Honduras Tax Regime

Honduras operates a territorial corporate income tax system layered with a series of surcharges and minimum-tax mechanisms designed to protect the tax base of an economy with a large informal sector. Resident companies are taxed on Honduran-source income at a flat statutory rate of 25%, and are additionally exposed to a 5% Solidarity Contribution on income above threshold levels, an alternative minimum tax keyed to gross income for very large taxpayers, and municipal turnover-based levies charged by the municipality of operation. The regime is administered by the Servicio de Administración de Rentas (SAR) and is undergoing incremental modernisation of electronic invoicing and anti-evasion enforcement, while remaining outside the OECD Inclusive Framework's Pillar Two minimum tax project for now.

1.1 Sources

Primary legislation includes the Income Tax Law (Ley del Impuesto Sobre la Renta), the Tax Code (Código Tributario), the Sales Tax Law (Ley del Impuesto Sobre Ventas) and the Municipalities Law (Ley de Municipalidades) governing local industry, commerce and services taxation.

1.2 Recent developments

Honduras has maintained its 25% corporate income tax rate alongside the 5% Solidarity Contribution levied on companies whose taxable income exceeds L 1 million, a combined statutory burden equivalent to an effective 30% headline rate for larger taxpayers. Anti-evasion legislation introduced an alternative 1% tax on gross income for taxpayers reporting losses in two consecutive years or in two years within a five-year period where gross income reaches L 100 million or more, creditable against income tax otherwise due. The tax administration has continued to expand mandatory electronic invoicing (Sistema de Facturación Electrónica) across taxpayer segments and has tightened documentation requirements for deductible expenses and related-party transactions.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

Honduran resident companies are taxed on a territorial basis: Honduran-source income is subject to corporate income tax (Impuesto Sobre la Renta) at a flat rate of 25% of net taxable income, irrespective of whether the income is foreign-remitted. Non-resident companies without a permanent establishment are subject to tax only on Honduran-source income, generally collected through final withholding. Foreign entities providing sea, land or air transportation services in Honduras are deemed to derive net taxable income equal to 10% of their Honduran-source gross income, to which the standard rate is then applied, producing a low effective rate on transportation receipts.

A Solidarity Contribution (Aportación Solidaria) of 5% is levied as a non-deductible surcharge on companies whose taxable income exceeds L 1 million, effectively raising the marginal statutory burden on profitable mid-size and large companies to 30%. Companies are also subject to a net asset tax in certain circumstances, though this is generally creditable against income tax liability.

2.2 Dividends and participation exemption

Honduras does not operate a formal participation exemption regime of the European type. Dividends distributed by Honduran resident companies out of after-tax profits to resident corporate or individual shareholders are, in practice, generally not subject to a further layer of corporate-level tax, since the profits have already borne the 25% corporate rate; distributions to non-resident shareholders are subject to withholding tax as described in section 4. There is no domestic holding-company regime offering blanket exemption for foreign dividends, so foreign-source dividends received by a Honduran company are analysed under the general territorial-source rules and any applicable double-tax relief.

2.3 Income determination and deductions

Taxable income is computed from financial-statement profit adjusted for tax rules, following the accrual method. Ordinary and necessary business expenses incurred to produce Honduran-source income are deductible provided they are properly documented and supported by valid tax invoices under the electronic invoicing regime; expenses lacking adequate substantiation are commonly disallowed on audit. Depreciation follows rates prescribed by the tax authority for defined asset categories, generally on a straight-line basis. Provisions and contingent liabilities are generally non-deductible until realised, and payments to related parties are subject to arm's-length scrutiny and, in some cases, specific deductibility caps.

2.4 Interest limitation

Interest expense must be at arm's length and supported by adequate documentation to be deductible; thin-capitalisation-style scrutiny applies to related-party debt, and interest on loans that do not serve the generation of taxable Honduran-source income is disallowed. There is no codified EBITDA-based interest-barrier rule of the EU ATAD type, but the tax administration applies substance-over-form and transfer-pricing principles to intercompany financing arrangements, and excessive related-party leverage is a recurring audit focus.

2.5 Losses

Net operating losses may generally be carried forward for a limited number of years under the Income Tax Law, subject to conditions on the origin and continuity of the business generating the loss; there is no loss carryback. The anti-evasion regime referenced in section 1.2 specifically targets taxpayers reporting recurring losses above a gross-income threshold, requiring payment of the alternative 1% gross-income tax as a backstop even where a loss position would otherwise eliminate income tax.

