San Pedro Sula GMT -6
EY
Boulevard Armenta, Km 2, N.O. Altia Business Park Tower 1 San Pedro Sula Honduras
Tegucigalpa GMT -6
EY
Centro Corporativo Los Próceres Tower 1 Tegucigalpa Honduras
Please direct all inquiries regarding Honduras to the persons listed below in the Costa Rica office.
Indirect tax contacts
Rafael Sayagués +506 2208-9880 (resident in San José, Costa Rica) New York: +1 (212) 773-4761 rafael.sayagues@cr.ey.com
Guillermo Leandro +506 2208-9887 (resident in San José, Costa Rica) guillermo.leandro@cr.ey.com
A. At a glance
Name of the tax Sales tax (ST)
Local name Sales tax (ST)
Date introduced 1 January 1964
Trading bloc membership None
Administered by Secretary of Finance (http://www.sar.gob.hn/)
ST rates
Standard 15%
Other 18% and exempt
ST number format
ST return periods
National Tax Registry number (RTN)
Monthly ST return (separate monthly withholding returns and monthly informational return if taxable person)
Defined in Official Gazette as large or medium-sized taxable person
Thresholds
Registration None
Recovery of ST by non-established businesses No
B. Scope of the tax
ST applies to the following transactions:
• The supply of taxable goods or services made in Honduras by a taxable person
• Self-consumption
• The importation of goods or services from outside Honduras, regardless of the status of the importer, with the exception of exempt goods or services
C. Who is liable
A taxable person for ST purposes is any entity or individual that supplies taxable goods or ser vices in Honduras in the ordinary course of a trade or business. Taxable persons that deal primar ily with final consumers may be designated as withholding agents for ST. All businesses must register as taxable persons; no separate registry for ST taxable persons exists. The national tax registry number (RTN) is used for ST purposes.
Exemption from registration. The ST law in Honduras does not contain any provision for exemp tion from registration.
Voluntary registration and small businesses. The ST law in Honduras does not contain any provi sion for voluntary ST registration.
However, a Simplified Sales Tax Regime is established for natural or legal persons that have a single commercial establishment and whose taxable sales do not exceed HNL250,000 per year; they will not be responsible for the collection of the ST, remaining only obliged to file an Annual Sales Return no later than 31 January of the following fiscal year. Further details can be found under the Special schemes subsection below.
Group registration. Group ST registration is not allowed in Honduras.
Non-established businesses. A “non-established business” is a business that has no fixed estab lishment in Honduras. A non-established entity is required to register as a taxable person if it engages in business activities within Honduras. Foreign taxable persons must complete a tax questionnaire, which includes information such as the names of the current shareholders and the projected sales during the first year. This information must be submitted together with the fol lowing documents:
• A copy of the Articles of Incorporation, together with an official translation in Spanish
• A special power of attorney granted to a legal representative in Honduras
The above documents must be apostilled or legalized by the Honduran Consul in the foreign tax able person’s country of residence.
Tax representatives. Non-established businesses must complete a questionnaire and include a special power of attorney granted to a legal representative in Honduras when registering for ST in Honduras.
Reverse charge. There is no reverse charge applicable for importation of services in Honduras. A non-established entity is required to register as a taxable person if it engages in business activities within Honduras.
Domestic reverse charge. A domestic reverse charge is applicable for certain transportation ser vices. Additionally, in the case of large taxable persons, they should act as withholding agents for ST purposes when the following payments are made: freight transport; cleaning and fumigation services; printing services; research services; security services; and the rental of offices, machin ery and equipment.
Digital economy. There are no specific rules regarding the taxation of the digital economy for ST purposes. However, generally taxable events are treated the same whether or not they are trans acted by digital means. The normal ST registration rules apply for such supplies by non-estab lished businesses.
Nonresident providers of electronically supplied services for business-to-consumer (B2C) supplies will not be required to register and account for ST in Honduras. No ST is accounted for on the supplies.
Nonresident providers of electronically supplied services for business-to-business (B2B) sup plies will be required to register an account for ST in Honduras.
