Commercial activity in Honduras is predominantly carried out through incorporated entities governed by the Commercial Code. The legal framework provides a closed list of corporate forms that qualify as mercantile entities, regardless of their underlying purpose.

Under Article 13 of the Commercial Code, the recognised corporate forms are:

• Sociedad en Nombre Colectivo (general partnership);
• Sociedad en Comandita Simple (limited partnership);
• Sociedad de Responsabilidad Limitada (SRL);
• Sociedad Anónima (SA);
• Sociedad en Comandita por Acciones; and
• Sociedad Cooperativa.

All of these entities may adopt a variable capital structure.

In practice, the Sociedad Anónima and the Sociedad de Responsabilidad Limitada are the most commonly used vehicles. The SA is typically preferred for medium and large-scale operations, regulated sectors and structures involving multiple investors. The SRL is widely used for closely held businesses and foreign subsidiaries due to its governance flexibility and streamlined internal structure.

From a tax perspective, all incorporated entities are treated as separate taxpayers. Corporate income tax is assessed at the entity level, and the choice of legal form does not alter the principle of separate taxation. Each company must obtain its own tax identification number and comply independently with accounting, reporting and filing obligations before the Tax Administration.

Honduran law also allows simplified incorporation mechanisms, including single-shareholder companies, subject to certain restrictions. Activities in regulated industries – such as financial services, extractive operations or public-private partnership projects – are generally excluded from simplified formation procedures and remain subject to enhanced regulatory oversight.

Foreign investors may operate through a locally incorporated subsidiary or through a registered branch. In both cases, the Honduran presence is taxed on Honduran-source income under the territorial tax regime.

Honduran tax law does not formally recognise transparent entities for domestic tax purposes. As a result, business structures formed under Honduran law are generally treated as taxable entities rather than as pass-through vehicles.

Certain partnership forms exist under commercial legislation; however, for tax purposes, they are typically regarded as independent taxpayers. Income is therefore taxed at the entity level before any distribution to partners.

Despite the absence of local tax transparency, foreign investment groups – particularly US-based investors – frequently use the Sociedad de Responsabilidad Limitada in order to obtain “look-through” treatment under foreign tax rules. This transparency, however, arises exclusively under foreign law and does not alter the Honduran tax treatment of the entity as a separate taxpayer.

In practice, there is no domestic equivalent to common law partnerships or fiscally transparent limited liability companies. Investment structures are therefore generally implemented through fully taxable corporate vehicles.

Corporate Residence

For corporate income tax purposes, residence in Honduras is determined primarily by incorporation. An entity is considered resident if it is organised and incorporated under Honduran law. The place of incorporation is the decisive criterion for determining tax residence.

Honduras does not apply a central management and control test as an alternative basis for residence. Therefore, foreign-incorporated entities are not treated as residents solely because of management decisions taken within the country.

Permanent Establishment

Although residence is incorporation-based, non-resident entities may become subject to Honduran taxation if they operate through a permanent establishment.

The concept of permanent establishment is defined in Article 4 of the Regulations to the Transfer Pricing Law. A permanent establishment arises when a foreign entity maintains a fixed place of business in Honduras through which it carries out all or part of its activities, and includes:

• centres of management or direction;
• branches, agencies or offices acting on behalf of the foreign enterprise;
• factories, workshops or similar facilities;
• sites used for the exploitation or extraction of natural resources; and
• warehouses used for domestic commercial activities.

A permanent establishment may also exist where a foreign company maintains offices providing technical, financial or consulting services, including services linked to contracts executed inside or outside Honduras.

In addition, a dependent agent may create a permanent establishment where a person or entity acting on behalf of the foreign enterprise habitually:

• concludes contracts in the name of the foreign company;
• carries out economic activities under contractual arrangements on its behalf; or
• makes payments locally related to the development of its business activities.

This dependent agent rule reflects a substance-over-form approach and aligns with the broader transfer pricing framework.

Taxation Consequences

Where a permanent establishment exists, only income attributable to Honduran-source activities is subject to tax, consistent with the territorial tax regime.

