Honduras’ tax system is characterized by its territorial tax regime, which taxes only Honduran-sourced income while exempting foreign-sourced income. With a corporate income tax rate of 25%, alongside a 5% solidarity tax, Honduras presents a straightforward tax structure for businesses. The absence of wealth, gift, and inheritance taxes further simplifies the landscape for individuals. However, despite being a signatory to international agreements like the OECD Multilateral Convention, Honduras has yet to ratify them, affecting the exchange of tax-related information. This profile provides an overview of the country’s tax policies, corporate and personal income tax structures, and its standing in international tax agreements.
Honduras’ Tax System overview
| Corporate Income Tax: | 25% |
| Personal Income Tax: | 25%, progr. |
| Inheritance Tax: | None |
| Gift Tax: | None |
| Wealth Tax: | None |
Territorial Tax Regime
Corporate Income Tax
Corporations incorporated in Honduras are subject to tax on Honduran source income at 25%, plus a 5% solidarity tax, for a total of 30%. Capital gains are taxed as ordinary income to a 10% tax rate.
Personal Income Taxation
Honduran residents are subject to tax on Honduran source income at progressive rates up to 25%. Capital gains are generally taxed at a rate of 10%. Honduras does not impose gift tax, inheritance tax or wealth tax.
Anti-Avoidance Rules
Honduras does not have General Anti Avoidance rules (GAARs). Honduras does have Transfer Pricing Rules, which apply in transactions between Honduran resident entities and entities operating under a special tax regime. Honduras has no Thin Capitalization rules. Honduras does not have Controlled Foreign Corporation (CFC) rules.
Double Tax Treaties (DTTs)
Foreign Investment Protection
Tax Info. Exchange Agreements (TIEAs)
OECD Multilateral Convention
Common Reporting Standard (CRS)
FATCA
In summary, Honduras’ tax system offers simplicity through its territorial tax regime, which limits taxation to domestic sources of income. While its corporate and personal tax rates are competitive, the lack of wealth, gift, and inheritance taxes adds to its appeal for investors. However, the absence of double tax treaties (DTTs) and the delay in adopting global tax information exchange standards pose challenges. As the country continues to navigate the complexities of global tax compliance, businesses and individuals operating in Honduras must remain aware of both its strengths and areas for potential growth in tax policy.
