Please direct all inquiries regarding Honduras to the persons listed below in the San José, Costa Rica, office of EY. All engagements are coordi nated by the San José, Costa Rica, office.
San Pedro Sula GMT -6
EY
Altia Business Park
Torre 1, Km 2, N.O.
Boulevard Armenta Piso 4 San Pedro Sula Honduras
Tegucigalpa GMT -6
EY
Centro Corporativo Los Próceres
Torre 1, Nivel 1, Oficina 1 Avenida La Paz Tegucigalpa, M.D.C. Honduras
Executive and immigration contacts
Luis Ocando +507 208-0100 (resident in Panama City, Panama)
Email: luis.ocando@pa.ey.com Rafael Sayagués +506 2208-9880 (resident in San José, Costa Rica) Fax: +506 2208-9999 Email: rafael.sayagues@cr.ey.com
Immigration contacts
Fernando Vargas +506 2505-0900 (resident in San José, Costa Rica) Fax: +506 2208-9999 Email: fernando.vargas.winiker@cr.ey.com Rosa Lacayo +504 2232-9100 (resident in Tegucigalpa, Fax: +504 2232-9102 Honduras) Email: rosa.lacayo@hn.ey.com
A. Income tax
Who is liable. Resident and nonresident individuals, regardless of their nationality, are subject to tax on their Honduras-source income only.
Individuals are considered resident if they live in Honduras for more than three consecutive months during a tax year.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Taxable employment income includes sala ry, pensions, bonuses, premiums, commissions and allowances (for example, housing and educational allowances). Payments made to board members, other executives and counselors not included in the payroll are subject to a 12.5% and 1% income withholding tax, respectively. The 12.5% rate applies to various payments, such as professional fees, commissions and bonuses, while the 1% rate applies to payments for goods and services.
Self-employment and business income. Income derived from selfemployment or from a trade or business is subject to tax.
Investment income. Dividends paid or credited by local compa nies to resident and nonresident individuals are subject to a 10% withholding tax. Royalties from franchises are subject to a 10% withholding tax. Technical advice and similar payments are subject to a 10% withholding tax.
Directors’ fees. Directors’ fees paid to nonresident individuals are subject to a 25% withholding tax. Directors’ fees paid to resident directors are taxed at the ordinary individual income tax rates (see Rates).
Capital gains. Capital gains are subject to a tax at a flat rate of 10%.
Capital losses are deductible only if derived from the sale of depreciable assets or from the sale of non-depreciable assets sold in the ordinary course of a trade or business. Occasional (nonhabitual) sales of non-depreciable assets are not subject to tax.
Capital gains must be reported and taxes paid within the first 10 days of the month following the month in which the transaction takes place. An annual return must be also be filed by 30 April each year.
Capital gains derived by nonresidents are subject to a 4% with holding tax on the gross proceeds, which is an advance payment of the final 10% tax. The withholding tax must be remitted with in the 10 calendar days following the transaction.
Deductions
Personal deductions and allowances. Annual deductions for medi cal and educational expenses are allowed up to a maximum of HNL40,000 (approximately USD1,638). For people older than 65 years old, the annual deductions for medical and educational expenses are up to the maximum HNL80,000 (approximately USD3,277).
Business deductions. All costs and expenses that are necessary to generate taxable income and protect investments are deductible.
Rates. Employment and self-employment income are taxable at the following rates.
taxable income Tax
rate
The above tax rates are subject to change by the government. Withholding tax is imposed on nonresidents at a rate of 25% on salaries, commissions and other similar compensation items.
Relief for losses. Self-employed individuals may not carry their losses forward or back.
B. Estate and gift taxes
Honduras does not impose estate or gift taxes. However, estates may be taxed as ordinary taxpayers if they derive income before distributions of assets are made to the beneficiaries.
C. Social security
The information below applies to companies with more than 10 employees.
Sickness and Maternity Contribution. The contribution rates for the Sickness and Maternity Contribution (Enfermedad y Maternidad) are 5% for the employer and 2.5% for the employee. The contribution is calculated on a maximum monthly salary of HNL9,849.70 (approximately USD412.50).
Old Age, Invalidity and Death Contribution. The contribution rates for the Old Age, Invalidity and Death Contribution (Vejez, Invalidez y Muerte) are 3.5% for the employer and 2.5% for the employee.
The contribution is calculated on a maximum monthly salary of HNL10,282.37 (approximately USD430.50).
