Honduras operates a tax system that includes obligations for both employers and employees, encompassing income tax, social security contributions, and other payroll-related taxes. Employers play a crucial role in this system, being responsible for withholding income tax from employee salaries and making contributions to social security and other funds on behalf of both themselves and their employees. Understanding these obligations is essential for compliant operation within the country.
The tax year in Honduras aligns with the calendar year, running from January 1st to December 31st. Both individuals and companies are subject to taxation based on their income derived from sources within Honduras. Compliance involves accurate calculation, timely payment, and proper reporting to the relevant authorities.
Employer Social Security and Payroll Tax Obligations
Employers in Honduras are required to contribute to several social security and payroll funds. The primary institution is the Honduran Social Security Institute (IHSS), which covers health, maternity, and disability insurance, as well as pensions. Additionally, contributions are made to the Complementary Pension Regime (RAP) and the National Institute of Professional Training (INFOP).
Contributions are calculated based on employee salaries, up to specific maximum contribution ceilings. Both employer and employee contribute, with the employer responsible for remitting the total amount.
Key contribution rates and ceilings (as of the latest available information, applicable for 2025 unless updated):
| Fund | Contribution Type | Employer Rate | Employee Rate | Maximum Monthly Salary Ceiling (HNL) |
|---|---|---|---|---|
| IHSS | Health/Maternity | 3.0% | 2.5% | 10,331.70 |
| IHSS | Disability/Old Age/Death | 4.0% | 2.5% | 10,331.70 |
| RAP | Pension | 1.5% | 1.5% | 9,382.40 |
| INFOP | Training | 1.0% | 0.0% | No ceiling |
- IHSS: Contributions are split between health/maternity and disability/old age/death. The ceiling applies separately to each component, though often calculated based on the same salary base up to the limit.
- RAP: This is a mandatory complementary pension scheme.
- INFOP: This contribution funds vocational training programs. There is no salary ceiling for the INFOP contribution.
Employers must register with these institutions and make monthly payments based on their payroll.
Income Tax Withholding Requirements
Employers are obligated to withhold income tax (Impuesto Sobre la Renta - ISR) from their employees' salaries under the Pay As You Earn (PAYE) system. The amount to be withheld depends on the employee's total annual income and the applicable progressive tax brackets.
The income tax calculation involves determining the employee's gross annual income, subtracting allowed deductions and the personal exemption, and then applying the tax rates to the resulting taxable income. The annual tax liability is then divided by 12 to determine the monthly withholding amount.
Annual income tax brackets and rates (as of the latest available information, applicable for 2025 unless updated):
| Annual Taxable Income (HNL) | Tax Rate |
|---|---|
| Up to 205,200.00 | 0% |
| From 205,200.01 to 313,470.00 | 15% |
| From 313,470.01 to 730,395.00 | 20% |
| Over 730,395.00 | 25% |
- These brackets and the tax-free threshold (the first HNL 205,200.00) are subject to annual adjustments based on inflation. Employers must use the rates and brackets published by the tax authority (SAR) for the relevant tax year.
Employee Tax Deductions and Allowances
Employees in Honduras are entitled to certain deductions and allowances that reduce their taxable income. The primary allowance is the personal exemption.
Common deductions and allowances include:
- Personal Exemption: A fixed annual amount that is tax-free. For the 2024 tax year (likely applicable for 2025 unless adjusted), this amount is HNL 205,200.00. This is automatically factored into the tax brackets.
- Mandatory Social Security Contributions: Employee contributions to IHSS and RAP are generally deductible from gross income for income tax purposes.
- Voluntary Contributions to Complementary Pension Plans: Contributions to approved voluntary pension schemes may also be deductible, subject to limits.
- Medical Expenses: Certain documented medical expenses for the employee and their dependents may be deductible, often subject to limits or conditions.
- Educational Expenses: Documented educational expenses for the employee and their dependents may be deductible, often subject to limits or conditions.
- Donations: Donations to approved charitable or non-profit organizations may be deductible, subject to limits.
Employers typically consider the mandatory social security contributions and the personal exemption when calculating monthly withholding. Employees claiming other deductions usually do so when filing their annual income tax return.
Tax Compliance and Reporting Deadlines
Employers have specific deadlines for remitting withheld taxes and social security contributions, as well as for filing required reports.
- Monthly Payroll Taxes and Social Security: Contributions to IHSS, RAP, and INFOP, along with withheld income tax, are typically due on a monthly basis. The specific deadline is usually within the first few days of the following month (e.g., the first 10 calendar days).
- Annual Income Tax Return (Employer): Employers must file an annual declaration reporting the total salaries paid and taxes withheld for all employees during the previous calendar year. This declaration is crucial for employees to file their own returns. The deadline is generally by the end of February or March of the following year.
- Annual Income Tax Return (Employee): Employees whose income exceeds the tax-free threshold or who wish to claim additional deductions must file their own annual income tax return. The deadline is typically by the end of April of the following year.
Accurate record-keeping of payroll, withholdings, and contributions is essential for compliance and audits by the tax authority (SAR) and social security institutions.
Special Tax Considerations for Foreign Workers and Companies
Foreign individuals working in Honduras are generally subject to Honduran income tax on their income earned from sources within the country, regardless of their residency status. If a foreign individual is considered a tax resident (typically by residing in Honduras for more than 183 days in a calendar year), they may be taxed on their worldwide income, although this is subject to potential double taxation treaties.
Foreign companies employing individuals in Honduras, even without a registered local entity, may establish a taxable presence or be required to register as an employer for payroll tax purposes. Utilizing an Employer of Record (EOR) service is a common strategy for foreign companies to employ workers legally in Honduras without establishing a local entity, as the EOR takes on the responsibility for payroll, tax withholding, and social security contributions.
Double taxation treaties exist between Honduras and several countries to prevent individuals and companies from being taxed twice on the same income. The application of these treaties depends on the specific country and the nature of the income. Foreign workers and companies should assess their situation based on relevant treaty provisions.
Regional variations in tax rates or obligations are generally not applicable to national taxes like income tax and social security contributions, which are governed by national law and apply uniformly across the country. However, local municipal taxes may exist, though these are separate from the national payroll and income tax obligations discussed here.
