Honduras

Honduras’ Transfer Pricing Law was enacted by the National Congress through Decree No. 232-2011 on December 10, 2011, to regulate all commercial and financial transactions carried out between related parties. Subsequently, the Transfer Pricing Regulations were issued through Agreement No. 027-2015 on September 18, 2015, establishing and expanding the procedures for the application of transfer pricing rules in Honduras.

The scope of this legislation covers any transaction carried out between entities domiciled or resident in Honduras and their related parties, including entities operating under special tax regimes that enjoy fiscal incentives.

Honduran tax authorities allow taxpayers to request an Advance Pricing Agreement (APA) to determine the arm’s-length value of commercial or financial transactions with related parties prior to their implementation and for a specified period of time.

For tax purposes, two or more individuals or legal entities whether domiciled in Honduras or abroad are considered related parties when any of the following conditions apply:

• An individual, entity, or corporation participates, directly or indirectly, in the management, control, or capital of another.
• The same individuals, entities, or corporations participate, directly or indirectly, in the management, control, or capital of two or more entities.
• The parties constitute a decision-making unit.
• They carry out direct or indirect commercial or financial transactions, where indirect transactions are those intended to reduce the income tax base, particularly involving Honduran resident or domiciled entities and parties located in jurisdictions classified as tax havens.
• They share the same directors or administrators.
• Where participation is defined in terms of capital or voting rights, a direct or indirect participation exceeding 50% is required.

For transfer pricing purposes, comparability analysis refers to the examination of two or more assets (tangible or intangible), services, or comparable companies to identify similarities and differences, and to determine whether material differences affecting price can be reliably adjusted.

Key comparability factors include:

• Characteristics of the goods or services.
• Functions performed, assets employed, and risks assumed.
• Contractual terms.
• Economic and market circumstances.
• Business strategies.

Pursuant to Decree No. 232-2011 and the OECD Transfer Pricing Guidelines, the arm’s-length principle may be applied using any of the following methods:

Transactional methods

• Comparable Uncontrolled Price (CUP) Method
• Resale Price Method (RPM)
• Cost Plus Method

Profit-based methods

• Profit Split Method (PSM)
• Transactional Net Margin Method (TNMM)

Honduran transfer pricing legislation also recognizes a sixth method applicable to goods traded on transparent international markets. Taxpayers may apply alternative methods if they can demonstrate that none of the standard methods can be reasonably and reliably applied to determine arm’s-length conditions.

Taxpayers engaged in commercial or financial transactions with related parties are required to:

• Determine income, costs, and deductions for tax purposes using prices and profit margins consistent with those agreed between independent parties.
• Notify the tax authority of the transfer pricing method selected to determine arm’s-length values.
• File a transfer pricing informative return, supported by sufficient analysis to assess transactions with related parties.

Additionally, Agreement SAR-653-2023 establishes guidelines for Country-by-Country Reporting (CbCR), which must be complied with by multinational groups with tax residence in Honduras.

Entities required to file CbCR include:

• Multinational group entities that are tax residents in Honduras.
• Constituent entities (other than the ultimate parent entity) that are tax residents in Honduras.

Information reported by jurisdiction includes:

• Revenue.
• Profit or loss before income tax and income tax paid.
• Stated capital and undistributed earnings.
• Number of employees and tangible assets.

The report must be filed in accordance with the annex to Agreement SAR-653-2023, in Excel (XML) format, within 12 months following the close of the fiscal year.