HONDURAS Law and Practice Contributed by: Alberto Zúniga, Carlos Zúniga and Garhem Padilla, Baker Tilly Honduras
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 rec - ognised 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 fis - cal 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 separa - tion between ordinary income and capital gain taxa - tion. Overall, Honduras maintains a restrictive and sector-specific loss relief framework rather than a broad-based carry-forward system applicable to all taxpayers. 2.5 Deduction of Interest 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 regu - lations. Interest paid to non-residents is subject to a 10% withholding tax, and compliance with withholding obligations is a condition for deductibility. 2.6 Consolidated Tax Grouping 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 utilisa - tion is strictly limited to the entity that generated the loss and, where applicable, only within the sectoral limitations described above. Groups therefore com - monly rely on structural planning rather than consoli - dation mechanisms to manage tax efficiency. 2.7 Capital Gains Capital gains realised by corporations are taxed at a flat rate of 10%. The taxable gain is generally calculat - ed 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 exemp - tion where statutory requirements are met. Non-residents are subject to a 4% withholding tax on the gross transaction value, followed by a final settle - ment to determine the effective 10% tax on the net gain. 2.8 Other Taxes on Transactions 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 trans - actions; • 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. 2.9 Other Notable Taxes 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.
216 CHAMBERS.COM
Powered by FlippingBook