Honduras

The country profile includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by the employers. Results reported include the average and marginal tax burdens for eight different family types.

It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

  
Honduras 2013
Tax / benefit of single persons

Wage level (% of average wage)

67

100

167

67

Number of children

0

0

0

2

1.

Gross wage earnings

77 362

115 465

192 827

77 362

2.

Standard tax allowances

52 717

58 981

71 698

52 717

Basic allowance

40 000

40 000

40 000

40 000

Married or head of family

0

0

0

0

Dependent children

0

0

0

0

Deduction for social security contributions and income taxes

0

0

0

0

Work-related expenses

0

0

0

0

Other

12 717

18 981

31 698

12 717

3.

Tax credits or cash transfers included in taxable income

0

0

0

0

4.

Central government taxable income (1-2+3)

24 645

56 484

121 129

24 645

5.

Central government income tax liability (exclusive of tax credits)

0

0

1 669

0

6.

Tax credits

0

0

0

0

Basic credit

0

0

0

0

Married or head of family

0

0

0

0

Children

0

0

0

0

Other

0

0

0

0

7.

Central government income tax finally paid (5-6)

0

0

1 669

0

8.

State and local taxes

0

0

0

0

9.

Employees’ compulsory social security contributions

Gross income

0

4 200

4 200

0

10.

Total payments to general government (7+8+9)

0

4 200

5 869

0

11.

Cash transfers from general government

0

0

0

0

For head of family

0

0

0

0

For two children

0

0

0

0

12.

Take-home pay (1-10+11)

77 362

111 265

186 957

77 362

13.

Employer’s compulsory social security contributions

0

8 148

8 148

0

14.

Average rates

Income tax (7 / 1)

0.0%

0.0%

0.9%

0.0%

Employees’ social security contributions (9 / 1)

0.0%

3.6%

2.2%

0.0%

Total payments less cash transfers [(10-11) / 1]

0.0%

3.6%

3.0%

0.0%

Total tax wedge including employer’s social security contributions [(10+13-11) / (1+13)]

0.0%

10.0%

7.0%

0.0%

15.

Marginal rates

Total payments less cash transfers: principal earner

0.0%

0.0%

12.5%

0.0%

Total payments less cash transfers: spouse

N.A.

N.A.

N.A.

N.A.

Total tax wedge: principal earner

0.0%

0.0%

12.5%

0.0%

Total tax wedge: spouse

N.A.

N.A.

N.A.

N.A.

Honduras 2013
Tax / benefit of married couples

Wage level (% of average wage)

100-0

100-33

100-67

100-33

Number of children

2

2

2

0

1.

Gross wage earnings

115 465

153 568

192 827

153 568

2.

Standard tax allowances

58 981

105 244

111 698

105 244

Basic allowance

40 000

80 000

80 000

80 000

Married or head of family

0

0

0

0

Dependent children

0

0

0

0

Deduction for social security contributions and income taxes

0

0

0

0

Work-related expenses

0

0

0

0

Other

18 981

25 244

31 698

25 244

3.

Tax credits or cash transfers included in taxable income

0

0

0

0

4.

Central government taxable income (1-2+3)

56 484

56 484

81 129

56 484

5.

Central government income tax liability (exclusive of tax credits)

0

0

0

0

6.

Tax credits

0

0

0

0

Basic credit

0

0

0

0

Married or head of family

0

0

0

0

Children

0

0

0

0

Other

0

0

0

0

7.

Central government income tax finally paid (5-6)

0

0

0

0

8.

State and local taxes

0

0

0

0

9.

Employees’ compulsory social security contributions

Gross income

4 200

4 200

4 200

4 200

10.

Total payments to general government (7+8+9)

4 200

4 200

4 200

4 200

11.

Cash transfers from general government

0

0

0

0

For head of family

0

0

0

0

For two children

0

0

0

0

12.

Take-home pay (1-10+11)

111 265

149 368

188 627

149 368

13.

Employer’s compulsory social security contributions

8 148

8 148

8 148

8 148

14.

Average rates

Income tax (7 / 1)

0.0%

0.0%

0.0%

0.0%

Employees’ social security contributions (9 / 1)

3.6%

2.7%

2.2%

2.7%

Total payments less cash transfers [(10-11) / 1]

3.6%

2.7%

2.2%

2.7%

Total tax wedge including employer’s social security contributions [(10+13-11) / (1+13)]

10.0%

7.6%

6.1%

7.6%

15.