Honduras does not currently have any double taxation treaties in force. Accordingly, residence and permanent establishment determinations are made exclusively under domestic legislation.

Corporate Taxation

Corporations incorporated in Honduras are subject to income tax at a general rate of 25% on net taxable income. Profits are calculated based on accounting results, subject to statutory adjustments and deduction rules.

In addition, a 5% solidarity contribution applies where net taxable income exceeds the statutory threshold, unless the taxpayer benefits from an exemption regime. This contribution effectively increases the tax burden for profitable entities.

Honduran legislation also includes a minimum income tax mechanism. Where the income tax calculated at 25% is lower than 1% of gross income and the applicable revenue threshold is met, the taxpayer must pay the higher amount. Honduras operates under a territorial tax regime; therefore, only Honduran-source income is subject to taxation.

Taxation of Businesses Owned By Individuals

Individuals carrying out business activities directly are taxed under the progressive individual income tax system. For fiscal year 2026, the updated progressive schedule provides for the following:

• an exemption up to HNL228,324.32 annually (monthly income up to HNL22,360.36 is exempt);
• 15% on the next bracket;
• 20% on intermediate income; and
• 25% on income exceeding HNL809,660.76 annually.

Since Honduran law does not recognise domestic tax-transparent entities, businesses are generally taxed either at the corporate level (if incorporated) or under the individual progressive regime (if operated directly by a natural person).

Corporate income tax in Honduras is calculated on net taxable income derived from accounting profits. Companies must prepare financial statements in accordance with applicable accounting standards, and those results constitute the starting point for determining the tax base. Taxable income is then adjusted through statutory inclusions and exclusions established in the Income Tax Law and related regulations. The Honduran system therefore follows a book-to-tax adjustment model rather than a purely fiscal accounting framework.

The most significant adjustments generally relate to:

• limitations on the deductibility of certain expenses;
• non-deductible provisions and reserves not expressly authorised by law;
• restrictions on related-party transactions not conducted at arm’s length;
• expenses lacking adequate documentation or economic substance; and
• expenses not directly linked to the generation of taxable Honduran-source income.

Depreciation and amortisation are deductible within statutory parameters, provided assets are used in income-generating activities. Expenses must be necessary, proportional and properly supported in order to be accepted for tax purposes.

Where transactions are carried out between related parties, transfer pricing rules require compliance with the arm’s length principle. Adjustments may be imposed by the Tax Administration if pricing deviates from market conditions.

Profits are generally taxed on an accrual basis. Income is recognised when earned and expenses when incurred, regardless of actual cash receipt or payment, unless specific provisions establish a different treatment.

Because Honduras applies a territorial system, only income considered Honduran-source is included in the taxable base. Foreign-source income is generally excluded unless specific anti-avoidance provisions apply.

Honduras does not currently operate a patent box regime, enhanced R&D deductions or automatic tax credits specifically designed for intellectual property development. There is no reduced corporate income tax rate applicable solely on the basis of technology innovation.

However, the Law for the Promotion and Development of Science, Technology and Innovation establishes a general policy framework aimed at encouraging technological advancement and innovation. The legislation contemplates the possibility of fiscal incentives for companies engaged in research, applied technology and innovation activities in priority sectors for national development.

Under this framework, the Honduran Institute of Science, Technology and Innovation (IHCIETI) may promote financing mechanisms and facilitate access to national and international funding sources. The law refers to the creation of financial instruments, including favourable credit schemes and support mechanisms, rather than automatic income tax exemptions.

In practice, the regime operates more as a policy-driven promotional framework than as a direct corporate tax relief system. Companies seeking tax efficiency in technology-driven projects typically rely instead on sectoral incentive regimes – such as export processing, free trade zones or BPO frameworks – where broader income tax and customs exemptions may be available subject to qualification. As a result, technology investment structuring in Honduras is primarily achieved through sector-based incentives rather than through standalone innovation-specific tax relief.

