HondurasTax Obligations Detailed

In Honduras, employers face various tax obligations, including payroll taxes, social security contributions, and income tax withholding.

Employer Payroll Taxes and Contributions

• Social Security: Employers contribute 7% of an employee's monthly salary for state welfare and 1.5% for the private contribution regime (RAP - Régimen de Aportaciones Privadas). There's also a 4% mandatory labor reserve fund contribution, capped at a monthly salary of HNL 50,568.75.
• Payroll Tax: Employers with more than five employees contribute 1% of the total payroll to the National Institute of Personal Training (INFOP).
• 13th and 14th Month Salary: Employers are obligated to pay the equivalent of one month's salary as a bonus in December (13th salary) and July (14th salary).

Employee Payroll Deductions

• Social Security: Employees contribute 2.5% of their monthly salary for state welfare and 1.5% for the private contribution regime. An additional 2.64% is deducted for Labor Reserve Contribution.
• Income Tax: Employers withhold income tax based on a progressive scale. The current (as of February 2025) income tax brackets and rates are:
  • 0% for income up to HNL 217,493.16 (without deductions) or 257,493.16 (with deductions)
  • 15% for income above the zero-tax threshold up to HNL 242,439.28
  • 20% for income between HNL 242,439.29 and HNL 563,812.30.
  • 25% for income exceeding HNL 563,812.31

Corporate Income Tax

The standard corporate income tax rate in Honduras is 25%. Companies with taxable income exceeding HNL 1,000,000 are subject to an additional 5% solidarity contribution.

Other Taxes

• Sales Tax (Impuesto sobre Ventas - ISV): A 15% tax applies to most goods and services. Specific rates exist for certain goods like alcohol and tobacco (18%).
• Real Property Tax: Annual tax levied by local governments, with rates varying by location.

Tax Deadlines and Filing Requirements

• Annual Income Tax Return: Due by April 30th of the following year. Financial statements are now required to be submitted with the return (as of December 2024).
• Sales Tax Return: Filed monthly, due by the 10th of the following month.
• Country-by-Country Reporting (CbCR): Multinational groups with reporting tax years beginning on or after January 1, 2025, are subject to CbCR notification and reporting requirements.

It's important to consult with a tax advisor for personalized guidance. Tax laws and regulations can change, so staying updated is crucial.

In Honduras, employers are responsible for deducting various taxes from employee salaries and remitting them to the government.

Employee Deductions

• Income Tax (ISR): A progressive tax based on earnings.
  • 0% for monthly income up to L19,920.
  • 15% for monthly income between L19,920 and L28,625.
  • 20% for monthly income between L28,625 and L62,151.
  • 25% for monthly income above L62,151.
• Social Security:
  • Sickness and Maternity: 2.5% of income up to L11,109.36.
  • Invalidity, Old Age, and Death: 1% of income up to L11,336.00.
• Instituto Nacional de Formación Profesional (INFOP): A contribution calculated based on employee earnings, with specific rates dependent upon company size and industry.

Employer Obligations

• Withholding and Remittance: Employers must deduct the correct amounts from employee salaries and submit them to the Honduran Revenue Administration Service (SAR) by the 10th day of the following month.
• Annual Tax Return: Employers must submit an annual income tax return, including financial statements, by December 31st of each year. For the 2024 tax year, the deadline was extended to the end of December 2024.
• Withholding Tax Table: Employers must utilize the updated withholding tax table provided by the SAR each year to calculate employee withholdings. For 2025, the annual taxable base is L217,493.16 (excluding deductions) or L257,493.16 (including deductions).
• Financial Statement Submission: Along with the annual tax return, employers are now required to submit financial statements to the SAR for informational purposes.

Deductible Expenses and Allowances

• Medical and Educational Expenses: Employees can deduct up to L40,000 annually for medical and educational expenses.
• Representation Expenses: Employees can deduct documented representation expenses.
• Donations: Donations to local educational and charitable institutions are deductible up to 10% of net taxable income.
• Personal Allowances: No personal allowances exist in Honduras.

Additional Information

• Minimum Wage: The minimum wage for 2024 is HNL 13,156.53. As of today, February 5, 2025, the 2025 figures may be available through official government channels.
• Tax Exemptions: Employees earning less than L 209,369.62 annually are exempt from filing an income tax return, although their employers still withhold and remit taxes.
• Residency: Individuals residing in Honduras for more than three months in a calendar year are considered tax residents.
• Tax Year: The Honduran tax year runs from January 1st to December 31st.

It's crucial for both employers and employees to stay updated on tax regulations, as they can change periodically. The information provided here is current as of February 5, 2025, and is subject to change. Consulting with a tax advisor is recommended for personalized guidance.

In Honduras, the Value Added Tax (VAT), locally known as Impuesto sobre Ventas (ISV), is a consumption tax applied to most goods and services.

