Country Name: Honduras
Currency: Honduran Lempira (HNL)
Primary Tax Authority: Servicio de Administración de Rentas (SAR) – Revenue Administration Service
Key Legislation:
- Income Tax Law (Ley del Impuesto sobre la Renta)
- Value Added Tax Law (Ley del Impuesto sobre Ventas – IVA)
- Corporate Tax Law
- Tax Code (Código Tributario)
Fiscal Authority Allocation
Centralized Fiscal System:
Honduras operates a centralized tax system, with the Revenue Administration Service (SAR) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and value-added tax (VAT). Local governments collect property taxes and municipal fees, but most tax revenues are centrally managed.
Corporate Income Tax (CIT)
Standard Rate: 25%
Honduras applies a flat corporate income tax rate of 25% on the net taxable income of resident companies. Non-resident companies are taxed on their Honduran-sourced income.
Corporate Forms and Taxation:
- Corporation (Sociedad Anónima – SA): Commonly used by larger businesses, taxed at the standard 25% CIT rate.
- Limited Liability Company (Sociedad de Responsabilidad Limitada – SRL): A popular form for smaller businesses, subject to the same CIT rate of 25%.
- Branches of Foreign Companies: Taxed at the same 25% CIT rate on Honduran-sourced income.
Exemptions and Incentives:
- Free Trade Zones (Zonas Libres): Companies operating in free trade zones are exempt from CIT, VAT, and customs duties, designed to promote exports and foreign investment.
- Tax Incentives for Agriculture and Tourism: Businesses in the agriculture and tourism sectors may qualify for tax exemptions or reductions.
Goods and Services Tax (GST) / Value-Added Tax (VAT)
Standard Rate: 15%
Honduras applies a VAT rate of 15% on most goods and services, including imports. VAT is levied on the sale of goods, the provision of services, and the importation of goods into the country. A higher VAT rate of 18% applies to certain goods, such as alcoholic beverages and tobacco.
Exemptions:
Basic food items, educational services, medicines, and certain healthcare services are exempt from VAT. Exports are zero-rated, allowing businesses to recover VAT on inputs related to their export activities.
Personal Income Tax (PIT)
Progressive Rates:
Honduras applies progressive personal income tax rates, which are as follows:
- Up to HNL 165,482: 0%
- HNL 165,483 to HNL 252,265: 15%
- HNL 252,266 to HNL 586,817: 20%
- Above HNL 586,818: 25%
Dividends:
Dividends paid to both residents and non-residents are subject to a 10% withholding tax.
Additional Mandatory Contributions
Social Security Contributions:
Employers and employees are required to contribute to Honduras’ social security system, which provides pensions, healthcare, and unemployment benefits.
- Employer Contribution: 9.67% of gross salary.
- Employee Contribution: 6.5% of gross salary.
Withholding Taxes
- Dividends: 10%
- Interest: 10%
- Royalties: 25%
Withholding tax rates can be reduced under Honduras’ double taxation agreements (DTAs).
Transfer Pricing Rules
Honduras adheres to OECD transfer pricing guidelines. Related-party transactions must comply with the arm’s-length principle, and companies must maintain documentation to support their pricing of cross-border transactions with related parties.
Special Tax Regimes
- Free Trade Zones: Companies operating in Honduras’ free trade zones enjoy complete exemptions from CIT, VAT, and import/export duties. These zones promote foreign investment and export-oriented businesses.
- Tourism Incentives: Companies in the tourism sector can benefit from tax holidays and other tax incentives, including exemptions from VAT and import duties for tourism-related goods and services.
Other Taxes
- Real Estate Tax: Property taxes are levied by local governments, typically ranging from 0.25% to 1.2% of the property’s assessed value.
- Capital Gains Tax: Capital gains are taxed as ordinary income, subject to the CIT or PIT rates.
- Excise Duties: Excise taxes apply to specific goods such as alcohol, tobacco, and fuel.
Double Taxation Agreements (DTAs)
Honduras has signed a limited number of double taxation agreements with countries such as Spain and Panama. These agreements help reduce withholding taxes on dividends, interest, and royalties and prevent double taxation of cross-border income.
Local Taxes
Local municipalities in Honduras collect property taxes and certain municipal fees. However, income tax, VAT, and other major taxes are administered by the central government through the Revenue Administration Service (SAR).
Compliance and Reporting
Annual Filing:
Corporate tax returns must be filed by April 30th of the following year. Personal income tax returns are due by the same date. The tax year in Honduras follows the calendar year.
Penalties for Late Filing:
Penalties for non-compliance or late filing include interest and fines. Interest rates on unpaid taxes are generally set at 1.5% per month, with additional penalties for significant delays.
Recent Developments
Tax Reform:
Honduras has implemented several tax reforms aimed at increasing tax compliance and reducing informality in the economy. These reforms include enhanced tax enforcement measures, modernization of tax collection systems, and expanded transfer pricing rules.
Digital Services Tax:
Honduras is exploring the introduction of a digital services tax, which would apply to foreign digital service providers, such as streaming platforms and e-commerce companies, that offer services to Honduran consumers.
Renewable Energy Incentives:
To promote investment in renewable energy projects, Honduras offers tax exemptions and incentives for companies involved in the development and operation of renewable energy facilities, such as solar and wind power plants.
Subscribe to my free newsletter for regular updates on law, taxation and business worldwide.