Corporate tax in Honduras

Summary  
Corporate Income Tax Rate (%) 25 (a)
Capital Gains Tax Rate (%) 10
Branch Tax Rate (%) 25 (a)
Withholding Tax (%) (b)
Dividends
10
Interest 10
Royalties 25
Leasing of Movable and Immovable Property 25
Communications 10
Public Entertainment Shows 25
Air, Sea and Land Transport 10
Mining Royalties 25
Salaries and Other Payments for Services 25
Fees and Commissions 25
Reinsurance 10
Videos and Films 25 (c)
Other 10
Branch Remittance Tax 10
Net Operating Losses (Years)  
Carryback 0
Carryforward 3 (d)

(a) An alternate minimum income tax and asset tax are also imposed (see Sec­tion B). A Social Contribution Tax is imposed at a rate of 5% on companies with net income exceeding HNL1 million (approximately USD45,105). Domiciled entities that have reported operating losses in two consecutive or alternate tax periods that are still open for examination are also subject to advance income tax payments (AIT) that are computed at a rate of 1% of gross income equal to or greater than HNL100 million (approximately USD4,510,539). The AIT may be credited against the annual corporate in­come tax, asset tax or the Social Contribution Tax.

b) Withholding taxes are imposed on payments to nonresident companies and individuals.

c) This withholding tax applies to payments for films and video tapes for movies,
television, video clubs and cable television.

d) Only companies engaged in agriculture, manufacturing, mining and tourism may carry forward net operating losses.

Taxes on corporate income and gains

Corporate income tax. Honduran resident companies are taxed on their worldwide income. Resident companies are those incorpo­rated in Honduras. Nonresident companies are subject to income tax only on income derived from Honduran sources.

Corporate income tax rates. Companies are subject to corporate income tax at a rate of 25% on their net income.

A Social Contribution Tax applies to companies with net income exceeding HNL1 million (approximately USD45,105).

A 1% income tax installment applies to taxpayers that meet the following conditions:

  • During open tax periods, they have reported operating losses in two consecutive or alternate tax periods.
  • In the prior tax period, they derived gross income equal to or greater than HNL100 million (approximately USD4,510,539).

The installment equals 1% of the gross income reported.

The income tax installment is a tax credit that may be applied against income tax, asset tax or the Social Contribution Tax on the filing of the year-end tax return.

The following taxpayers are not subject to the income tax install­ment:

  • Individuals or entities in the preoperative phase, up to a maxi­mum of five years.
  • Companies and individuals that incur losses resulting from an act of God or force majeure. This loss needs to be certified by an audit firm registered with the respective accounting associa­tion, notwithstanding a subsequent examination by the tax authorities.
  • Companies and individuals authorized by the tax authorities to carry forward losses in accordance to Section 20 of the Hondu­ran Income Tax Law (HN ITL).
  • Companies and individuals that calculated and paid tax in the prior tax period and are subject to income tax installments in accordance to Section 34 of the HN ITL.
  • Companies and individuals that prove through a tax audit re­port, carried out by an audit firm registered with the respective accounting association, that the tax loss is real, subject to veri­fication from the tax authorities.
  • Companies and individuals established under Section 7 of the HN ITL and tax-exempt by law or Special Legislative Decrees.

Companies operating under the following special regimes are exempt from income tax, sales tax, customs duties and certain municipal taxes:

  • Free Trade Zone
  • Industrial Processing Zone (Zona Industrial de Procesamiento, or ZIP)
  • Temporary Import Regime (Régimen de Importación Temporal, or RIT)
  • Agroindustrial Export Zone (Zona Agro-Industrial de Expor-tación, or ZADE)
  • Free Tourist Zone (Zona Libre Turística, or ZOLT)

Alternative minimum income tax. An alternative minimum in­come tax applies to resident individuals or corporations with annual gross income in a fiscal year equal to or greater than HNL10 million (approximately USD451,054). The alternative minimum income tax is calculated by applying a rate of 1.5% to gross income. Legal entities must apply the ordinary rate of 25% to net income and apply the alternative minimum tax rate of 1.5% to gross income. The income tax payable is the higher amount resulting from these two calculations.

The minimum income tax rate is reduced to 0.75% of gross in­come for individuals or legal entities producing or selling the following products or services:

  • Cement production and distribution
  • Public utility services provided by state-owned companies
  • Products and medicines for human use (at the importation and production levels)
  • Bakery-related products

Asset tax. An asset tax is assessed based on net assets (as defined in the law) reported in the company’s balance sheet. The asset tax rate is 1%. Income tax may be credited against asset tax. If the income tax equals or exceeds the asset tax for the tax year, no asset tax is due. If the income tax is less than the asset tax, the difference is payable as asset tax. In such circumstances, the asset tax represents a minimum tax for the year.