VAT Rates

• Standard Rate: 15% applies to most goods and services.
• Higher Rate: 18% applies to specific goods like alcoholic beverages, tobacco products, and first-class airline tickets.
• Additional Taxes: A 4% tourist tax may apply in certain situations.

Registration

• Threshold: Businesses with an annual turnover exceeding HNL 250,000 (approximately USD 10,500 as of February 2025) must register for VAT. Non-resident companies providing taxable goods or services within Honduras, regardless of turnover, are obligated to register.
• Process: Registration involves Form SAR-410 submitted to the Honduran Revenue Administration Service (SAR). The form mandates details such as the taxpayer's name and address, incorporation date, registration number, legal representative's tax ID, shareholders' information, primary business activity, anticipated operating start date, fiscal year-end, tax obligations, withholding agent details, any special scheme registry, and tax exemptions with supporting resolutions. Online registration is not currently available. While a local representative is not mandatory, using one can simplify navigating the procedures.

Filing and Payment

• Frequency: VAT returns are filed monthly.
• Deadline: Returns must be submitted by the 10th of the following month.
• Payment: VAT payments are due concurrently with the return filing.

Exempt Goods and Services

Several goods and services are exempt from VAT, including:

• Exported goods and services
• Essential groceries (as defined by Decree 005-2014)
• Prescription drugs and medical devices
• Healthcare and educational services
• Most financial services
• Agricultural inputs (e.g., fertilizers, pesticides)
• Certain fuels (e.g., gasoline, kerosene, firewood, coal)
• Books, magazines, and educational materials
• Water and electricity services
• Passenger transport
• Raw materials for agriculture and agro-industry

Penalties for Non-Compliance

Failing to meet VAT obligations can result in various penalties:

• Fines: Monetary penalties apply to late filing and inaccuracies.
• Interest Charges: Unpaid VAT accrues interest.
• Suspension of Registration: Persistent non-compliance can lead to the suspension of a business's VAT registration, prohibiting charging or reclaiming VAT until the issues are rectified.
• Legal Action: In severe instances, legal action might be initiated.

Additional Notes

• As of today, February 5, 2025, electronic invoicing is not mandatory in Honduras.

It's vital to stay updated on any changes to tax regulations by checking official sources like the Servicio de Administración de Rentas (SAR). Consulting with tax professionals in Honduras is highly recommended for personalized advice, especially regarding international transactions and digital service provisions.

Honduras offers several tax incentives, primarily focused on attracting foreign investment and promoting specific sectors. These incentives often include exemptions from various taxes and duties.

Corporate Tax Incentives

• Free Trade Zones (ZOLI): Companies operating within designated ZOLIs are generally exempt from corporate income tax (CIT), sales tax, customs duties, and certain municipal taxes. This applies to income generated from export activities. Sales into the domestic Honduran market may be subject to standard tax regulations.
• Industrial Processing Zones (ZIP): Similar to ZOLIs, ZIPs offer tax exemptions for industrial activities focused on export production. These benefits can include exemptions from CIT for up to 20 years and exemptions from local taxes for up to 10 years.
• Temporary Import Regime (RIT): The RIT allows duty-free imports of materials and goods used in the production of exports for businesses not located in ZOLIs or ZIPs.
• Tourism Incentive Law: Specific incentives are available for businesses in the tourism sector, although the specifics of these incentives can vary.
• Renewable Energy Law: Investments in renewable energy projects, particularly those generating 50MW or more, may be eligible for tax exemptions for up to 10 years.
• Service Centers: Honduras offers an incentive regime for service center companies, including call centers and business process outsourcing (BPO) operations. Benefits may include tax holidays on imported equipment and income tax exemptions on revenue generated within free trade zones.
• Other Sector-Specific Incentives: Additional incentives might be available for businesses in sectors such as agro-industry, manufacturing, mining, and tourism, although the specifics may require consultation with local authorities.
• Municipal Incentives: Individual municipalities may also offer their own specific tax incentives, so it is essential to verify with the relevant local authorities.

Individual Tax Incentives

• Tax-Exempt Income: As of 2023, annual income below L199,039.47 is exempt from income tax. This threshold is subject to change and should be verified for the current tax year.
• Medical Expense Deduction: Individuals can deduct up to HNL 40,000 for qualified medical expenses. This deduction is not included in the calculation of annual taxable income. Additional deductions or credits may be available for individuals over 65 years of age.
• Exemptions for 13th and 14th Month Salaries: The 13th and 14th month salaries, paid in June and December, respectively, are exempt up to a certain limit, based on multiples of the minimum wage.
• Vacation Bonus Exemption: Vacation bonuses are exempt up to the equivalent of 30 days' salary.

Application Procedures

The specific application procedures for each incentive may vary. It's recommended to consult with local tax authorities or a qualified tax advisor in Honduras for detailed information on eligibility criteria and application requirements. As tax laws and regulations can change, keeping up-to-date with the latest information is vital. This information is current as of February 5, 2025.