HONDURAS Law and Practice Contributed by: Alberto Zúniga, Carlos Zúniga and Garhem Padilla, Baker Tilly Honduras
In addition, a 5% solidarity contribution applies where net taxable income exceeds the statutory thresh - old, 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 appli - cable revenue threshold is met, the taxpayer must pay the higher amount. Honduras operates under a ter - ritorial 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. Com - panies must prepare financial statements in accord - ance 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 Hondu - ran system therefore follows a book-to-tax adjustment model rather than a purely fiscal accounting frame - work. 2. Corporate Tax Regime 2.1 Taxable Profits
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 con - ducted at arm’s length; • expenses lacking adequate documentation or eco - nomic 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 nec - essary, 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 dif - ferent 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. 2.2 Technology Investments 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 tech - nological advancement and innovation. The legislation
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