Financial transaction tax. A financial transaction tax applies to local and foreign currency operations carried in either national or foreign currency within the institutions of the national banking system, including the following:

  • National Bank for Agricultural Development (Banco Nacional de Desarrollo Agrícola, or BANADESA)
  • Financial entities
  • Representation offices that are supervised by the National Commission on Banking and Insurance (Comisión Nacional de Bancos y Seguros, or CNBS)

The financial transaction tax applies to the following transac­tions:

  • Debits (withdrawals) from at-sight deposits and checking accounts, carried out by the institutions referred to in the pre­ceding paragraph (the financial institutions).
  • Debits (withdrawals) of deposits from saving accounts, carried out by the financial institutions.
  • Loan operations granted by the financial institutions that need to be absorbed by the lender. The contribution under the finan­cial transaction tax applies only to disbursements and not to payments received by the financial institution. The CNBS must ensure that this special contribution is not transferred to the borrower.
  • Issuance of cashier’s checks, certified checks, traveler’s checks and other similar existing financial instruments by financial in­stitutions, or financial instruments to be created in the future, if they are issued without using the accounts mentioned in the first two bullets above.
  • Payments or transfers in favor of third parties of money recov­ered or collected in the name of such parties that are carried out by the financial institutions without using the accounts men­tioned in the first two bullets above.
  • Transfers or money remittances abroad or locally, carried out through the financial institutions, without using the accounts mentioned in the first two bullets above.
  • Credit card annual membership renewals, for the principal card­holder only.

The following are the amounts of the contributions required under the financial transaction tax for the first, second, fourth, fifth and sixth categories of transactions listed above:

  • First, second, fifth and sixth categories listed above: HNL2 (ap­proximately USD0.09) per thousand or fraction of thousand
  • Fourth category: HNL1.50 (approximately USD0.06) per thou­sand or fraction of thousand

The contributions for the transactions in the seventh (last) cate­gory above are provided in the following table.

Credit line

Exceeding HNL Not exceeding
HNL
Contribution HNL
40,000 50,000 500
50,000 100,000 600
100,000 200,000 700
200,000 500,000 800
500,000 1,000,000 900
1,000,000 1,000

The law does not establish the contribution for the third category.

Capital gains. Capital gains are subject to tax at a rate of 10%.

Occasional (non-habitual) sales of non-depreciable assets are not subject to tax.

Capital losses are deductible only if derived from the sale of de­preciable assets or from the sale of non-depreciable assets sold in the ordinary course of a trade or business.

The capital gain tax payment must be made for each transaction within 10 working days following the date on which the payment is received by the seller.

For the transfer of immovable property or rights and values car­ried out with a nonresident, the buyer must withhold 4% of the transfer value. The capital gain tax withheld constitutes a credit to such tax for the seller. The tax withheld must be reported in a filing and paid by the buyer within 10 calendar days following the date of the transaction.

Administration. The regular statutory tax year runs from 1 January through 31 December. However, taxpayers may elect a different tax year by giving notice to the tax authorities. Companies with a regular statutory tax year must file an annual income tax return and pay any corresponding tax due within 120 days after the end of the tax year. For companies with a different tax year, the filing and payment deadline is 90 days after the end of their tax year. Mandatory advance tax payments are pay able each quarter based on the income tax liability for the preceding tax year.

Dividends. A 10% withholding tax is imposed on dividends.

Foreign tax relief. Honduras does not grant any relief for foreign taxes paid.

Determination of taxable income

General. Net taxable income is computed in accordance with gen­erally accepted accounting and commercial principles, subject to certain adjustments required by the Honduran income tax law.

Inventories. Inventories are valued using the first-in, first-out (FIFO), last-in, first-out (LIFO) or weighted-average cost methods.

Provisions. Provisions for contingent liabilities, such as sever­ance pay, are not deductible for tax purposes. However, payments of such liabilities are deductible expenses.

Tax depreciation. Depreciation may be computed using the straight-line method. Companies may obtain authorization from the tax authorities to use other depreciation methods. However, after a company selects a depreciation method, the method must be applied consistently thereafter. The following are the applicable straight-line method rates for some common assets.

Asset Rate (%)
Buildings 2.5 to 10
Plant and machinery 10
Vehicles 10 to 33
Furniture and office equipment 10
Tools 25

Relief for losses. Companies engaged in agriculture, manufactur­ing, mining and tourism may carry forward net operating losses for three years. However, certain restrictions apply. Net operating losses may not be carried back.

Groups of companies. Honduran law does not allow the filing of consolidated income tax returns or provide any other tax relief to consolidated groups of companies.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Sales tax 15
Customs duties 1 to 20
Payroll taxes; paid by employers; average rate 8.5
Municipal taxes
Property tax; imposed on companies owning real estate Various
Industry trade and service municipal tax;
imposed monthly on income derived
from the operations of companies; rates vary according to the annual production volume, income or sales
Up to HNL500,000 0.03
From HNL500,000 to HNL10,000,000 0.04
From HNL10,000,000 to HNL20,000,000 0.03
From HNL20,000,000 to HNL30,000,000 0.02
Over HNL30,000,000 0.015

Foreign-exchange controls

The Honduran currency is the lempira (HNL). As of 10 October 2015, the exchange rate for the lempira was HNL22.1703 = USD1.

No restrictions are imposed on foreign-trade operations or foreign currency transactions.

Tax treaties

Honduras has not entered into any income tax treaties with other countries.