Honduras operates a sector-based tax incentive framework under which specific industries and entities may qualify for preferential tax treatment, subject to prior authorisation and ongoing regulatory compliance. These regimes are granted through special statutes and require formal registration before the competent authority.

The principal productive incentive systems include:

• Free Trade Zones (ZOLI) and Export Processing Zones (ZIP), primarily for export-oriented manufacturing and services;
• the Temporary Import Regime (RIT);
• BPO and call centre services;
• renewable energy projects;
• tourism development regimes; and
• agro-industrial and export-focused activities.

Depending on the regime, benefits may include partial or total exemption from corporate income tax, solidarity contribution and net asset tax for a defined period, as well as suspension or exemption of customs duties and VAT on machinery, equipment and production inputs directly linked to the authorised activity.

A significant recent development concerns the Temporary Import Regime (RIT). In February 2026, Decree 2-2026 extended the validity of RIT incentives for an additional five fiscal years.

In addition to productive regimes, Honduras also recognises preferential treatment for non-profit entities, including non-governmental organisations (NGOs), foundations and associations engaged in public interest activities. These entities may obtain tax-exempt status with respect to income directly linked to their authorised non-profit purposes, subject to registration and ongoing compliance with reporting obligations. However, income derived from commercial activities not directly related to their institutional objectives may remain taxable.

Across all incentive frameworks, access is conditional upon formal qualification and continued compliance. Regulatory scrutiny has intensified in recent years, with greater emphasis on operational substance, traceability of transactions and alignment with the authorised business scope. Failure to meet these requirements may lead to the suspension or revocation of benefits.

Accordingly, while Honduras offers structurally meaningful tax incentives across multiple sectors, these regimes are compliance-driven and require careful structuring and sustained regulatory management.

Honduran tax law does not provide a general loss carry-back mechanism. Losses cannot be offset against taxable income of prior fiscal years.

Loss carry-forward is regulated under Article 20 of the Income Tax Law, but applies only to specific productive sectors. Only taxpayers engaged in the following activities may request loss carry-forward treatment:

• agricultural activities;
• agro-industrial activities;
• manufacturing;
• mining; and
• tourism.

Taxpayers outside these sectors are not entitled to offset operating losses against future taxable income.

Conditions and Limitations

To benefit from the regime, losses must be properly documented and substantiated as arising from the taxpayer’s operations in a given fiscal year. The recognised loss may be amortised in subsequent fiscal years, subject to the following restrictions:

• a maximum of 50% of the net taxable income of each subsequent year may be offset; and
• the carry-forward period is limited to three fiscal years following the year in which the loss was generated.

Losses must be applied, where possible, until fully absorbed within the permitted three-year period.

Capital losses are not deductible against ordinary income. Likewise, operating losses cannot be offset against capital gains, reflecting the system’s separation between ordinary income and capital gain taxation. Overall, Honduras maintains a restrictive and sector-specific loss relief framework rather than a broad-based carry-forward system applicable to all taxpayers.

Interest expenses are generally deductible, provided they are incurred to generate taxable Honduran-source income and are properly documented.

Honduran legislation does not establish a statutory thin capitalisation rule or an EBITDA-based limitation on interest deductibility. However, deductions may be challenged where the transaction lacks economic substance or fails to comply with transfer pricing regulations.

Interest paid to non-residents is subject to a 10% withholding tax, and compliance with withholding obligations is a condition for deductibility.

Honduran tax law does not permit consolidated tax grouping. Each company within a corporate group is treated as an independent taxpayer. As a result, losses incurred by one entity cannot be offset against profits of another entity within the same group. Loss utilisation is strictly limited to the entity that generated the loss and, where applicable, only within the sectoral limitations described above. Groups therefore commonly rely on structural planning rather than consolidation mechanisms to manage tax efficiency.

Capital gains realised by corporations are taxed at a flat rate of 10%. The taxable gain is generally calculated as the difference between the acquisition cost (or book value, as applicable) and the sale price. Certain corporate reorganisations, such as mergers or spin-offs between related entities, may qualify for exemption where statutory requirements are met.