There are no other specific e-commerce rules for imported goods in Honduras.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Honduras.
Registration procedures. Entities or individuals that are subject to the sales tax must register as taxable persons using Form SAR-410. This form must be submitted by paper and must contain the following information: complete name of taxable person, company address, date of incorporation, company registration number, legal representative tax ID, shareholders’ name and tax ID, company’s main business activity, expected operating start date, company’s year-end closing date, tax obligations and withholding agents, registry on a special scheme, tax exemptions and its current resolution.
Taxable persons must also notify the tax authority of the use of printed invoices or receipts. Deregistration. The taxable person must notify the tax authorities about ceasing operations, and it must file its tax return within 30 days after that notification.
Changes to ST registration details. A taxable person must notify the tax authorities of any chang es to its ST registration details (for example, changes to the company’s name, address, company’s main business activity or whether the company is eligible for tax exemptions).
Such notifications can be made online (via the tax administration’s online portal “Virtual Office” or by paper (in person at the tax authorities’ office). Such notifications must be made within 10 days of the change taking place.
In addition, the tax administration may exercise its powers of data verification in compliance with the formal obligations of the tax obligors. The data update service in the National Tax Registry (RTN) through the Virtual Office allows the tax obligors or representatives to make the pertinent modifications to comply with their formal tax obligation of always keeping their data updated.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of ST.
The ST rates are:
• Standard rate: 15%
• Special rate: 18%
The standard rate of ST applies to all supplies of goods or services unless a specific measure provides for a special rate or an exemption.
A higher rate of 18% is imposed on supplies of alcoholic beverages and cigarettes.
Examples of goods and services taxable at 18%
• Alcoholic beverages
• Cigarettes
• Air transport tickets in executive class, first class, business class or similar standards
The term “exempt supplies” refers to supplies of goods and services that are not subject to ST and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Goods that form part of the average weekly shopping
• Pharmaceutical products
• Cleaning fluids and disinfectants
• Raw materials and tools for agricultural and agro-industrial production; major and minor poul try species and fish, herbicides, insecticides, pesticides, rodenticides and other anti-rodents, live animals; means of animal reproduction; seed and vegetative material for the sowing and sexual and asexual spreading; raw material for the elaboration of balanced food in its final presentation, except that destined for pets
• Transfer of assets in a merger or liquidation
• Medical services
• Personal insurance and reinsurance
• Gasoline, kerosene and related oil products
• Firewood and coal
• Books and newspapers
• Leather, except fine leather goods
• Water and electrical services
• Education
• Passenger transport
• Financial services
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Honduras.
E. Time of supply
The time when ST becomes due is called the “time of supply” or “taxable event.”
For the supply of goods, the time of supply is the earlier event between the issuance of the invoice or the delivery of the goods. For a supply of services, the time of the supply is the earlier of the issuance of the invoice or the performance of the services.
Deposits and prepayments. There are no special time of supply rules in Honduras for deposits and prepayments. As such, the general time of supply rules apply, and the taxable event is the earlier of the issuance of the invoice and the performance of the services or delivery of goods.
Continuous supplies of services. There are no special time of supply rules in Honduras for con tinuous supplies of services. As such, the general time of supply rules apply, and the taxable event is the issuance of the invoice.
Goods sent on approval for sale or return. The taxable event for goods sent on approval or “for sale or return” should be when they are actually sold. If the goods are not sold or returned, ST should not be due.
Reverse-charge services. The reverse charge is not applicable in Honduras, and as such there are no special time of supply rules.
Leased assets. There are no special time of supply rules in Honduras for supplies of leased assets. As such, the general time of supply rules apply (as outlined above), and the tax point is the earlier of the issuance of the invoice or the performance of the services.
Imported goods. The time of supply for imported goods is when the goods are “nationalized,” that is, when the goods clear all customs formalities for importation. For the importation of services, the time of supply is the earlier of the issuance of the invoice or the performance of the services.
