adheres to the MCAA. Thus, all multinationals that exceed the consolidated income limit established in the Agreement (750 million euros or 19 billion lempiras) and that have operations in Honduras through resident entities are required to submit the CbC Report without exceptions. 

3. Future Implications and Conclusions

The CbC Report is crucial for Honduras' strategy to effectively integrate into the global dynamics of fiscal justice. As the country continues to align with the requirements of the BEPS Inclusive Framework, it faces the challenge of updating its agreements and legislation for a smoother and more efficient exchange of fiscal information. Continuous commitment to transparency not only improves the oversight of multinationals' activities but also strengthens the integrity of the Honduran tax system, ensuring an equitable contribution from all companies. The effectiveness in implementing the CbC Report will indicate Honduras' progress in its integration into the global economy and adherence to international regulations.

It is crucial to highlight the need for Honduras to advance with decisive steps such as ratifying the MAAC and signing and subsequently ratifying the MCAA. These actions are essential to avoid unnecessarily extending fiscal obligations to more companies than required. Currently, many multinationals already comply with the obligation to submit the CbC Report in other countries where they operate. Integrating Honduras into these international agreements would allow recognition of these reports submitted abroad, thus avoiding the duplication of the submission of the same fiscal information. This measure would not only simplify the requirements on multinational companies but also strengthen the country's fiscal information exchange system, aligning it with global practices and reducing unnecessary administrative burdens.