Worldwide VAT, GST and Sales Tax Guide
non-established supplier of the service may be required to register for ST in every jurisdiction where it has customers that are not taxable persons. In Honduras, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. Normally the sale of the assets of a ST-registered or ST-registrable business will be subject to ST at the appropriate rate. However, a transfer of a business as a going concern (TOGC) may be outside the scope of the tax under certain conditions. A TOGC is the sale of a business or part of a business capable of separate operation including assets. Where the sale meets the conditions, the supply is treated as outside the scope of ST. In Honduras, a TOGC is treated as outside the scope of ST, which includes the sale of a mercantile establishment and the sale of the assets of the mercantile establishment. The sale of the mercantile establishment would be subject to the real estate tradition tax, a rate which is 1.5% on the value of the transaction. However, in the event of a transfer of inventory, the transaction may be subject to sales tax at a rate of 15% of the transaction value.
Transactions between related parties. In Honduras, there are no specific rules that indicate the value for ST purposes for transactions between related parties. However, under local law, transfer pricing rules are applicable in Honduras. The provisions established in the transfer pricing law and its regulations follow in general terms the principles of the Organisation for Economic Co-operation and Development (OECD) and are applicable to national or transnational transactions carried out between related entities.
C. Who is liable
A taxable person for ST purposes is any entity or individual that supplies taxable goods or services in Honduras in the ordinary course of a trade or business. Taxable persons that deal primarily with final consumers may be designated as withholding agents for ST. All businesses must register as taxable persons; no separate registry for ST taxable persons exists. The national tax registry number (i.e., Registro Tributario Nacional [RTN]) is used for ST purposes.
Exemption from registration. The ST law in Honduras does not contain any provision for exemption from registration.
Voluntary registration and small businesses. The ST law in Honduras does not contain any provision for voluntary ST registration. However, a simplified sales tax regime is established for natural or legal persons that have a single commercial establishment and whose taxable sales do not exceed HNL250,000 per year; they will not be responsible for the collection of the ST, remaining only obliged to file an annual sales return no later than 31 January of the following fiscal year. Further details can be found under the Special schemes subsection below.
Group registration. Group ST registration is not allowed in Honduras.
Fixed establishment. In Honduras, there is no legal definition of a fixed establishment for ST purposes. However, a permanent establishment (PE) definition was included in the transfer pricing regulations issued in 2014 and it was supplemented in September 2015, which also applies to ST. A PE is a fixed place of business where an individual or an entity, resident or domiciled in another country, engages in business activities within Honduras. Note that further to the recent modification of the PE rule, a fixed place of business should be understood as:
• Any place of management of a nonresident
• Branches, agencies or offices acting on behalf of a nonresident
• Factories, workshops, immovable property or other similar installations
• Mines, mineral deposits, quarries, forests, factories, or other center of exploitation or extraction of natural resources
Tax representatives. Non-established businesses must fill out and sign the Return of Registration and Updating to the National Tax Registry (Form SAR-410-PJ) and include a special power of attorney granted to a legal representative in Honduras, its DNI or passport or resident card for foreigners when registering in the National Tax Registry.
Reverse charge. There is no reverse charge applicable for importation of services in Honduras. A non-established entity is required to register as a taxable person if it engages in business activities within Honduras.
Domestic reverse charge. A domestic reverse charge is applicable for certain transportation services. Additionally, in the case of large taxable persons, they should act as withholding agents for ST purposes when the following payments are made: freight transport; cleaning and fumigation services; printing services; research services; security services; and the rental of offices, machinery and equipment.
Digital economy. There are no specific rules regarding the taxation of the digital economy for ST purposes. However, generally taxable events are treated the same whether or not they are transacted by digital means. The normal ST registration rules apply for such supplies by non-established businesses.
Nonresident providers of electronically supplied services for business-to-consumer (B2C) supplies will not be required to register and account for ST in Honduras. No ST is accounted for on the supplies.
Nonresident providers of electronically supplied services for business-to-business (B2B) supplies will be required to register an account for ST in Honduras.
There are no other specific e-commerce rules for imported goods in Honduras.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Honduras.
Registration procedures. Entities or individuals that are subject to any type of tax must register as taxable persons using Form SAR-410. This form must contain the following information: complete name of taxable person, company address, date of incorporation, company registration number, legal representative tax ID, shareholders’ names and tax IDs, company’s main business activity, expected operating start date, company’s year-end closing date, tax obligations and withholding agents, registry on a special scheme, tax exemptions and its current resolution.
