General

VAT/GST registration

VAT/GST compliance

International Supplies of Goods and Services

VAT/GST recovery

Tax points

Invoices

Record-Keeping Requirements

Audits

Special Indirect tax rules

Rulings

Types of indirect taxes (VAT/GST and other indirect taxes).

VAT, known as sales tax (impuesto sobre ventas).

Are there other indirect taxes?

• Consumption tax.
• Production tax. 
• Contribution to the preservation of road assets. 
• Tax on public roads services. 
• Tax on airport services. 
• Tax on tourist services. 
• Temporary security rate.

What supplies are subject to VAT?

All goods and services are taxed with this tax, except for specific goods and services exempted by law.

What are the standard or other rates (i.e. reduced rate) for VAT/GST and other indirect taxes?

VAT

15 percent (standard); 18 percent on sale of first-class airline tickets; and 18 percent on import or sale of alcoholic beverages, carbonated water and tobacco products.

Production and consumption tax

• Cigarettes 350 Honduran lempira (HNL) per thousand (about 17 US dollars (USD)). 
• Alcoholic beverages and carbonated waters HNL0.6787 to HNL32.6725 per liter (about USD0.0295 to USD1.4205).

Contribution for preservation of road assets

• Production and import of fuels USD0.03 to USD1.4089. 

Taxes on specific services and activities 

• Tax on public roads service HNL200 to HNL2,200 (about USD8.70 to USD95.65). 
• Tax on airport services. National departures HNL52.10 (about USD2.16) and international departures USD47.59. 
• Tax on tourist services.
• Services provided by hotels, rental cars and travel agencies 4 percent.

Temporary security rate

This contribution taxes the banking transactions, the contribution goes from HNL2 up to a maximum of HNL1000.

Who is required to register for VAT/GST and other indirect taxes?

VAT 

• It is required for local individuals and legal entities, including exporters that sell goods and provide services. 
• Importers of goods.

Production and consumption tax

• Producers and importers of cigarettes and other tobacco products. 
• Producers and importers of alcoholic beverages and carbonated water.

Contribution for preservation of road assets

Producers and importers of fuels.

Tax on public road services

Individuals and legal entities that own vehicles.

Tax on airport services

Legal entities that manage Honduran airports.

Tax on tourist services

Legal entities established as hotels, car lessees and travel agencies.

Is voluntary registration for VAT/GST and other indirect taxes possible for an overseas company (e.g. if the annual turnover is below the relevant VAT/GST and other indirect taxes registration threshold)?

Voluntary registration is not possible for non-established businesses with activity in Honduras.

Are there any simplifications that could avoid the need for an overseas company to register for VAT?

No.

Does an overseas company need to appoint a fiscal representative?

It is not mandatory or necessary to appoint a fiscal representative for an overseas company.

Which forms and supporting documentation does an overseas company need to submit for VAT/GST and other indirect tax registrations?

Not applicable.

Is grouping* for VAT/GST and other indirect taxes possible?

No.

How frequently are VAT/GST and other indirect tax returns submitted?

VAT returns are submitted monthly.

What are the exchange rate rules in your country?

The exchange rates are fixed by the Central Bank of Honduras based on the references from the foreign exchange market.

Exports – Goods

How are exports of goods treated?

The impuesto sobre ventas (ISV/VAT) amount over goods to be exported is at zero (0), this means that good exports are exempted from ISV, nevertheless the person has to be registered as an exporter in the Servicio de Administración de Rentas (SAR) when initiating operations; in addition, they are obligated to file tax returns before tax authorities. It is important to note that exporters are entitled to the tax credit as long as they have paid the ISV when purchasing goods, services, good importations; and note that although imports were not subject to pay ISV, taxpayers are obligated to issue tax receipts.

Exports – Services

How are exports of services treated for VAT/GST purposes?

With respect to ISV, exports of services according to Article 6 of the Ley del Impuesto Sobre Ventas (LISV) are at zero (0) tax rate. This means that service exports are exempted from ISV; however, Article 17 of the LISV indicates that a service is rendered in national territory when it takes place, totally or partially, within the borders of Honduras, whether the active and passive subjects are natural or legal persons, national or foreign, or whether or not they have their domicile or not in the country. Based on the above, there could be objections from the tax authority that, if the service is provided in Honduras, the zero tax rate is not applicable considering that Honduran tax legislation does provide a definition of export of services.

The person has to be registered as an exporter in the SAR when initiating operations; in addition, they are obligated to file tax returns before tax authorities. It is important to note that exporters are entitled to the tax credit right as long as they have paid the ISV when purchasing goods, services, good importations; and note that although imports were not subject to pay ISV, taxpayers are obligated to issue tax receipts.

Imports – Goods

How are goods dealt with on importation?

Goods imports are subject to ISV and the taxable basis used must be the CIF value, plus customs duties, selective consumption taxes, specific taxes and other charges to importations.

Imports – Services

How are services brought in from abroad treated for VAT purposes?

Service imports are subject to ISV payment and the tax must be based on the amount shown in the invoice.

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Invoices that support the input VAT must meet the requirements established in the invoicing regime.

Are there any restrictions to the deduction of input VAT?

As mentioned above, invoices that support VAT must meet the requirements established in the invoicing regime.

When is VAT/GST due on a supply of goods or services?

In the import stage and each step of the sales process of goods and services.

Is a business required to issue tax invoices?

Yes.

Is it possible/mandatory to issue invoices electronically?

Yes, it is possible but not mandatory to issue invoices electronically. Approval from the tax authority is required.

Is it possible for the vendor to issue an invoice (i.e. self-billing)?

Yes, it is possible.

How long must records and invoices be retained?

The prescribed period in Honduras is 5 years.

Can invoices be stored abroad?

No, tax proofs must be kept in the companies domicile.

Do tax audits take place on a regular basis?

No, if the tax authorities detect an irregularity, an audit is performed within 5 years of the date of the irregularity.

Are audits done electronically in your country (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

• The non-payment of collected taxes (VAT) or the partial payment thereof after the deadlines will force collectors to pay the treasury the sums due and a surcharge of 5 percent per month (or fraction of a month) up to a maximum of 60 percent. 
• The non-submission or submission outside of the time set for the VAT return submission will be fined with a penalty of 1 percent of the respective tax if the return is submitted within five days of the date of submission. After this period, the fine will be 2 percent per month (or fraction of month) up to a maximum of 24 percent.

Are there any special rules for the sale of a company by one taxpayer to another where VAT is not due on the sale?

No.

Are there unique specific indirect tax rules that you would not expect to find in ‘standard’ VAT jurisdictions?

No.

Does a reverse charge mechanism apply for goods or services?

This mechanism does not apply in Honduras.

Are there indirect tax incentives available (e.g. reduced rates, tax holidays)?

Companies operating under special systems (free-tax zone) could get an exemption of the payment of import taxes, VAT and income taxes.

Are rulings and decisions issued by the tax authorities publicly available?

Yes, they can be found at Servicio De Administracion De Rentas.

Rubén Alonzo
Senior Partner
KPMG in Honduras
T: +504 2238 5605
E: realonzo@kpmg.com

Plinio Vasquez
Partner, Tax
KPMG in Honduras
T: +504 2238 5605
E: pliniovasquez@kpmg.com

Luis Zelaya
Senior Supervisor, Tax
KPMG in Honduras
T: +504 2238 5605
E: lzelaya@kpmg.com