flag Honduras Honduras: Investing

FDI in Figures

According to the UNCTAD's World Investment Report 2021, FDI inflows to Honduras declined from USD 498 million in 2019 to USD 419 million in 2020, following the economic and health crisis triggered by the COVID-19 pandemic. Honduras' FDI stock also reached USD 16.9 billion in 2020. Main investing countries include the U.S., Canada, and Mexico followed by other Caribbean and Latin American countries (El Economista). The most attracting sectors for investment also include production of harnesses, garments, and textile products, bank services, transport, storage and telecommunications, among other services (El Economista).

Honduras ranked 133rd out of 190 economies on the last Doing Business report, published by the World Bank in 2020, which indicates a drop of 12 points compared to the previous year. Investments in Honduras face various challenges, including violence, insecurity, weak public institutions, high levels of corruption, heavy bureaucracy and underdeveloped infrastructure. However, the country has certain assets that attract foreign investors, including a decent level of productivity, decentralisation, the privatisation of many sectors, and the establishment of International Free Trade Zones. Government policies have been friendly towards foreign private investment, which is generally accorded the same rights as domestic investment. The government has bet on a young, and bilingual population, along with tourism, agriculture, and textiles to bolster its FDI. Crime reduction's strategies have also been implemented. In recent years, Honduras made starting a business less expensive by reducing the notary fees for the preparation of the articles of incorporation. The government has also made significant improvements in streamlining procedures and eliminating a series of administrative obstacles involved in the process of establishing a company through the adoption of new legislation, such as the Law of the Bay Islands Free Zone and the Law for the Promotion and Protection of Investments, both of which have highly favourable incentive packages. In early 2022, the Honduran special economic zone of Próspera adopted cryptocurrencies as legal tender which can be used as a form of payment for individuals and businesses, in an endeavour to boost economic activity and attract foreign investment through crypto. Among the major investments made in the country in recent years is the construction of the Patuca III hydropower dam by Chinese company Sinohydro, which was delivered in 2021 after an investment of US$349 million by the Chinese giant.

 

Country Comparison For the Protection of Investors

  Honduras Latin America & Caribbean United States Germany
Index of Transaction Transparency* 3.0 4.1 7.0 5.0
Index of Manager’s Responsibility** 8.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 6.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 498419700
FDI Stock (million USD) 16,479.416,898.017,598.2
Number of Greenfield Investments* 7.08.03.0
Value of Greenfield Investments (million USD) 34439857

Source: UNCTAD - Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

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Tax Rates

Value-added tax (VAT) - Impuesto sobre ventas (local name)
15% on goods and services.
18% for alcohol, cigarettes, and first, executive and business class air travel.
Exempt items include: goods that form part of the average weekly shopping; pharmaceutical products; cleaning fluids and disinfectants; 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; transfer of assets in a merger or liquidation; medical services; personal insurance and reinsurance; gasoline, kerosene and related oil products; firewood and coal; books and newspapers; leather, except fine leather goods; water and electrical services; education; passenger transport; financial services.
Company Tax
25%
Withholding Taxes
Dividends: 10%, Interests: 10%, Royalties: 0 (residents)/25% (non-residents)
Social Security Contributions Paid By Employers
10% (8.5% for state welfare and 1.5% for the private contribution regime).
Other Domestic Resources
Fiscal Administration Services
Overview of Honduras' tax measures in response to Covid-19
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 
 

Individual Taxes

Income tax Progressive rate up to 25%
From HNL 0 to 172,117.89 0% (including NHL 40.000 for non-documented medical expenses)
From HNL 172,117.89 to 262,449.27 15%
From HNL 262,449.27 to 610,347.16 20%
Above HNL 610,347.16 25%
Individuals with gross income above HNL 1 billon 1% on gross income, if it is greater than the tax payable as per the standard progressive rates
 
 

Country Comparison For Corporate Taxation

  Honduras Latin America & Caribbean United States Germany
Number of Payments of Taxes per Year 59.0 28.2 10.6 9.0
Time Taken For Administrative Formalities (Hours) 203.0 327.5 175.0 218.0
Total Share of Taxes (% of Profit) 39.1 46.8 36.6 48.8

Source: Doing Business - Latest available data.

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Investment Opportunities

Tenders, Projects and Public Procurement
Inter-American Development Bank, Tenders in South America
DgMarket, Tenders Worldwide
Setting Up a Company
Consult Doing Business Website, to know about procedures to start a Business in Honduras.
Useful Resources
Foundation for Investment and Development of Exports (FIDE)
 

Business Setup Procedures

Setting Up a Company Honduras Latin America & Caribbean
Procedures (number) 11.00 8.00
Time (days) 42.00 25.22

Source: Doing Business.

 
 
 

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Latest Update: September 2022