2.6 Group taxation

Honduras does not have a consolidated or group-relief regime; each Honduran company files and is assessed on a stand-alone basis regardless of common ownership. Losses and profits of affiliated Honduran companies cannot be pooled, and intra-group transactions are subject to the same transfer-pricing and documentation requirements as third-party dealings, including for management fees, royalties and intra-group financing.

2.7 Controlled foreign companies

Honduras does not operate a formal controlled foreign company (CFC) attribution regime, consistent with its territorial approach to taxing Honduran-source income only. Passive income earned abroad by foreign subsidiaries of Honduran groups is therefore not automatically attributed to the Honduran parent; however, distributions and payments actually repatriated to Honduras, and any Honduran-source income of the foreign entity, remain subject to the general territorial and withholding rules.

2.8 Transfer pricing

Honduras applies transfer-pricing rules based substantially on OECD principles, requiring related-party transactions to be conducted at arm's length. Taxpayers meeting statutory thresholds must prepare and retain contemporaneous transfer-pricing documentation (informative return and supporting study) demonstrating the pricing methodology applied to cross-border and, in some contexts, domestic related-party transactions. The tax administration has increased scrutiny of intercompany services, royalties and financing, and penalties apply for non-filing or inadequate documentation.

2.9 Incentives

Honduras offers sector-specific incentive regimes, most notably for export processing (maquila) operations and free-zone regimes (Zonas Libres, ZOLI, ZIP) that provide income tax holidays or reduced rates, together with customs duty and sales tax exemptions on inputs, for qualifying export-oriented manufacturing and services activity. Tourism, renewable energy and certain agro-industrial investments benefit from targeted exemptions under specific promotion laws. These regimes typically require registration with the competent authority and compliance with export or investment thresholds, and generally displace the general 25% plus 5% Solidarity Contribution burden with a preferential or zero rate for the incentivised activity.

2.10 Pillar Two

Honduras has not enacted Pillar Two legislation and is not currently applying an income inclusion rule, undertaxed profits rule or qualified domestic minimum top-up tax. Honduran-headquartered groups with revenues above the EUR 750 million threshold that have subsidiaries or a parent in jurisdictions that have implemented Pillar Two may nonetheless be affected indirectly through top-up taxation imposed abroad, and multinational groups with Honduran operations should monitor Honduras's participation in international minimum-tax developments given the incentive regimes described in section 2.9.

2.11 Branch income and reorganisations

A Honduran branch of a foreign company is taxed on its Honduran-source income at the standard 25% rate (plus the 5% Solidarity Contribution where applicable), computed on the same territorial basis as a resident subsidiary; article 5, numeral 4 of the Ley del Impuesto Sobre la Renta (Decreto-Ley No. 25 of 20 December 1963; numeral 4 as reformed by article 4 of Decreto No. 17-2010, article 5 itself last amended by article 1 of Decreto No. 182-2012) charges at 10% the income or profits obtained by foreign enterprises through Honduran branches, subsidiaries, affiliates, agencies and legal representatives operating in the country. Article 5 taxes non-resident and non-domiciled persons on their gross Honduran-source receipts at scheduled rates, collected by withholding from the Honduran payer, so the charge attaches to the income or profits obtained through the branch rather than to any act of remittance, and it is distinct from the 10% that numeral 5 of the same article applies to dividends and other participations in profits or reserves. Whether numeral 4 operates in addition to, or instead of, the ordinary corporate charge borne by a branch registered as a taxpayer is not resolved by the text, so the interaction should be confirmed with the Servicio de Administración de Rentas before a position is taken. Corporate reorganisations — mergers, spin-offs and conversions — are governed by the Commercial Code and tax rules that generally require case-by-case analysis of asset transfers, with capital gains and asset step-ups potentially triggering tax unless specific relief or continuity conditions are met; there is no codified tax-neutral reorganisation regime comparable to that found in more developed OECD systems.

3.1 Residence and rates

Individuals resident in Honduras are taxed on Honduran-source income under the same territorial principle applied to corporations; non-residents are taxed on Honduran-source income only, typically via withholding. Employment, business and professional income is taxed under a progressive schedule with brackets and an exempt threshold that are adjusted periodically; for 2026 the schedule broadly runs from an exempt band through intermediate rates in the range of roughly 15% to 25%, with the top marginal rate of 25% applying to income above the highest bracket threshold. Individuals engaged in independent professional or business activity self-assess and file annual returns; employees are generally subject to monthly payroll withholding reconciled on filing.