Taxable persons must also notify the tax authority of the use of printed invoices or receipts.
Deregistration. For ST purposes: The taxable person must present a written notification (it must contain the statement where the reasons and the fiscal period from which the cancellation of the obligation is notified, as well as the file number where the non-use of tax documents was notified, if applicable). The taxable person must also submit a copy of the last five tax documents used, and the two subsequent ones not used, from the range of documents authorized in the last application. The written notification must be accompanied by supporting documentation (e.g., lease contracts, deed or purchase contract, change of economic activity) if applicable. In addition, the taxable person must provide proof of data update from the National Tax Registry. Finally, the taxable person must present an official receipt of payment for HNL200.
Changes to ST registration details. A taxable person must notify the tax authorities of any change that may result in a modification of its tax liability (e.g., changes to the company’s name, address, company’s main business activity or whether the company is eligible for tax exemptions).
Such notifications can be made online (on the SAR website, by clicking on the “RTN Update Request” option or by paper (or personally at the tax authorities’ offices by filing Form SAR410-PJ). Such notifications must be made within 10 days of the change taking place.
In addition, the tax administration may exercise its powers of data verification in compliance with the formal obligations of the tax obligors. The data update service in the National Tax Registry through the SAR website allows tax obligors or representatives to make the pertinent modifications to comply with their formal tax obligation of always keeping their data updated.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of ST.
The ST rates are:
• Standard rate: 15%
• Special rate: 18%
The standard rate of ST applies to all supplies of goods or services unless a specific measure provides for a special rate or an exemption.
Examples of goods and services taxable at 18%
• Alcoholic beverages
• Cigarettes
• Domestic and international air transportation tickets in executive class, first class, business class or similar standards
The term “exempt supplies” refers to supplies of goods and services that are not subject to ST and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Goods that form part of the essential items of popular use
• Pharmaceutical products for human use
• Calcium hypochlorite, sodium hypochlorite and chlorine
• Raw materials and tools for agricultural and agro-industrial production; major and minor poultry species and fish, herbicides, insecticides, pesticides, rodenticides and other anti-rodents, live animals; means of animal reproduction; seed and vegetative material for the sowing and sexual and asexual spreading; raw material for the elaboration of balanced food in its final presentation, except that destined for pets
• Medical services
• Personal insurance and reinsurance
• Gasoline, diesel, bunker “C,” kerosene, LPG gas, Av-jet, crude oil or reconstituted oil
• Books, newspapers, scientific, technical and cultural magazines
• Bovine leather and skins destined for small industry and handicraft use
• Electric energy services except for consumption exceeding seven hundred and fifty kilowatts/ hour
• Education services
• Passenger land transportation services
• Banking and financial services
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Honduras.
E. Time of supply
The time when ST becomes due is called the “time of supply” or “taxable event.”
Examples of items for which input tax is nondeductible
• ST paid on items or services for personal consumption
• ST paid on gifts or presents
Examples of items for which input tax is deductible (if related to a taxable business use)
• ST paid on purchases of goods or fixed assets to produce sales subject to ST
• ST paid for services needed to produce goods or other services subject to ST and repair services
Partial exemption. Proportionality rules are applicable according to the Honduran legislation. In this sense, when individuals and entities sell both goods or services exempt and subject to ST, the ST paid in the acquisition of goods and services directly associated with the subject activity should give rise to the right of input tax. In the cases that the acquisition of goods and services cannot be directly linked only to a subject activity from the taxable person, it should give right to input tax in the corresponding percentage of the subject activity, for its part, the credit related to exempt operations will constitute a cost or expense.
Approval from the tax authorities is not required to calculate the input tax deduction credit in Honduras. The guidelines stipulated in the sales tax law must be followed to calculate the tax credit. Special methods of calculation are not allowed in Honduras.
Capital goods. The input tax incurred on the acquisition of a capital good should give rise to the right of input tax, as long as it is associated to an activity subject to ST for the taxable person. If the capital good is used for both subject and exempt activities, the taxable person should have the right of input tax in the percentage correspondent to subject activities. The Honduran legislation does not establish a definition of capital goods. If the ST paid on the acquisition of the capital good is used as input tax, such amount should not be included as part of the cost of the asset for depreciation.
Refunds. If the amount of input tax recoverable in a month exceeds the amount of output tax payable, the taxable person obtains an input tax credit. It should be noted that the right to request a transfer or refund is time-barred. The right to claim the tax credit expires in five years, pursuant to the Section 144 from the Tax Code, therefore the credit may be carried forward to offset output tax in subsequent ST periods, when claimed to be refunded.
