Located in the middle of Central America, Honduras has a democratic government and a free market company. The country has suffered domestically but now is ready for business growth and foreign investment. A diverse array of opportunities for investors can be found in Honduras industries like textiles, agricultural productions and call centers.
In order to start a business in Honduras, you will have to choose what type of entity you would like your company to be. The most common are:
- Sociedad de Responsabilidad Limitada, a limited liability company
- Sociedad Anónima, Public limited company
The Honduras limited liability company is the most preferred choice when setting up a business. This type of entity requires at least one director and two shareholders that do not need to be a resident of Honduras and can be any nationality.
The requirements for a public limited company are two shareholders, either individuals or legal entities and at least one director. The appointed director should not be a resident of Honduras. A statutory auditor must also be appointed for this type of entity.
After choosing the entity type, there are six steps required to start a business in Honduras.
- Obtain the public deed with a notary public present who will draw up the organizational paperwork.
- Register in the Mercantile registry which is located at the Chamber of Commerce and Industry of the municipality of domicile.
- Obtain the National Tax Registry (Registro Tributario Nacional, RTN) at the Servicio de Administracion de Rentas (SAR), Ministry of Finance. This process can take anywhere from 23-25 business days.
- Apply for an Operation Permit before the municipality of domicile. This process can take 2-3 weeks to be completed.
- Register and obtain an import and export licence. This can take about 20 days.
- There are three registrations necessary for a company with employees: registering at the Social Fund for Housing (Régimen de Aportaciones Privadas RAP), registering at the Social Security Institute, (Instituto Hondureño de Seguridad Social IHSS), and registering at the Hand Labour Training Institute (Instituto Hondureño de Formación Profesional INFOP). These processes take 1-2 days each.
Having a local expert to help with these requirements can remove some of the complexity surrounding these steps. It is mandatory to have a local registered attorney for tax and compliance requirements, as well as audits.
The Corporate Income Tax rate is 25% on the profits of business. If a company's profits are greater than L 1,000,000.00 (approximately, USD 40,859.35), they must pay an additional 5% in solidarity taxes.
If the company presents losses and their assets are greater than L 3,000,000.00 (approximately USD 122,578.06) they must pay an additional 1% in solidarity taxes.
Services and goods are subject to a 15% value added tax. Tax payers withhold from supplier taxes 1% to 12.5% which is considered an advanced payment for income. This is unless the supplier provides a withholding certification which exempts the supplier from the deduction. Withholdings for non-resident vendors are according to the table of services which range from 10% to 25%, depending on the service. Distribution or payment of dividends or any other form of distribution of retained earnings or reserves to resident or domiciled individuals and/or legal entities is taxed via withholding at 10%.
Opening a bank account
The process to open a bank account in Honduras must be done by a proxy with a deed registered in the Chamber of Commerce. It is necessary to have the deed of incorporation, RTN, data and identification of the signatories and the representative and commercial and banking references. All of the documents must be provided in order for the bank to know the Ultimate Beneficial Owner (UBO).
The legal departments of the banks must follow the anti-money laundering regulations and requests of compliance officers so all the documents must be in order to make sure that there are no doubts about the validity of the business. This process can take anywhere from two weeks to a month, depending on the information provided to the bank.
The first step to hiring employees is to sign a contract that states the length of employment. The working day is 8 hours, 44 hours a week with additional work paid as overtime. Employers are required to pay an annual Christmas bonus of one month's salary during the first two weeks of December. The provisions of the labor code state that companies cannot hire less than 90% of Honduran employees and they cannot be paid less than 85% of the total wages.
Contributions to social security, withholding taxes and neighbourhood taxes are the obligation of the employers. Workers earn annual leave through their years of service. They are given 10 days off after a year of work, 12 days after two years, 15 days after three years and 20 days after four years.
TMF Honduras has extensive local knowledge about the requirements of starting and maintaining a business in the country. Our experts understand the complexities surrounding tax and labor regimes and can support your business whether you want to expand into the country or already have a presence in Honduras. We can help with registration procedures, preparation of tax returns, billing and all reporting. Get in touch with us today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.