3.2 Capital income and real estate

Capital gains realised by individuals on the disposal of Honduran assets, including real estate and securities, are generally subject to income tax under the ordinary rules, with specific withholding mechanisms applying to gains on real property transfers, often collected through the notarial or registry process. Dividends distributed to resident individual shareholders are treated under the general income rules described in section 2.2, without a separate preferential flat rate comparable to that found in participation-exemption jurisdictions. Rental income earned by individuals is taxable, with allowable deductions for property-related expenses.

3.3 Social security and payroll

Employers and employees contribute to the Honduran Social Security Institute (Instituto Hondureño de Seguridad Social, IHSS) and to complementary private pension and housing funds (RAP, INFOP), with contribution rates and ceilings set by regulation and applied to gross salary up to statutory caps. Employers withhold income tax monthly from employee salaries based on the annualised progressive schedule, with year-end reconciliation for employees with multiple income sources or significant deductions. The thirteenth and fourteenth month bonuses customary in Honduras (aguinaldo and 'catorceavo mes') are subject to specific statutory treatment for both social security and income tax purposes.

3.4 Inbound individuals

Honduras does not levy a general net wealth tax or a comprehensive inheritance and gift tax at the national level, though certain property transfers attract transfer duties and registration fees. There is no broad expatriate or inbound-assignee preferential tax regime of the type found in some OECD jurisdictions; foreign employees working in Honduras are generally taxed under the same territorial rules as Honduran nationals on Honduran-source employment income, subject to any applicable double-tax treaty relief, of which Honduras has a limited network.

Honduras applies withholding tax on a range of outbound payments to non-residents, generally at a standard rate of 25% on Honduran-source income not otherwise subject to a specific reduced rate, with dividends, interest, royalties and technical service fees each carrying their own statutory withholding treatment. Honduras's double-tax treaty network is limited compared with larger economies, so most cross-border payments are taxed at the domestic statutory rate without treaty reduction; taxpayers should verify treaty status transaction-by-transaction given the network's limited coverage. Where no treaty applies, unilateral foreign tax credit relief may be available under domestic law for Honduran residents suffering foreign tax on foreign-source income brought into the Honduran tax base.

Because Honduras's treaty network is narrow, most inbound investors rely on domestic-law relief, careful structuring of payment flows, and, where available, incentive-regime exemptions (section 2.9) rather than treaty reduction. Withholding agents are responsible for remitting tax within statutory deadlines and for issuing withholding certificates; failure to withhold correctly exposes the Honduran payer to joint liability for the unwithheld tax plus penalties and interest.

5.1 General anti-abuse and substance

The Tax Code empowers the SAR to disregard transactions or structures lacking economic substance and to recharacterise arrangements designed principally to avoid or reduce Honduran tax, applying a substance-over-form standard in audits. Related-party transactions, including intra-group financing, royalties and management fees, are subject to heightened scrutiny under the transfer-pricing regime described in section 2.8, and the tax administration has been increasingly active in challenging arrangements that shift Honduran-source profit offshore without corresponding economic activity.

5.2 Exchange of information and disclosure

Honduras participates in international tax transparency initiatives, including exchange-of-information arrangements coordinated through regional and multilateral channels, and the tax administration has continued to expand third-party reporting obligations (financial institutions, notaries, registries) to support audit selection. There is no domestic mandatory disclosure regime comparable to the EU's DAC6, but taxpayers engaging in aggressive cross-border structuring should expect information requests where Honduras has an applicable exchange-of-information instrument with the counterparty jurisdiction.

6.1 Sales tax (ISV)

Honduras levies a sales tax (Impuesto Sobre Ventas, ISV) rather than a full input-credit VAT, at a standard rate of 15%, with a higher rate of 18% applying to beer, spirits and other alcoholic beverages, cigarettes and other tobacco products, and to air transport tickets in executive, first or business class, and specific exemptions for a defined basket of basic foodstuffs, medicines and educational materials. Registered taxpayers charge ISV on taxable sales and services and remit net of allowable input tax credits on purchases used in taxable activity, filing monthly returns. Imports are subject to ISV at the border in addition to customs duties, and exporters under the maquila and free-zone regimes benefit from ISV exemption on qualifying inputs.

