Honduras

The net taxable income of an enterprise is determined by deducting all ordinary and necessary expenses incurred in the generation of income. These include, among others, amortisation and depreciation; municipal taxes; donations made in favour of the State, the Central District, municipalities, and legally recognised educational, charitable, and sporting institutions; mandatory employer and employee contributions to the social security system; and 'reasonable' charges for royalties and management services.

In general, all expenses incurred in the generation of taxable income are considered deductible for income tax purposes. However, certain expenses are non-deductible, even if incurred in the generation of income (e.g. interest paid to owners or shareholders and capital losses).

Depreciation

Depreciation is generally computed using the straight-line method. Taxpayers may obtain authorisation from the tax authorities to apply alternative depreciation methods. Once a depreciation method is selected, it must be applied consistently in subsequent periods.

The following straight-line depreciation rates apply to certain common assets:

Goodwill

Goodwill may be amortised over a five-year period.

Start-up expenses

Organisation and reorganisation expenses are deductible in full, provided they do not exceed 10% of the initial capital stock. These expenses may be amortised over five years.

Interest expenses

Interest expenses are deductible when incurred for the purpose of generating taxable income. Interest paid to shareholders, owners, or their spouses is not deductible.

Bad debt

Taxpayers may recognise a bad debt provision of up to 1% of total credit sales, subject to a cap of 10% of the accounts receivable balance.

Charitable contributions

Contributions made to organisations legally recognised by the government are deductible.

Capital losses

Capital losses are not deductible in determining net taxable income. Such losses may only be offset against capital gains, which are subject to a 10% tax rate (see 'Capital gains tax' in the Other taxes section).

Contingent liabilities

Provisions for contingent liabilities (such as severance pay) are not deductible for tax purposes. However, actual payments made during the fiscal year are considered deductible expenses.

Fines and penalties

Fines and penalties are not deductible.

Taxes

With the exception of the Solidarity Contribution, net assets tax, CIT, and sales tax (where sales tax paid is credited against sales tax payable), taxes and contributions paid to districts or municipalities are deductible when determining taxable income.

Net operating losses

Companies engaged in agriculture, manufacturing, mining, and tourism may carry forward losses for three years. However, certain restrictions apply. Losses may not be carried back.

Payments to foreign affiliates

Payments to foreign affiliates are deductible as long as the service is effectively received.