Table of Contents
When you’re looking to expand your business to another country — or to potentially relocate your business — it’s important to know the different tax laws that are in place in your destination country. These factors can dramatically impact whether your target country will be a good environment for your business.
In this overview of Honduras’s tax system, we’ll look at three key aspects: personal taxes, corporate taxes, and value-added taxes.
SERVIAP can help with your global expansion needs. Contact us today to learn how you can expand your business with PEO in Honduras.
Honduras Personal Taxes
Here’s everything you need to know about personal taxes in Honduras:
Who is Taxed?
In Honduras, residents are subject to taxation on all income they earn worldwide, even if it derives from another territory. Non-residents, on the other hand, are only taxed on income they earn from sources within Honduras.
To be considered to be a Honduran resident, a person must have resided within the country for a total of 183 days or more during a single calendar year.
What is the Tax Rate?
Honduras’ personal income tax rate is graduated based on your income, measured in Honduran lempiras (HNL). Those earning less than 172,117 HNL (or just under $5,000 USD) are considered exempt from income taxes. Beyond that income level, the rates are as follows:
- 172,118 to 262,449 HNL: 15%
- 262,450 to 610,347 HNL: 20%
- Over 610,347 HNL: 25%
This amount applies to wages and salaries, income from personal businesses and professions, investment profits, and more. These tax brackets are updated every five years.
National vs. International Income
For residents, Honduras considers both national and international income when determining tax rates and amounts. For non-residents, the only figure that concerns Honduras is money that has been generated from a Honduran source, including money earned while living in Honduras.
Capital Gains, Exemptions & Other Considerations
Honduras has a blanket 10% capital gains tax, calculated by subtracting the costs of purchase and improvements from the final selling price. There is also a real estate tax, which varies by region.
Honduran residents can claim two main deductions. They can claim up to 50,000 HNL for qualified medical expenses, as well as donations made to approved institutions, including schools and sports organizations.
Honduras Corporate Taxes
Here’s everything you need to know about corporate taxes in Honduras:
Who is Taxed?
Resident companies in Honduras are subjected to income tax on their net income, which is calculated by subtracting profit-generating expenses from gross income. Non-resident companies are only responsible for corporate income taxes on income that stem from sources in Honduras.
What is the Tax Rate?
The tax rate for all applicable corporate income is 25%. While that rate is higher than some other countries in Central America, the effective tax rate is in line with most other countries in the region since it applies only to net profits rather than gross income.
What is Taxable Income?
Honduras calculates its corporate taxes based on companies’ annual net profits. Companies can deduct qualified business expenses from gross income. Capital investment and other costs can usually be deducted, although these expenses cannot be claimed all at once and must be spread out over several years instead.
Tax Incentives & Deductions
Honduras has established several special regimes within the country where companies can claim exemption from corporate taxes. These include:
- Free trade zones (FTZs)
- Temporary Import regimes (RITs)
- Industrial Processing Zones (ZIP)
- International service companies (including call centers)
- Tourism incentive laws
- Renewable energy incentives
While these incentives are certainly attractive for some companies, you should also be aware that Honduras has no agreements with any other nations regarding foreign tax credits. While Honduras only taxes companies on money derived from Honduran sources, that income may be double-taxed by a primary country of residence.
Honduras VAT Taxes
Value-added taxes, better known as VAT taxes, are a common form of consumption tax. The value-added portion is the difference between a company’s sales and its cost of purchasing services or goods from another company. Here are the most important things you need to know about VAT taxes in Honduras:
Who is Taxed?
VAT taxes have been in place in Honduras since 1964. While no official registration is required for companies operating in Honduras, companies whose annual taxable income exceeds 250,000 HNL must collect VAT taxes from customers and turn that money over to the Honduran government in monthly returns.
Non-established businesses, meaning small unincorporated businesses, are not required to collect VAT money from their customers. Finally, travelers and those in Honduras purchasing goods they intend to export can potentially receive a refund for any VAT taxes paid in the country.
What is the Tax Rate?
The standard VAT tax rate in Honduras is 15%, which applies to most goods and services. This coverage includes cellular service, internet access, and other similar services. However, several things are exempt from the VAT tax, including equipment, pharmaceuticals, raw materials, and other goods like school supplies and staple grains.
Some goods carry a higher VAT tax rate. Alcoholic beverages and tobacco have a VAT tax of 18%, as do upgraded first-class and business class airline tickets.
Is Honduras Right for Your Business?
SERVIAP is a leading Professional Employer Organization (PEO) ready to help your business expand operations throughout the Western Hemisphere. PEO is a model of co-employment, where we assume total responsibility for your talent, allowing you to focus on the strategic activities of your organization.
Contact us today to learn more about how you can expand your business in Honduras.