F. Recovery of ST by taxable persons
A taxable person may recover input tax, which is ST charged on goods and services supplied that are used to generate taxable income. Input tax is generally recovered by a deduction from output tax, which is ST charged on supplies made. Input tax may be deducted in the month in which the invoice is received or in the following three months.
Input tax includes ST charged on goods and services supplied in Honduras, ST paid on imports of goods and reverse-charge ST on domestic self-consumption of services. The input tax credit is available only for goods and services acquired to generate income and for the purchase of machinery and equipment.
A valid tax invoice or customs document must generally accompany a claim for an input tax credit.
Input tax credits can be sold or transferred to another taxable person. However, approval must be obtained from the tax authorities before doing this.
The time limit for a taxable person to reclaim input tax in Honduras is three months.
Nondeductible input tax. No deduction is allowed on input tax charged on goods self-consumed or services rendered for the taxable person’s own benefit. Also, the deduction is not allowed when the purchases are not properly documented with the corresponding invoices or receipts that comply with the format requirements established in the Billing Regime and its amendments.
Examples of items for which input tax is nondeductible
• ST paid on items or services for personal consumption
• ST paid on gifts or presents
Examples of items for which input tax is deductible (if related to a taxable business use)
• ST paid on purchases of goods or fixed assets to produce sales subject to ST
• ST paid for services needed to produce goods or other services subject to ST and repair services
Partial exemption. Proportionality rules are applicable according to the Honduran legislation. In this sense, when individuals and entities sell both goods or services exempt and subject to ST, the ST paid in the acquisition of goods and services directly associated with the subject activity should give rise to the right of input tax. In the cases that the acquisition of goods and services cannot be directly linked only to a subject activity from the taxable person, it should give right to input tax in the corresponding percentage of the subject activity.
Approval from the tax authorities is not required to calculate the input tax deduction credit in Honduras. Special methods of calculation are not allowed in Honduras.
Capital goods. The input tax incurred on the acquisition of a capital good should give rise to the right of input tax, as long as it is associated to an activity subject to ST for the taxable person. If the capital good is used for both subject and exempt activities, the taxable person should have the right of input tax in the percentage correspondent to subject activities. The Honduran legislation does not establish a definition of capital goods. If the ST paid on the acquisition of the capital good is used as input tax, such amount should not be included as part of the cost of the asset for depreciation.
Refunds. If the amount of input tax recoverable in a month exceeds the amount of output tax pay able, the taxable person obtains an input tax credit. The credit may be carried forward to offset output tax in subsequent ST periods, when claimed to be refunded.
Pre-registration costs. Taxable persons are not permitted to recover input tax paid on purchases made prior to ST registration.
Bad debts. The Honduran legislation does not establish a mechanism for claiming relief for the ST on bad debts. In this sense, upon the taxable event, ST should be declared and paid within 10 days of the following month in which the sale occurred, regardless if the customer paid or not.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Honduras.
G. Recovery of ST by non-established businesses
Input tax incurred by non-established businesses in Honduras is not recoverable. Diplomatic consular delegations, and international organizations and agencies are entitled to reimbursement for ST paid in Honduras. Depending on the claimant’s status, the claimant may request a refund of the ST or exercise the right to offset the ST credit by making subsequent purchases subject to ST. If the credit has not been offset after six months, the amount may be applied against other taxes.
H. Invoicing
ST invoices. A taxable person must generally provide an ST invoice for all taxable supplies made, including exports. An invoice is generally necessary to support a claim for input tax credit. If the nature of the business makes it impractical for a taxable person to issue tax invoices, the ST authorities may authorize the use of cash registers and computerized systems to issue receipts instead of invoices.
The Honduran invoicing regulations establish that taxable persons should request an authorization from the tax authorities to print invoices or receipts. Taxable persons may use two methods to obtain their invoices or receipts:
• Printing through printing houses
• Self-printing through cash registers or computer systems connected to their accounting systems
Self-printed invoices or receipts include a barcode that contains important information about the transaction. This exempts taxable persons from having to enter the data manually into their accounting system.
It is important to note that invoices must comply with the requirements established in the Billing Regime and its amendment to allow the input tax incurred to be deductible.