Pre-registration costs. Input tax incurred on pre-registration costs in Honduras is not recoverable. Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) cannot be recovered in Honduras.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Honduras.
G. Recovery of ST by non-established businesses
Input tax incurred by non-established businesses that are not registered for ST in Honduras is not recoverable. However, diplomatic consular delegations, international organizations and agencies are entitled to reimbursement for ST paid in Honduras. Depending on the claimant’s status, the claimant may request a refund of the ST or exercise the right to offset the ST credit by making subsequent purchases subject to ST.
H. Invoicing
ST invoices. Taxable persons who transfer goods and/or provide services of any nature are obliged to issue a ST invoice. An invoice is generally necessary to support a claim for input tax credit.
In the event invoices cannot be issued, the taxable person may use other tax receipts duly authorized by the tax authorities.
The Honduran invoicing regulations establish that the taxable persons who are interested in printing authorized ST invoices will be able to do so in two methods:
• Printing through printing houses duly registered at the Tax Registry of Printers
• Self-printing through cash registers or computer systems
Self-printed invoices or receipts include a barcode that contains graphic representation of the information contained in the invoice or receipts and/or supplementary documents.
It is important to note that invoices must comply with the requirements established in the Billing Regime to allow the input tax incurred to be deductible.
Credit notes. A credit note can be used to support an accounting adjustment, cancel transactions, accept returns and grant discounts made after the issuance of the corresponding ST invoice (e.g., the granting of a discount or bonus, a change in price or the return of the goods). A credit note must include the same information as the invoice to be modified.
Electronic invoicing. Electronic invoicing is allowed in Honduras, but not mandatory.
Scope of electronic invoicing. For B2B, B2C and business-to-government (B2G) supplies, electronic invoicing is allowed but not mandatory in Honduras. There is no threshold beyond which taxable persons are required to adopt electronic invoicing in Honduras. The requirements related to electronic invoicing are the same as those for paper invoicing. While electronic invoicing is allowed in Honduras, in practice it is not used.
Simplified ST invoices. Simplified ST invoicing is not allowed in Honduras. As such, full ST invoices are required.
Self-billing. Self-billing is allowed in Honduras. It can only be used for costs and expenses incurred for the purchase of goods and/or rendering of services of unskilled labor and may not be used to support a ST credit. The total amount of the transactions supported by the purchase receipt may not exceed 5% of the total operating expenses deductible from the gross taxable income, excluding financial expenses.
Proof of exports. ST does not apply on supplies of exported goods. However, to qualify as ST-free, exports must be supported by customs documents that prove the goods have left Honduras. Suitable evidence includes invoices and bills of lading.
Foreign currency invoices. ST invoices are generally issued in the domestic currency, which is the Honduran lempira (HNL). However, a taxable person can issue invoices with another currency denomination, but to do so it must indicate the exchange rate in effect on the date of issuance.
Supplies to nontaxable persons. There are no special rules for invoices issued for supplies made by taxable persons to private consumers. Full ST invoices are required to be issued.
Records. In Honduras, examples of what records must be held for ST purposes include accounting books, invoices or equivalent receipts as supporting documents for the activities carried out and supporting documents authorized by the tax authorities.
In Honduras, ST books and records must be held outside of the country. However, there is no provision in the Honduras ST law outlining where records should be held. In practice, copies of records can be held outside of Honduras. However, note that records must be available to be provided to the tax authorities upon request during a tax audit, in a timely manner.
Personal liability for company officers. Company officers can be held personally liable for errors and omissions in ST declarations and reporting in Honduras. The ST law doesn’t make distinction between the owner of the company, managers, administrative personal, accountant, etc. It outlines that if whoever is responsible for the company’s commercial accounting, books or tax records disregards said obligation, keeps different accounts that hide the true situation of the company, does not record economic operations or does so falsely or reflecting fictitious operations, must be punished by imprisonment from six months to two years, if this facilitates the commission of a crime of tax fraud or subsidy fraud or a crime against social security or the pension system.
Statute of limitations. The statute of limitations in Honduras is five years. This only applies for obligations relating to taxable persons registered in the National Tax Registry. The tax authorities should be able to go back to review returns for a five-year period for registered taxable persons. In the other cases (i.e., non-registered taxable persons), the statute of limitations should be seven years.