HONDURAS Law and Practice Contributed by: Alberto Zúniga, Carlos Zúniga and Garhem Padilla, Baker Tilly Honduras
tions are not subject to a distinct shareholder taxa - tion regime. 3.5 Taxation of Individuals on Shares in Public Corporations 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 share - holder 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 deter - mine the final tax due on the net gain. The absence of a preferential regime for publicly listed shares reflects the simplified and uniform equity taxa - tion structure under Honduran law. 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes In the absence of income tax treaties, withholding taxes in Honduras apply strictly under domestic leg - islation. The principal withholding rates applicable to 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 exemp - tion 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 pay - non-residents are: • dividends: 10%; • interest: 10%; and • royalties: 25%.
er 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 withhold - ing compliance and deductibility at the local level. 4.2 Key Treaty Jurisdictions for Inbound Investment Honduras does not currently have any double taxa - tion 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. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices Given that Honduras has no effective income tax trea - ties, 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. 4.4 Transfer Pricing Issues for Inbound Investors Transfer pricing rules have been applicable in Hon - duras 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:
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