Credit notes. An ST credit note may be used to reduce ST charged and reclaimed on a supply if the value is reduced for any reason (for example, the granting of a discount or bonus, a change in price or the return of the goods). A credit note must generally include the same information as a tax invoice.
Electronic invoicing. Electronic invoicing is allowed in Honduras, but not mandatory. However, at the time of preparing this chapter, the tax authorities have not implemented electronic invoicing in practice and therefore it’s not currently possible.
Simplified ST invoices. Simplified ST invoicing is not allowed in Honduras. As such, full ST invoices are required.
Self-billing. Self-billing is allowed only in operations with unskilled labor and it is required that the deductible expense does not exceed 5% of the total of deductible expenses of the gross tax able income, excluding financial expenses. Note that this invoice is not accepted as documenta tion to support input tax.
Proof of exports. ST does not apply on supplies of exported goods. However, to qualify as ST-free, exports must be supported by customs documents that prove the goods have left Honduras. Suitable evidence includes export invoices and bills of lading.
Foreign currency invoices. ST invoices must be issued in the domestic currency, which is the Honduran lempira (HNL).
Supplies to nontaxable persons. There are no special rules for ST invoices issued for supplies made by taxable persons to private consumers. Full ST invoices are required to be issued.
Records. Records that must be held for ST purposes in Honduras include accounting books, invoices, daily purchases and selling records.
In Honduras, ST books and records must be held within the country. However, there is no provi sion in the Honduras ST law outlining where records should be held. In practice, copies of records can be held outside of Honduras. Records must be available to be provided to the tax authorities upon request during a tax audit, in a timely manner.
Record retention period. The records and accounting information should be kept for five years by the taxable person that correspond to the statute of limitations in Honduras.
Electronic archiving. Electronic archiving is allowed in Honduras, but not mandatory. Whereas physical archiving is mandatory.
I. Returns and payment
Periodic returns. ST returns are submitted monthly by the 10th day of the month following the end of the return period. In addition, all taxable persons that withhold taxes must file the month ly withholding return that covers ST in addition to payroll taxes, local professional fees and any others withheld. This is Form SAR-540 (Declaración Mensual de Retenciones), the Monthly Withholding Return. This withholding return is also due to be submitted by the 10th day of the month following the end of the return period.
Taxable persons whose annual turnover is below HNL250,000 (approximately USD10,293) are not required to file ST returns or pay ST if the taxable person is included in the Simplified Sales Tax Regime (see further details below under the Special schemes subsection).
Periodic payments. Payment in full is due on the same date as the return submission deadline, i.e., by the 10th day of the month following the end of the return period. Payment must be paid in Honduran lempira (HNL). Payments can be made by BACS, cheque, cash or online transfer.
Large taxable persons as defined in the Official Gazette are required to withhold 15% ST on payments related to the following:
• Transportation services
• Cleaning and fumigation services
• Printing and screen-printing services
• Investigation and security services
• Commercial sites and machinery and equipment rent
This withheld ST must be paid in full along with a separate monthly withholding return that, like the regular ST return, must be submitted by the 10th day of the month following the end of the return period.
Electronic filing. Electronic filing is allowed in Honduras, but in practice it is not applied by the tax authorities. However, in the case of ST returns filed by medium and large taxable persons, they are obliged to file such returns electronically. Medium and large taxable persons are those taxable persons that exceed a certain level of sales and gross income listed by the tax authorities.
Payments on account. Payments on account are not required in Honduras.
Special schemes. Simplified Sales Tax Regime. This scheme is for natural or legal taxable persons with a single commercial establishment and taxable turnover that does not exceed HNL250,000. Users are only obliged to file an Annual Sales Return no later than 31 January of the following fiscal year.
Secondhand goods. Taxable persons who sell used goods should only pay taxes upon importation and not ST. There are special taxes on certain secondhand goods, including tires, clinical waste and vehicles.
Annual returns. Annual returns are not required in Honduras.
Supplementary filings. Monthly purchases sales tax return. Taxable persons that file monthly sales tax returns must also report purchases and imports (taxable or exempt) through a monthly pur chases sales tax return (form SAR 527).
