The income tax is defined in the article 1 of its Law (Income Tax Law), as the tax calculated from the incomes generated from capital, work or the combination of both, and considerate as income everything that modifies and adds to the patrimony of the taxpayer.
The ISR (by its acronyms in Spanish) is mainly a redistributive tax, since it is paid proportionally depending on the annual income, and represents a main source of income for the Central Administration.
We will focus on this opportunity in the personal tax applicable to natural persons, which is paid according to the progressive rate scale that it is established in the 22nd article of the Income Tax Law, which was duly modified through Decree number 22-2016. This amendment establishes that the tax must have an automatic annual adjustment starting from 2017, based on the inter-annual variation of the Consumers’ Price Index (IPC by its acronyms in Spanish). It is important to highlight that the IPC is a macroeconomic indicator that is used to calculate the inflation rate in the country.
Starting 2018, and as a result of an increase of the annual inflation rate of the country, the Rent Management Service (SAR by its acronyms in Spanish) issued Decree SAR–009-2018, through which the progressive Income Tax rate scale for the natural personas starting in the fiscal exercise of 2018 is adjusted.
In Honduras, by the end of 2017, the inter-annual inflation was 4.73%, and by virtue of that percentage is that the authority increases the exempt base of Income Tax so that natural persons can be able to recover their economic condition and acquisition capacity that they have lost during the prior year due to the increase in the country’s inflation, and the high cost of living faced by Hondurans, year after year.
Some Hondurans have criticized said measure, since they remark that it is not necessary to continue making changes in the applicable taxes and instead improve the collection and block the fiscal evasions in order to fight against the increase of the annual inflation.
The new progressive scale that came into force since January 1st of 2018, increases the roof of the exempt base for the payment of the income tax, by means, every natural person that annually holds an income less than L 152,557.15, which in addition have to add L 40,000.00 on health expenses, is exempt of the payment, and so on the rest of the scales are adjusted.
As reflected, when raising the taxable base of the Income Tax, the number of Hondurans that are exempt from the payment of the same increases. Also, when modifying the following scales, thousands of workers are benefited. However, is not avoided the evasion of large companies and that is why many criticize the measure.
Associate
García & Bodán
Honduras