Non-residents are subject to a 4% withholding tax on the gross transaction value, followed by a final settlement to determine the effective 10% tax on the net gain.

In addition to corporate income tax, incorporated businesses may be subject to:

• value added tax (VAT) at 15% on most goods and services;
• real estate transfer tax at 1.5% on property transactions;
• municipal gross income tax, assessed annually by local governments; and
• financial transaction charges applicable to certain banking operations.

The applicability of these taxes depends on the nature of the transaction.       

Incorporated businesses may also be subject to:

• a 5% solidarity contribution on net taxable income above the statutory threshold; and
• a 1% net asset tax calculated on assets as of December 31st of the prior fiscal year, unless exempt.

These taxes operate alongside the standard 25% corporate income tax and may increase the effective tax burden for certain entities.

Most closely held businesses in Honduras operate through incorporated entities, particularly Sociedad Anónima (SA) or Sociedad de Responsabilidad Limitada (SRL). Although individuals may conduct business activities directly as sole proprietors, the corporate form is generally preferred due to limited liability protection, clearer governance structures and operational flexibility.

There is no separate tax regime applicable to closely held entities. The corporate tax framework applies uniformly, regardless of ownership concentration.

Honduras does not operate a materially lower corporate tax rate compared to the top marginal individual rate. Corporations are taxed at 25%, while individuals are subject to progressive rates that reach 25% at the highest bracket. Because the top marginal individual rate aligns with the corporate rate, there is limited incentive to incorporate purely for rate arbitrage purposes.

However, individuals conducting business activities directly are not subject to the net asset tax or the 5% solidarity contribution, which apply only to corporate entities and other qualifying legal persons. As a result, in certain cases, operating as an individual entrepreneur may produce a lower effective tax burden compared to operating through a corporation.

Distributions from corporations are subject to a 10% withholding tax on dividends, which may further increase the combined effective tax burden at the shareholder level.

Honduran law does not establish specific anti-incorporation rules targeting professionals. The system relies primarily on rate alignment and the separate taxation of dividends rather than anti-deferral mechanisms.

Honduran tax law does not impose specific anti-accumulation rules preventing closely held corporations from retaining earnings for reinvestment purposes. There is no accumulated earnings tax or deemed distribution mechanism triggered solely by the retention of profits.

Corporations are required under commercial law to allocate 5% of annual net profits to a legal reserve until that reserve reaches 20% of the subscribed capital. Once this threshold is achieved, the reserve may be capitalised, although the annual allocation obligation continues. Beyond this statutory reserve requirement, retained earnings are not subject to additional taxation until they are formally distributed. Dividend tax is triggered only upon declaration and payment.

Accordingly, closely held corporations may accumulate profits without immediate tax consequences at the shareholder level.

Dividends distributed by closely held corporations to individuals are subject to a final withholding tax of 10%. This withholding applies regardless of whether the shareholder is resident or non-resident, and generally constitutes final taxation at the shareholder level.

Capital gains realised by individuals on the sale of shares are taxed at a flat rate of 10% on the net gain. The taxable gain is determined as the difference between the acquisition cost (or book value, as applicable) and the sale price.

Where the seller is a non-resident individual, the purchaser must withhold 4% of the gross transaction value at the time of transfer. A subsequent settlement before the Tax Administration determines the final tax liability based on the 10% rate applied to the net gain.

The tax treatment does not vary based on the degree of ownership concentration; closely held corporations are not subject to a distinct shareholder taxation regime.

Honduran tax law does not establish a differentiated regime for publicly traded corporations compared to closely held entities. The tax treatment of dividends and capital gains is uniform. Dividends received by individuals are subject to a 10% withholding tax, which generally constitutes final taxation at the shareholder level. Capital gains derived from the sale of shares are taxed at a flat rate of 10% on the net gain. In the case of non-resident sellers, a 4% withholding on the gross transaction value applies at the time of transfer, followed by a settlement process to determine the final tax due on the net gain.