6.2 Transaction, payroll and other taxes

Real property transfers attract a transfer tax and municipal registration fees payable on the cadastral or transaction value, and municipalities separately levy an industry, commerce and services tax on gross annual income under a banded schedule that layers a further cost of doing business on top of national corporate tax. Employers bear payroll-related social security and training-fund contributions described in section 3.3. Excise duties apply to fuel, alcohol, tobacco and certain luxury goods, and a net asset tax may apply in defined circumstances, generally creditable against income tax. There is no general net wealth tax on individuals.

7.1 Filing, assessment and audit

The tax year is generally the calendar year. Corporate income tax returns are due by 30 April following the tax year-end, with mandatory quarterly advance payments based on the prior year's tax liability due during the year. The Servicio de Administración de Rentas (SAR) administers assessment and audit, with increasing reliance on electronic invoicing data and third-party information to select cases for review; audits focus heavily on deductibility documentation, related-party pricing and the anti-evasion minimum-tax triggers described in section 1.2. Statutory limitation periods apply to assessments, subject to extension where fraud or non-filing is established.

7.2 Rulings, appeals and penalties

Taxpayers may seek administrative rulings from the SAR on the interpretation of specific provisions, though the ruling practice is less developed than in mature OECD administrations. Assessments may be challenged through administrative reconsideration before the SAR and subsequently before the administrative and judicial courts, including the possibility of ultimate review by the Supreme Court on points of law. Penalties for late filing, late payment, under-reporting and failure to maintain adequate documentation are set by the Tax Code and can be substantial, with interest accruing on unpaid tax from the original due date; voluntary correction before the start of an audit generally attracts reduced penalties.

Late payment of any of the above attracts statutory interest and surcharges from the original due date, and repeated non-compliance can trigger closure orders or other administrative sanctions against the taxpayer's establishment. Taxpayers under the maquila or free-zone regimes retain separate reporting obligations to the relevant promotion authority in addition to standard SAR filings.

9.1 Entity choice

The Sociedad Anónima (S.A.) is the standard vehicle for foreign investment, offering limited liability and flexible share capital structuring; the Sociedad de Responsabilidad Limitada (S. de R.L.) is also used, particularly for smaller or wholly-owned subsidiaries. Branches of foreign companies are permitted and are taxed on Honduran-source income at the standard rate, but branches face registration and capital-repatriation formalities that lead many investors to prefer a locally incorporated subsidiary. Maquila and free-zone entities must be specifically constituted and registered to access the preferential regimes in section 2.9.

9.2 Structuring and incentives

Given the absence of group relief and CFC rules, Honduran groups often structure Honduran operations as stand-alone taxpayers optimised individually for the 25% CIT plus 5% Solidarity Contribution, while directing export-oriented manufacturing and back-office services into the maquila or free-zone regimes to access income tax holidays. Related-party financing and service arrangements should be priced and documented defensively given active transfer-pricing enforcement, and businesses anticipating loss periods should model the alternative 1% gross-income minimum tax exposure described in section 1.2 well before the relevant two-year lookback is triggered.

9.3 Worked effective-rate illustration

A Honduran manufacturing subsidiary earns taxable income of L 20,000,000 after deducting properly documented operating expenses and depreciation. Corporate income tax at 25% is L 5,000,000. Because taxable income exceeds the L 1,000,000 Solidarity Contribution threshold, a further 5% non-deductible surcharge applies only to the taxable income in excess of L 1,000,000, i.e. 5% × 19,000,000 = L 950,000. The combined national tax charge is 5,000,000 + 950,000 = L 5,950,000, an effective rate of 5,950,000 / 20,000,000 = 29.8% on taxable income before any municipal industry and commerce tax, which is levied separately on gross annual revenue rather than on profit and therefore adds a further, revenue-based cost on top of this 30% profit-based effective rate.

9.4 Compliance

Expect mandatory electronic invoicing for sales and purchases, monthly ISV compliance, quarterly income tax advance payments, annual CIT and Solidarity Contribution filing, transfer-pricing documentation above the applicable thresholds, municipal registration and annual municipal tax filing in each municipality of operation, and IHSS/RAP/INFOP payroll compliance for any local employees. Groups relying on maquila or free-zone status must maintain the export and investment records required to defend the preferential regime on audit.