Honduras: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Residents are taxed on their worldwide income. Married couples are generally taxed jointly, but they may elect for separate taxation.
INCOME TAX
Income tax is payable on income obtained by all persons and entities (except companies located in Export Processing Zones or Free Trade Zones). Unlike nonresident individuals, residents are entitled to personal allowances and tax credits. The tax bands (updated every five years) are as follows (2006):
INCOME TAX |
|
| TAXABLE INCOME, HNL (US$) | MARGINAL TAX RATE |
| Up to 70,000 (US$3,561) | nil |
| 70,000 - 100,000 (US$5,087) | 10% on band over US$3,561 |
| 100,000 - 200,000 (US$10,174) | 15% on band over US$5,087 |
| 200,000 - 500,000 (US$25,436) | 20% on band over US$10,174 |
| Over 500,000 (US$25,436+) | 25% on band over US$25,436 |
| Source: Global Property Guide | |
Allowances
Residents can deduct the following allowances from their gross income:
- Payments for education costs and fees paid to doctors: maximum of HNL20,000 (US$1,017) annually
- Payments for professional services other than those indicated above: maximum of HNL5,000 (US$254)
- Gifts made to the state and legally recognized institutions
- Medicines and medication of the elderly, retired, and/or disabled individuals: maximum of HNL10,000 (US$509)
The Tourism Promotion Law grants several benefits for retirees interested in residing in Honduras, including duty-free entry of a car and home appliances. Retirement income not derived from Honduran sources is exempt from taxes.
To become eligible for these benefits, retirees must submit an application, through a Honduran attorney, to the Ministry of Tourism. Beneficiaries must bring into Honduras, through the national commercial banking system, a minimum of US$600 per month. Non-retired persons must bring in a minimum of US$1,000 per month.
Capital Gains
Capital gains earned by nonresidents from selling real property located in Honduras are taxed at a fixed rate of 10%. The taxable gain is the gross selling price less acquisition costs and improvement costs.
Capital gains less than HNL50,000 (US$) realized by resident individuals from selling their principal residence are exempt from taxation only if the gains are reinvested in a property that would serve as their principal residence. Gains exceeding this threshold amount are taxable.
PROPERTY TAX
REAL ESTATE TAX (Impuesto sobre bienes inmuebles)
Honduras collects annual property taxes based on the Ley de Municipalidades (Law of Municipality). The tax rates are levied on the property’s declared value and vary depending on the municipality. In the capital Tegucigalpa, the rate is 5% for properties located in the Central District. It is from 0.1% to 0.8% for properties in the San Pedro Sula, and 0.15% for urban properties located in other areas.
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