The absence of a preferential regime for publicly listed shares reflects the simplified and uniform equity taxation structure under Honduran law.

In the absence of income tax treaties, withholding taxes in Honduras apply strictly under domestic legislation. The principal withholding rates applicable to non-residents are:

• dividends: 10%;
• interest: 10%; and
• royalties: 25%.

These rates apply uniformly, as Honduras does not currently have any double taxation treaties in force that would reduce withholding tax burdens.

No treaty-based reliefs are available. Relief may only arise where a specific statutory exemption applies, such as incentive regimes granting income tax exemption to the local paying entity. However, in ordinary cross-border transactions, the withholding obligation applies in full.

Withholding tax compliance is an area of consistent enforcement by the Tax Administration. The local payer is responsible for withholding and remitting the tax, and failure to comply may result in the disallowance of the underlying expense for corporate income tax purposes, in addition to penalties and surcharges. The Tax Authority pays particular attention to:

• cross-border service payments;
• management and administrative fees;
• interest paid to foreign related parties; and
• royalty and intellectual property payments.

Inbound investors must therefore carefully structure intercompany arrangements to ensure both withholding compliance and deductibility at the local level.

Honduras does not currently have any double taxation treaties in force. Foreign investors must therefore assess their tax position exclusively under Honduran domestic law and under the tax rules of their own home jurisdiction. The absence of a treaty network simplifies the local framework but increases the importance of careful structuring at the investor level.

Given that Honduras has no effective income tax treaties, the issue of treaty shopping does not arise in the traditional sense. The Tax Administration does not challenge structures based on treaty abuse, as there are no treaty benefits available. Instead, scrutiny tends to concentrate on substance, related-party pricing and the proper application of domestic withholding tax rules.

Inbound investors should nevertheless ensure that cross-border structures reflect economic reality, particularly where holding or financing entities are involved.

Transfer pricing rules have been applicable in Honduras since 2014 and apply to transactions between related parties, whether domestic or cross-border. For inbound investors operating through a Honduran subsidiary, the most sensitive areas typically include:

• intercompany financing arrangements;
• management and administrative service fees;
• royalty and intangible payments; and
• distribution and supply chain pricing.

The Tax Administration has increased documentation expectations in recent years. In particular, country-by-country reporting became effective from fiscal year 2025 under SAR administrative regulation, introducing additional transparency requirements for multinational groups meeting applicable thresholds.

While enforcement remains primarily documentation-driven, transfer pricing is an area of growing technical review by the authorities.

Limited risk distribution models are not automatically disallowed under Honduran law. However, the Tax Administration may review whether the allocation of risks and margins is consistent with the arm’s length principle. Where a Honduran entity operates as a distributor with limited functional risk, the authority may examine whether the profit level reflects the functions performed, assets used and risks assumed locally.

Challenges typically arise where contractual risk allocation does not align with operational reality.

Honduras applies transfer pricing rules based on the arm’s length principle. The domestic framework recognises internationally accepted valuation methods and requires related-party transactions to reflect market conditions. While conceptually inspired by OECD standards, the Honduran regime operates within a strictly domestic legal environment. It does not rely on treaty-based co-ordination mechanisms, and functions independently of bilateral tax agreements.

Certain features distinguish the local system in practice. The statutory definition of related parties is broader than in many jurisdictions and may extend to family relationships within specified degrees. In addition, the Tax Administration retains flexibility to apply alternative valuation approaches where traditional methods do not adequately reflect the economic substance of the transaction.

Enforcement remains documentation-driven. Although the technical framework references OECD methodology, Honduras has not incorporated the full OECD administrative infrastructure, particularly regarding dispute resolution and cross-border administrative co-operation.

Transfer pricing has become an area of increased technical focus by the Tax Administration, particularly in cross-border group structures. However, because Honduras does not maintain any double taxation treaties, there is no mutual agreement procedure (MAP) mechanism available to resolve international transfer pricing disputes through treaty channels. As a result, disputes are resolved exclusively under domestic administrative and judicial procedures. This underscores the importance of maintaining robust contemporaneous documentation and defensible intercompany policies.