Marginal rates

Total payments less cash transfers: principal earner

0.0%

0.0%

0.0%

0.0%

Total payments less cash transfers: spouse

0.0%

0.0%

0.0%

0.0%

Total tax wedge: principal earner

0.0%

0.0%

0.0%

0.0%

Total tax wedge: spouse

0.0%

0.0%

0.0%

0.0%

The national currency is the Lempira (HNL). In 2013, the average exchange rate was HNL 19.73 to USD 1. In that year, the average worker earned HNL 115 465.02.

The Report includes estimates of the tax wedge over the whole of the income distribution ordered by deciles of total labour income of formal wage earners derived from the household surveys.

Deciles of Incomes

1

2

3

4

5

6

7

8

9

10

Local currency (HNL)

47 014

68 493

76 957

83 682

88 106

95 396

113 091

138 634

177 428

302 226

USD1

2 382

3 471

3 900

4 241

4 465

4 834

5 731

7 025

8 991

15 316

Dollars in PPP2

4 674

6 810

7 651

8 320

8 760

9 485

11 244

13 783

17 640

30 048

Ratio to the minimum wage3

0.6

0.9

1.0

1.0

1.1

1.2

1.4

1.7

2.2

3.8

1. Average official exchange rates published by the central bank.

2. Calculated using the implied conversion rate (National currency per current international dollar in purchasing power parity) published by the IMF in the World Economic Outlook dataset.

3. Ratio of the income decile to the official minimum wage of the country.

1. Personal income tax system

The fiscal year is the calendar year.

1.1. Central government income tax

Law decree No. 25-63 establishes the income tax in Honduras. This tax applies to employment income, self-employment, business income and investment income. It covers all kinds of profits, rents, gains, utilities, dividends, salaries, wages, and fees.

Employment income refers to salaries, pensions, bonuses, commissions and benefits in kind paid to an employee in exchange for his work.

Exempt income – the most notable types of income relating to employment are:

  • Vacation bonus of up to thirty days paid in accordance with the Labour Code.

  • The thirteenth and fourteenth months’ bonuses up to ten times the average minimum wage, in each case.

1.1.1. Tax unit

Members of the family are taxed separately.

The personal income tax is applied to residents and other persons residing in Honduras for more than 3 consecutive months, regardless of their nationality.

1.1.2. Tax allowances and tax credits

1.1.2.1. Standard tax allowances and tax credits

  • A basic allowance of HNL 40 000.

1.1.2.2. Main non-standard tax allowances and tax credits

  • Donations and bequests to the state, municipalities, education institutions, sports or charitable institutions up to10% of the taxable income.

1.1.3. Tax schedule

The personal income tax liability was calculated on the taxable income according to the following schedule in 2013:

Income (HNL) up to

Marginal rate (%)

110 000

0.0

200 000

15.0

500 000

20.0

above

25.0

1.2. State and local taxes

No state or local taxes are levied on wages.

2. Compulsory social security contribution to schemes operated within the government sector

2.1. Employee contributions

Program

Marginal rate (%)

Old age, disability and death program (IHSS)

1.0

Healthcare and Maternity Insurance (IHSS)

2.50

Social Housing Fund – FOSOVI

1.5

The employee contributions are levied on gross wages. The lower threshold is the monthly minimum national wage, which was equal to HNL 6 670.85 in 2013. The upper ceiling is HNL 7 000 according to the SOJD Resolution No.02-29-02-2011 that applied for that year. The thirteenth and fourteenth month bonuses are exempt from social security contributions.

2.2. Employer contributions

Employers are required to contribute to the following public programs.

Program

Marginal rate (%)

Old age, disability and death program (IVM)

2.0

Healthcare and Maternity Insurance (SEM)

5.0

Work Injury

0.2

Social Housing Fund – FOSOVI

1.5

Professional Formation National Institute – INFOP

1.0

The employer contribution rates are applied to the payroll.

3. Universal cash transfer

3.1. Amount for spouse and for dependent children

None.

4. Main changes in tax/benefit since 2013

In July 2015, a social security law was passed introducing a new multi-pillar social security scheme. The program is structured with a collective capitalization pillar and a complementary pillar with individual accounts. The most important development is that employers will make a new payment of 4% of the payroll in respect of labour insurance. Companies with less than 10 workers are exempt from this contribution until January 2018.

5. Memorandum items

5.1. Identification of an AW

The data refer to the earnings of workers within the formal sector. The average worker’s wage was calculated using microdata from the national household surveys.