Professional Risk Contribution. The contribution rate for the Professional Risk Contribution (Riesgo Profesional) is 0.2% and is only applicable for the employer.
The contribution is calculated on a maximum monthly salary of HNL9,849.70 (approximately USD412.50).
Private Contribution Regime — Social Housing Fund. The contribu tion rate for the Private Contribution Regime – Social Housing Fund (Régimen de Aportaciones Privadas – Fondo Social para la Vivienda) is 1.5% each for the employer and employee.
The contribution is calculated on the employee’s salary less the base salary (HNL10,282.37 [approximately USD430.50]). The result is multiplied by 1.5% in order to calculate the contribution for the employer and the employee.
Labor Reserve Contribution. The contribution is only applicable for the employee. The contribution rate is 4%, which is applied to 3 minimum wage salaries. A minimum wage salary is HNL10,021.18 (approximately USD419.50).
If the employee’s salary is less than 3 minimum wage salaries (HNL30,063.54 [approximately USD1,258.55]), the labor reserve contribution is calculated on the salary paid to the employee by applying a rate of 4%.
D. Tax filing and payment procedures
Employers are responsible for withholding income taxes and social security contributions from employees’ salaries on a monthly basis. Employees are not required to file an annual income tax return if their only source of income is employment compensation. Nonresidents are not required to file an annual income tax return if their income tax liability has been satisfied through withholding at source.
The ordinary tax year runs from 1 January to 31 December. Returns must be filed and any tax liabilities due must be paid by 30 April of the year following the tax year. However, in certain specified circumstances, taxpayers may elect a special tax year. Self-employed individuals and individuals with a trade or busi ness must make advance income tax payments.
E. Double tax relief and tax treaties
Honduras has not entered into tax treaties with other countries. However, Honduras has entered into tax information and exchange agreements with Ecuador and the United States.
F. Temporary visas
Depending on their country of citizenship, individuals may be required to apply for and obtain an entry visa before traveling to Honduras. The visa may be granted by a Honduran consulate overseas or by the immigration authorities in Honduras, depend ing on the citizenship of the individual. Because the rules indicat ing the countries of citizenship of individuals who are required to obtain an entry visa before entering Honduras and requirements for obtaining a visa often vary, it is necessary to check the entry visa requirements on a case-by-case basis.
G. Work visas (and/or permits)
Foreigners must apply for a Special Residence Permit with the immigration authorities. The granting of this permit is subject to specific rules applicable to employers and employees that need to be checked on a case-by-case basis because they often vary. After the required documents are filed with the immigration authori ties, it takes approximately four to six months to obtain the Special Residence Permit. Special Residence Permits are valid for terms ranging from one year to five years and may be renewed for up to five years. After five years, a new type of per mit request must be filed. In addition, foreign employees must apply for a work permit with the Ministry of Labor.
H. Residence visas (and/or permits)
The government of Honduras may grant migratory statuses that allow foreigners to reside in Honduras under several options, such as renters, investors, retirees and certain family relatives. The residency request must be submitted to and processed by the immigration authorities in Honduras. Because the applicable requirements may vary from case to case, they should be checked in advance.
I. Family and personal considerations
Family members. The legislation of Honduras requires that family members of foreign workers file for a Special Residence Permit as dependents. If a family member wants to work in Honduras, he or she must apply independently for a different type of Special Residence Permit with the immigration authorities and for a work permit with the Ministry of Labor. Children of expatriates must have student visas to attend schools in Honduras.
Marital property regime. Assets obtained by any means, except by donation, after the marriage is commenced are considered to be marital property.
Forced heirship. If an individual dies without leaving a will, the beneficiaries of the individual’s assets and patrimony according to the law are the following:
Descendants
Spouse
Ascendants
Collaterals
Municipal governments
The priority order is set by the Civil Code according to a series of different combinations. The following must be deducted, paid and/or removed from the deceased’s estate before it is distributed among the beneficiaries:
Funeral expenses
Mortuary procedural expenses
Debts
Taxes
Maintenance obligations of the deceased
Marital property
Driver’s permits. Foreigners entering the country are authorized to drive vehicles with a current driver’s license from their coun try, subject to the validity of the authorization under which he or she remains in Honduras. When the foreigner obtains a migra tory status that allows him or her to reside in Honduras, he or she is required to obtain a local driver’s license.
Honduras does not have driver’s license reciprocity agreements with any other country.