In practice, where a transfer pricing assessment results in an adjustment, the taxpayer may reflect the corresponding accounting correction. However, the process remains strictly domestic and does not involve bilateral co-ordination with foreign tax authorities.

Given the absence of tax treaties, compensating adjustments do not benefit from mutual agreement mechanisms and must be resolved within the Honduran administrative framework.

Local branches of foreign corporations and locally incorporated subsidiaries are generally subject to the same corporate income tax rate and compliance obligations. Both are taxed on Honduran-source income under the territorial system. A branch does not constitute a separate legal entity for corporate law purposes, but for tax purposes it is treated as a taxable presence in Honduras.

There is no preferential or punitive regime applicable solely because the local vehicle is structured as a branch rather than as a subsidiary.

Capital gains derived by non-residents from the sale of shares in Honduran corporations are subject to taxation. A 4% withholding applies on the gross transaction value at the time of transfer. The non-resident seller must subsequently determine the final tax due at a 10% rate on the net gain (ie, the difference between the acquisition cost and the sale price), with credit given for the amount withheld.

Indirect transfers may also be subject to taxation. Where shares of a foreign holding company derive their value primarily from a Honduran subsidiary, the tax authority may apply the economic substance principle to assert Honduran taxing rights over the transaction.

Because Honduras has no double tax treaties in force, no treaty relief is available for either direct or indirect disposals.

Honduran legislation does not contain standalone “change of control” trigger rules comparable to those found in certain treaty jurisdictions. However, a change in ownership that results in the disposal of shares – whether directly or indirectly – may trigger capital gains tax.

In group restructurings, the tax authority may analyse whether the transaction effectively results in the transfer of a Honduran business or underlying assets. The economic reality principle may be invoked to look beyond formal ownership layers where appropriate.

Honduran corporate income tax is not based on formulary apportionment principles. Income attributable to a local affiliate is determined under ordinary accounting rules, subject to transfer pricing adjustments where related-party transactions exist.

An exception applies to certain transportation activities (air, maritime and land transport operated by foreign entities), where taxable income may be deemed as a percentage of gross revenue derived from Honduran sources.

Payments made by a Honduran subsidiary to a foreign affiliate for management or administrative services are deductible, provided that:

• the expense is necessary and directly linked to the generation of taxable income;
• adequate supporting documentation exists;
• the charge reflects arm’s length pricing; and
• the applicable withholding tax has been properly applied and remitted.

The tax authority frequently reviews management fee arrangements to verify the existence of real services and to prevent profit shifting through inflated charges. Substance and documentation are therefore critical.

Related-party financing is not subject to a formal thin capitalisation ratio under Honduran domestic law. Interest paid to a non-resident affiliate is generally deductible, provided that it is:

• connected to the generation of taxable Honduran-source income;
• properly documented; and
• consistent with the arm’s length principle under transfer pricing rules.

In addition, interest payments to non-residents are typically subject to a 10% withholding tax. As a practical matter, withholding compliance is relevant both from an exposure perspective and because failure to withhold may jeopardise the deductibility of the expense at the local level.

Beyond conventional debt instruments, the Tax Administration may also scrutinise intercompany balances that function economically as disguised profit distributions. In particular, shareholder or related-party receivables that do not arise from genuine commercial transactions and remain outstanding beyond 100 calendar days may be recharacterised as advance dividends, triggering dividend withholding tax treatment.

Accordingly, while related-party borrowing is feasible, inbound groups should ensure that intercompany loans and other balances reflect commercial substance, are correctly documented, and are administered under clear repayment terms in order to avoid reclassification risk.

Honduras operates under a territorial tax system. As a general rule, corporate income tax applies only to income derived from Honduran sources. Accordingly, foreign-source income earned by a Honduran corporation is not subject to Honduran corporate income tax. Income generated entirely outside the country and not attributable to a permanent establishment in Honduras falls outside the domestic tax base.

