Honduras Taxes for Individuals and Businesses

The Honduran tax system is built on a territoriality principle. This means that tax obligations are determined by where income is generated, not by the citizenship or residency status of the person or company earning it. Income originating from activities within Honduras is subject to taxation, while income earned from foreign sources is not.

Personal Taxation in Honduras

An individual’s tax obligations in Honduras are determined by their residency status. A person is considered a tax resident if they are present in the country for more than 183 days in a calendar year. The responsibility for tax on a non-resident’s Honduran-sourced income is handled through withholding by the entity paying them.

Taxable income for residents includes salaries, wages, professional fees, and any other earnings generated from activities within Honduras. The country uses a progressive tax system. For the 2025 tax year, the rates are as follows:

• Income up to HNL 217,493.16 is exempt.
• Income from HNL 217,493.17 to HNL 331,638.50 is taxed at 15%.
• Income from HNL 331,638.51 to HNL 771,252.38 is taxed at 20%.
• Income exceeding HNL 771,252.39 is taxed at a rate of 25%.

Certain deductions are permitted to reduce an individual’s taxable income. These include medical expenses and educational costs for dependents, though specific limits and documentation requirements apply.

Mandatory social security contributions are required from both employees and employers. These contributions fund pensions, health, and other social benefits. Payments are calculated as a percentage of the employee’s salary and are withheld directly from their pay.

Business and Investment Taxation

Corporate entities operating in Honduras are subject to a Corporate Income Tax (CIT) on their locally sourced net income. The standard CIT rate is a flat 25%. Taxable income is determined by taking the company’s gross revenue and subtracting allowable business expenses, such as the cost of goods sold, administrative salaries, and depreciation of assets.

In addition to the standard CIT, businesses may be subject to a solidarity contribution. This is a 5% surcharge applied to net taxable income that exceeds HNL 1 million. This effectively increases the total tax rate for highly profitable companies.

Honduras also implements a Net Asset Tax, which functions as a form of minimum tax. This tax is levied at a rate of 1% on the total value of a company’s net assets, but it only applies to asset values exceeding HNL 3 million. Companies must calculate both their CIT and their Net Asset Tax liability each year and are required to pay whichever amount is greater.

Gains realized from the sale of capital assets are taxed separately from regular business income. A capital gains tax of 10% is applied to the profit made from selling assets such as real estate or securities. This flat rate is distinct from the progressive rates for personal income or the flat rate for corporate income.

Understanding the Sales Tax

The primary indirect tax in Honduras is the Sales Tax, known locally as Impuesto Sobre Ventas (ISV). This operates as a value-added tax, applied at each stage of the production and distribution chain for goods and services. The general rate for the ISV is 15%.

Certain goods are subject to a higher ISV rate. Alcoholic beverages and tobacco products, for instance, are taxed at an 18% rate. This increased rate is also applied to some services, such as first-class and business-class airline tickets.

Conversely, a number of essential goods and services are exempt from the ISV altogether. This list includes:

• Basic food items
• Pharmaceutical products
• Raw materials for industry
• School supplies

Tax Administration and Filing

The tax authority responsible for overseeing compliance in Honduras is the Servicio de Administración de Rentas (SAR). Both individuals and corporations are required to file annual tax returns to report their income and calculate their tax liability. The deadline for these annual filings is April 30th of the year following the tax year being reported.

Tax returns are submitted through an online portal established by the SAR. For those unable to use the online system, in-person filing at designated SAR offices remains an option, though electronic submission is the preferred method.

Payment of taxes can be made through authorized banks and financial institutions. For corporations, tax payments are made in installments throughout the year. These advance payments are due on June 30, September 30, and December 31, with the final balance settled at the time of the annual return filing.

Special Tax Regimes and Incentives

Honduras offers several special tax regimes designed to attract foreign investment and stimulate specific sectors of the economy. One of the most prominent is the Free Trade Zone (ZOLI) regime. Businesses operating within a designated ZOLI are granted significant tax benefits, including full exemptions from income tax, customs duties on imports and exports, and various municipal taxes.

Another program is the Tourism Incentive Law, which provides tax breaks for new and existing tourism projects that meet certain investment criteria. Approved projects can receive exemptions from income tax and import duties on goods and equipment needed for construction and operation.

It is important to note that the framework for these incentives is the subject of proposed legislative changes. A “Tax Justice Bill” under debate in the Honduran National Congress would, if enacted, eliminate many existing tax incentive regimes, including ZOLI. The proposal aims to replace them with two new systems: “Zonas Francas” (Free-Trade Zones) for exporters and the “Incentive Regime for Investment Development” (RINDE) for companies producing for the domestic market.