Honduras Personal Income Tax

Resident and nonresident individuals, regardless of their nationality, are subject to tax on their worldwide income.

Individuals are considered resident if they live in Honduras for more than three consecutive months during a tax year.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Taxable employment income includes sala­ry, pensions, bonuses, pre miums, commissions and allow ances (for example, housing and educational allowances). Payments made to board members, other executives and counselors not included in the payroll are subject to a 12.5% and 1% income withholding tax, respectively. The 12.5% rate applies to various payments, such as professional fees, commissions and bonuses, while the 1% rate applies to payments for goods and services.

Self-employment and business income. Income derived from self-employment or from a trade or business is subject to tax.

Investment income. Dividends paid or credited by local compa­nies to resident and nonresident individuals are subject to a 10% withholding tax. Royalties from franchises are subject to a 10% withholding tax. Technical advice and similar payments are sub­ject to a 10% withholding tax.

Directors’fees. Directors’ fees paid to nonresident individuals are subject to a 25% withholding tax. Directors’ fees paid to resident directors are taxed at the ordinary individual income tax rates (see Rates).

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

Capital losses are deductible only if derived from the sale of de preciable assets or from the sale of non-depreciable assets sold in the ordinary course of a trade or business. Occasional (non-habitual) sales of non-depreciable assets are not subject to tax.

Capital gains must be reported and taxes paid within the first 10 days of the month following the month in which the transac­tion takes place. An annual return must be also be filed by 30 April each year.

Capital gains derived by nonresidents are subject to a 4% with­holding tax on the gross proceeds, which is an advance payment of the final 10% tax. The withholding tax must be remitted with­in the 10 calendar days following the transaction.

Deductions

Personal deductions and allowances. Annual deductions for medi­cal and educational expenses are allowed up to a maximum of HNL40,000 (approximately USD1,814).

Business deductions. All costs and expenses that are necessary to generate taxable income and protect investments are deductible.

Rates. Employment and self-employment income are taxable at the following rates.

Annual taxable income (HNL)

Exceeding                  Not exceeding

 

Tax on lower
amount
HNL
Rate on
excess

%

0 141,000 0 0
141,000 215,000 0 15
215,000 500,000 13,500 20
500,000 73,500 25

 

The above tax rates are subject to change by the government.

Withholding tax is imposed on nonresidents at a rate of 25% on salaries, commissions and other similar compensation items.

Relief for losses. Self-employed individuals may not carry their losses forward or back.

Estate and gift taxes

Honduras does not impose estate or gift taxes. However, estates may be taxed as ordinary taxpayers if they derive income before distributions of assets are made to the beneficiaries.

Social security

Health Attention Insurance. The contribution rates for Health Attention Insurance (Seguro de Atención de Salud) are 5% for the employer and 2.5% for the employee.

For 2016, the contribution is calculated on a maximum monthly salary of HNL7,717.50 (approximately USD339).

Social Welfare Insurance. The contribution rates for Social Welfare Insurance (Seguro de Previsión Social) are 3.5% for the employer and 2.5% for the employee.

For 2016, the contribution is calculated on a maximum monthly salary of HNL8,882.30 (approximately USD390).

Private Contribution Regime — Social Housing Fund. The contribu­tion rate for the Private Contribution Regime – Social Housing Fund (Régimen de Aportaciones Privadas – Fondo Social para la Vivienda) is 1.5% each for the employer and employee.

The contribution is calculated on monthly compensation in excess of HNL8,882.30 (approximately USD390).

Labor insurance. Employers must make a labor insurance contri­bution at a rate of 1.32%, which is calculated on a maximum of three minimum wages (HNL8,882.30).

Tax filing and payment procedures

Employers are responsible for withholding income taxes and social security contributions from employees’ salaries on a monthly basis. Employees are not required to file an annual income tax return if their only source of income is employment compensation. Nonresidents are not required to file an annual income tax return if their income tax liability has been satisfied through withholding at source.

The ordinary tax year runs from 1 January to 31 December. Returns must be filed and any tax liabilities due must be paid by 30 April of the year following the tax year. However, in certain specified circumstances, taxpayers may elect a special tax year. Self-employed individuals and individuals with a trade or busi­ness must make advance income tax payments.

Double tax relief and tax treaties

Honduras has not entered into tax treaties with other countries. However, Honduras has entered into tax information and exchange agreements with Ecuador and the United States.

Temporary visas

Depending on their country of citizenship, individuals may be required to apply for and obtain an entry visa before traveling to Honduras. A Honduran consulate overseas grants the visa. Because the rules indicating the countries of citizenship of indi­viduals who are required to obtain an entry visa before entering Honduras and requirements for obtaining a visa often vary, it is necessary to check the entry visa requirements on a case-by-case basis.

Work visas (and/or permits)

The government of Honduras grants a Working Special Permit to foreign employees. The granting of this permit is subject to spe­cific rules applicable to employers and employees that need to be checked on a case-by-case basis, because they often vary. After the required documents are filed with the immigration authori­ties, it takes approximately three months to obtain this permit. Work permits are valid for terms ranging from one year to five years and are renewable for similar time periods.

Residence visas (and/or permits)

The government of Honduras may grant migratory statuses that allow foreigners to reside in Honduras under several options, such as renters, investors, retirees and certain family relatives. The residency request must be submitted to and processed by the immigration authorities in Honduras. Because the applicable requirements may vary from case to case, they should be checked in advance.

Family and personal considerations

Family members. The legislation of Honduras does not grant auto­matic work authorizations to family members of foreign workers. Family members wanting to work in Honduras must apply inde­pendently to obtain work authorizations.

Children of expatriates must have student visas to attend schools in Honduras.

Marital property regime. Assets obtained by any means, except by donation, after the marriage is commenced are considered to be marital property.

Forced heirship. If an individual dies without leaving a will, the beneficiaries of the individual’s assets and patrimony according to the law are the following:

  • Descendants
  • Spouse
  • Ascendants
  • Collaterals
  • Municipal governments

The priority order is set by the Civil Code according to a series of different combinations. The following must be deducted, paid and/or removed from the deceased’s estate before it is distributed among the beneficiaries:

  • Funeral expenses
  • Mortuary procedural expenses
  • Debts
  • Taxes
  • Maintenance obligations of the deceased
  • Marital property

Driver’s permits. Foreigners entering the country are authorized to drive vehicles with a current driver’s license from their coun­try, subject to the validity of the authorization under which he or she remains in Honduras. When the foreigner obtains a migra­tory status that allows him or her to reside in Honduras, he or she is required to obtain a local driver’s license.

Honduras does not have driver’s license reciprocity agreements with any other country.