The territorial approach is a defining characteristic of the Honduran tax framework.

Under Honduran tax principles, deductible expenses must be directly linked to the generation of taxable income. Where a Honduran corporation incurs costs exclusively related to the production of foreign-source income that is exempt under the territorial system, those expenses are generally not deductible for corporate income tax purposes.

This reflects the structural symmetry of the territorial regime: income not subject to tax cannot generate deductible costs.

Dividends received by a Honduran corporation from foreign subsidiaries are not subject to corporate income tax in Honduras. Because foreign-source income is excluded from the tax base, repatriated profits from non-resident subsidiaries do not trigger additional domestic taxation. No participation exemption regime is required, as the territorial system itself provides the relief.

Intangible assets developed by a Honduran corporation may be licensed or transferred to foreign affiliates. However, if the transaction generates Honduran-source income, it remains taxable locally.

Where intellectual property is transferred or licensed to a related foreign entity, transfer pricing rules apply. The transaction must reflect arm’s length conditions, and appropriate compensation must be recognised at the Honduran entity level. If a transfer is structured in a way that effectively shifts value abroad without adequate remuneration, the Tax Administration may adjust the taxable base under transfer pricing principles.

Honduras does not have controlled foreign corporation (CFC) legislation. Local corporations are not taxed on the undistributed income of their foreign subsidiaries. Foreign branches operating outside Honduras are likewise not subject to Honduran taxation on foreign-source income. The territorial system eliminates the need for CFC-type inclusion mechanisms.

Honduran tax law does not contain formal substance requirements applicable to foreign subsidiaries of Honduran corporations. However, where cross-border transactions occur between related parties, the Tax Administration may evaluate economic substance under transfer pricing rules and general anti-avoidance principles.

Gains derived by a Honduran corporation from the sale of shares in a foreign affiliate are generally not subject to Honduran corporate income tax. Under the territorial tax system, only income derived from Honduran sources falls within the domestic tax base. Accordingly, capital gains arising from the disposal of shares in non-resident companies are typically treated as foreign-source income.

Tax exposure may arise only where the transaction effectively involves the transfer of Honduran-source assets or economic interests located in Honduras.

Honduran tax legislation does not contain a single codified general anti-avoidance rule (GAAR) comparable to those found in certain OECD jurisdictions. However, several statutory and administrative mechanisms operate to prevent base erosion and artificial loss generation.

A notable measure is the anti-evasion regime requiring certain taxpayers with recurring operational losses and significant gross income levels to pay a 1% advance income tax calculated on gross revenue. This mechanism applies to entities that report consecutive or alternating losses in non-prescribed fiscal periods and exceed statutory gross income thresholds. The advance payment operates as a minimum tax and may be credited against annual income tax liabilities.

In addition, the Tax Administration may invoke the principle of economic reality to recharacterise transactions where the legal form does not reflect their substantive nature. This principle is particularly relevant in indirect share transfers, related-party financing arrangements and intra-group service structures.

Tax evasion is also classified as a criminal offence under the Criminal Code, and administrative penalties may apply in cases of inaccurate reporting or failure to comply with withholding and documentation obligations.

Although Honduras does not maintain a fully developed GAAR framework, the combination of minimum taxation mechanisms, transfer pricing rules and substance-based review provides the authorities with meaningful anti-avoidance tools.

Honduras does not operate a fixed or periodic audit cycle applicable to all taxpayers. The Tax Administration retains discretion to initiate audits within the applicable statute of limitations period. Audits may be triggered by risk indicators, inconsistencies in filings, transfer pricing disclosures or sector-specific review programmes.

In recent years, enforcement has become more data-driven, supported by digital filing systems and expanded information reporting obligations, including transfer pricing documentation and country-by-country reporting requirements.

While routine cyclical audits are not standard practice, compliance oversight has become increasingly structured and technologically supported.

Honduras joined the OECD Inclusive Framework on BEPS in 2019. Since then, certain transparency and transfer pricing measures have been strengthened at the domestic level.

