Transfer Pricing in Honduras
The Transfer Pricing rules are in force since 2015 in Honduras. The purpose of this article is to address the main aspects of this regime such as definitions, Transfer Pricing methodology, formal obligations such as the Informative Affidavit and sanctions for non-compliance.
The Transfer Pricing regime in Honduras was introduced in 2011, through the publication of the “Transfer Pricing Regulation Law” by Decree N°232-2011, nonetheless, the regulation stated that it would enter into force only in January 2014.
In September 2015, Agreement N°027-2015 is published, which regulates the Transfer Pricing Law. In this regulation provisions were given about filing deadline, methodology to be used, among others. Therefore, it is from this year in which taxpayers reached in the regulation are required to file an Affidavit.
Also, at the end of 2016, the New Honduran Tax Code was enacted, which amends Article 113 related to Transfer Pricing.
Transfer Pricing: Concept
Transfer prices are defined as those prices or values agreed for transactions performed among related parties, which are also commonly referred to as intercompany transactions.
The Principle of Full Competence in Honduras
The Arm’s Length principle, which regulates Transfer Pricing, is based on the fact that the prices agreed for transactions among related parties must be in accordance with market value, i.e. based on prices that would have been agreed upon by independent third parties.
This principle is also regulated in the Honduran Transfer Pricing legislation, in article 3, paragraph 5 of the Transfer Pricing Law.
It is defined as one in which commercial transactions among related parties are treated as if they were carried out among independent parties.
Application Scope of Transfer Pricing in Honduras
Pursuant to Article 2 of the Law and the Regulations of said Law, the Transfer Pricing rules apply to transactions performed among an individual or legal entity resident in Honduras, with the related parties and/or those covered by Special Regimes having tax benefits.
Definition of Related Parties in Honduras
- The natural person or legal entity who participates in the other company, directly or indirectly, in the management, control or capital. Enterprises are included in this participation exerting through a linkage or kinship relationship of the natural person.
- Enterprises that have the same persons in common who participate according to the quoted above in both companies.
- A natural or juridical person resident in Honduras, regarding to the permanent establishment abroad.
- The permanent establishment in Honduras, regarding to the parent company abroad.
- The person resident in the country in relation to the agent, distributor who have exclusivity.
- When contractual clauses are agreed upon that are preferential with respect to those granted to third parties in similar circumstances.
- When there is financial dependence derived from a joint action agreement.
- Transactions are performed with parties incorporated in a country or territory of low or no taxation called tax haven.
- More than 50% of the capital is owned, directly or indirectly.
- It can influence the company’s business decisions.
Transfer Pricing Methodology in Honduras
- Uncontrolled Comparable Price Method.
- Added Cost Method.
- Resale Price Method.
- Profit Distribution Method.
- Net Transaction Margin Method.
Comparability Analysis in Honduras
In order to be able to analyze whether a transaction is comparable, Article 19 of the Regulations sets forth certain comparability factors such as:
- The characteristics of the goods or services transactions.
- The functions, assets and risks assumed by each party in the transaction.
- The contractual terms ruling the transaction.
- Economic circumstances.
- Business and commercial strategies.
Transfer Pricing Affidavit Honduras
According to Article 17 of the Transfer Pricing Regulation Law, taxpayers within the Application Scope of Transfer Pricing must file, along their Tax Affidavit, the Transfer Pricing Affidavit to the Executive Revenue Directorate.
Likewise, Article 30 of the Regulations of the Law states the persons required to file such Affidavit:
- Individuals or legal entities who perform transactions with related parties, provided they are medium or large taxpayers. It should be noted that according to the instructions for filling out the affidavit, only those who exceed US$250,000 for intercompany transactions will file.
- Individuals or legal entities who transact with related parties that are armed by special regimes having tax benefits.
- Individuals or legal entities who perform commercial transactions with related parties or with companies that reside in countries known as tax havens.
- Individuals or legal entities who perform transactions with related parties whose accumulated amount exceeds the amount indicated by the Tax Administration. Which according to the Instructions of the affidavit would be one million U.S. dollars in the fiscal year and will be for small taxpayers.
Transfer Pricing Documentation in Honduras
Taxpayers must have the documentation supporting the analysis of the transactions performed with related parties before a possible requirement from the Tax Administration.
Sanctions for Transfer Pricing Non-Compliance in Honduras
According to Article 35 of the Regulation stipulates specific infractions related to non-compliance with Transfer Pricing rules, such as:
- Failure to provide or providing false information in the affidavits or documentation required by the Tax Administration, which is punishable with US$10,000 payable in Lempiras.
- Declaring a lower taxable base due to a valuation not according with the Arm’s Length principle, whose sanction will correspond to a fine of 15% of the value of the adjustment, in case it has been committed jointly with the previous infraction the fine will amount to 30% or US$20,000.
- Any other non-compliance with any other provision of the Transfer Pricing Regulation Law, which will be sanctioned with a fine of US$5,000 payable in Lempiras.
Offices in Honduras
Increased Transfer Pricing controls in HondurasJune 4, 2022
7,655 MSMEs covered by Tax Exemption LawSeptember 14, 2021
Increase in the Registration of new companies in San Pedro SulaSeptember 2, 2021
Transfer Pricing Ranking 2023
We are pleased to inform you that we belong to the 2023 Ranking of Transfer Prices by World TP in Honduras