Taxable persons subject to this reporting obligation are those categorized as medium and large taxable persons, including those:
• Operating under special tax regimes
• Carrying out ST exempt business transactions
The return must be filed through the tax authorities’ DET LIVE web-based platform during the first 20 days of each month.
Taxable persons are required to separate and identify purchases that generate sales tax credits from those considered as part of the company’s costs and expenses.
Correcting errors in previous returns. In case of an error in a previous return (for example, when the amount of tax to be paid was not correctly stated), a rectifying return must be submitted. This can be filed online (via the Virtual Office system). There is no requirement to submit a letter to the tax authorities outlining the errors. Depending on the corrective return, further payment may be required to be made at the same time or a separate request for additional input tax credit. There is no specific timing or deadline to submit such corrections. Penalties may be imposed if such errors are noted during a tax audit and were not corrected by the taxable person, resulting in a request for an adjustment by the tax authorities.
Digital tax administration. There are no transactional reporting requirements in Honduras.
J. Penalties
Penalties for late registration. A taxable person that fails to register for ST on a timely basis is subject to penalties. Penalties are computed based on a taxable person’s gross income and gener ally range from 10% of a minimum wage to 10 times a minimum wage. However, taxable persons with high amounts of gross income may be subject to additional penalties.
Penalties for late payment and filings. The penalty assessed for the late submission of a ST return is 1% if filed within five days after the filing date. If the tax liability is not paid within these five days, a 2% monthly penalty applies up to a maximum of 24%.
The surcharge assessed for the late filing of an ST return is 5% per month, up to 60% if the tax liability is not paid by the 10th day of the month following the end of the return period.
Penalties for errors. The following infractions may be subject to the temporary closure of the business establishment:
• Failure to issue invoices (or other valid tax documents) when required or issuing tax documents that don’t comply with the legal requirements
• If an issued tax document is not duly recorded in the taxable person’s accounting registries
• If the taxable person’s records are not presented to the tax or customs authorities when required
If a taxable person incurs in one of the abovementioned infractions for the first time, a fine is imposed based on its annual gross income. In case of recurrence, the fine will be increased by 50%. Furthermore, the recurrence of the same infraction may lead the tax authorities to proceed with a temporary closure of the business establishment, which will last until the situation has been rectified. The law clarifies that a taxable person engages in recurrence when an infraction is breached two or more times in the same fiscal year.
Failure to notify or late notification to the tax authorities of changes to a taxable person’s ST registration details could result in a penalty between HNL0.01 to HNL1 million, which depends on the company’s annual gross income. For further details, see the subsection above Changes to ST registration details.
Penalties for fraud. Tax fraud is deemed to occur if a taxable person files a return that results in the underpayment of taxes as a result of illegal actions. The Penal Code provides the following prison terms for tax evasion:
• Three to six years of imprisonment and a fine equivalent to 120% of the value of the defrauded, if said value does not exceed HNL250,000
• Six to 10 years of imprisonment and a fine equivalent to 120% of the value of the defrauded, if said value does not exceed HNL250,000
In addition, a fine equal to 50% of the underpaid ST applies. If the underpaid ST cannot be calculated, the applicable fine is calculated based on the assessment issued by the tax authorities.
Personal liability for company officers. Company officers can be held personally liable for errors and omissions in ST declarations and reporting in Honduras. The ST law doesn’t make distinction between the owner of the company, managers, administrative personal, accountant, etc. It outlines that if whoever is responsible for the company’s commercial accounting, books or tax records disregards said obligation, keeps different accounts that hide the true situation of the company, does not record economic operations or does so falsely or reflecting fictitious operations, must be punished by imprisonment from six months to two years, if this facilitates the commission of a crime of tax fraud or subsidy fraud or a crime against social security or the pension system.
Statute of limitations. The statute of limitations in Honduras is five years. The tax authorities should be able to go back to review returns for a five-year period for registered taxable persons. In the other cases (i.e., non-registered taxable persons), the statute of limitations should be seven years.