Transfer pricing legislation predates accession to the Inclusive Framework, but subsequent regulatory developments – including country-by-country reporting requirements effective from fiscal year 2025 – reflect increased alignment with BEPS minimum standards. Broader structural reforms, such as CFC rules or global minimum taxation mechanisms, have not been implemented to date.

The Honduran tax administration has shown interest in aligning aspects of domestic regulation with international transparency standards. However, implementation has been gradual and primarily focused on reporting and documentation obligations rather than structural system redesign. Policy discussions regarding broader reform have occurred in recent years, but no comprehensive BEPS-based overhaul has been enacted.

Honduras maintains a territorial tax system. As such, many BEPS concerns relating to worldwide taxation or foreign income deferral are not central features of the domestic regime. The primary BEPS-relevant area in practice is transfer pricing compliance for cross-border related-party transactions.

Honduras continues to position itself as a jurisdiction with a relatively simple corporate tax framework and sector-specific investment incentives.

While international transparency measures have increased, the domestic regime has not incorporated aggressive anti-base-erosion mechanisms such as CFC inclusion rules or interest limitation regimes aligned with BEPS Action 4. This reflects an ongoing balance between fiscal oversight and investment competitiveness.

Key structural characteristics include:

• a territorial tax system;
• the absence of CFC rules;
• no global minimum tax regime;
• no comprehensive treaty network; and
• sector-based incentive regimes.

These features contribute to administrative simplicity, although they also limit international co-ordination mechanisms.

Honduran legislation does not currently contain specific anti-hybrid mismatch rules comparable to BEPS Action 2 recommendations. Hybrid instrument planning is therefore not specifically targeted under domestic law, although general substance and transfer pricing principles may apply where relevant.

The territorial system remains a defining feature of Honduran corporate taxation. Only income sourced within Honduras is subject to income tax.

Interest payments are deductible where connected to taxable Honduran-source income, regardless of the residence of the lender, subject to transfer pricing and withholding requirements. No proposals to transition toward a worldwide system have been enacted.

Honduras does not apply CFC rules and has not enacted legislation to tax undistributed foreign subsidiary income. While international discussions on anti-deferral measures continue globally, no formal CFC proposal has been approved domestically.

Domestic anti-avoidance mechanisms operate primarily through minimum tax provisions, transfer pricing rules and the application of the economic substance principle, rather than through treaty-based limitations. In particular, Honduran legislation includes measures designed to prevent the artificial erosion of the tax base, such as the advance income tax applicable to taxpayers reporting recurring losses while maintaining significant gross income levels.

Honduras does not currently maintain a network of double taxation conventions. As a result, treaty-based anti-abuse provisions – such as limitation-on-benefits clauses or principal purpose tests – do not form part of the domestic anti-avoidance framework. Consequently, anti-avoidance enforcement relies predominantly on domestic tax rules, administrative review and transfer pricing controls.

Transfer pricing remains the principal BEPS-aligned enforcement area. Recent developments include enhanced reporting obligations and increased scrutiny of cross-border financing and service arrangements. The tax authority has shown growing technical engagement in this field, particularly in documentation reviews.

Country-by-country reporting became applicable from fiscal year 2025, pursuant to administrative regulation. This represents the most significant recent transparency measure aligned with BEPS minimum standards. Multinational groups meeting the relevant thresholds must assess reporting obligations carefully.

Honduras has not enacted a standalone digital services tax. However, digital services provided to Honduran users may fall within the scope of existing indirect tax and income tax rules where source criteria are met. No Pillar One implementation has been introduced.

Although policy discussions concerning taxation of the digital economy have taken place, no formal digital taxation regime has been approved. Digital commerce is therefore taxed under general sourcing and withholding rules.

Payments made to non-residents for the use of intellectual property in Honduras are subject to withholding tax at the applicable statutory rate. No differentiation is made based on whether the recipient is located in a low-tax jurisdiction, as Honduras does not maintain a formal tax haven list for enhanced withholding purposes.