Doing Business in Honduras

Do you want to expand your business into Honduras or hire employees there? Here are some key things you need to know about a Honduras expansion.

Honduras Economy Overview

Currency

Honduran Lempira (HNL)

Working hours

44 hours/week

Public/bank holidays

11 public holidays

Capital

Tegucigalpa

Languages

Spanish

Population

10.8 million

Minimum hourly salary

38.46 HNL

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Honduras, like many other countries, treats self-employed individuals or contractors and full-time employees differently. Misclassification of contractors in Honduras may lead to fines and penalties for the offending company.

Fun fact

Slightly larger than the state of Tennessee, Honduras is mountainous and the only Central American country without active volcanoes.

The Republic of Honduras is known for its pristine coastline, skilled workforce, and Mesoamerican culture. While Honduras experienced slow economic growth in 2023, its GDP reached $34.4 billion in the same year. The central location in Latin America makes trade and transportation efficient. One can fly to the US within 4 hours, and transport services are found at the major ports. In the city of Puerto Cortés, businesses can benefit from free trade zones, with benefits including the exemption of fees on the import of raw materials.

Investing in Honduras provides access to productive employees and a cost-effective labor force. The country does not restrict the types of business entities or structures that can be established in the country. Businesses in Honduras are offered tax incentives, and they can ship goods to the United States without paying duties. The exemptions from paying duties and a strong labor force make Honduras an attractive location for doing business and pursuing future investments.

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Overview of Honduras's Economy

Honduras is a major textile and agricultural exporter of raw materials, including fruit and coffee. Its real GDP grew by 3.4% in 2023, with a slow growth rate forecast for 2024. To improve venture capital, the Castro administration’s 2024 Public Investment Program (PIP) will strengthen the country’s economic outlook by supporting infrastructure development.

Honduras’s inflation rate decreased in February 2023 and stands at 4.5% in 2024. Honduras has a large portion of remittances that totaled 27% of its GDP in 2023.

Government Initiative	Details
IMF-supported economic development program	Fiscal balance set to decline due to the program
IMF credit extension	Over $820 million over the next 3 years

The country offers businesses tax exemptions based on specific regions in the country; however, there are no current tax treaties.

Taxes

Employer tax: 15.1- 16.6%

Healthcare

Disability, Old Age, Death (capped at 10,282.37 HNL, i.e., $424.47)

3.5%

Pension Regimen de Aportaciones Privadas; Compulsory for businesses with 10+ employees

1.5%

Labor Coverage Insurance

Collective Capitalization Pillar

2.6%

Employee tax: 5.1-6.6%

Sickness and Maternity

2.5% (for employees on income up to a maximum ceiling of HNL 10,342.19)

Invalidity, Old Age, and Death

1% from employees on income up to a maximum ceiling of HNL 10,796.49

Pension Regimen de Aportaciones Privadas; Compulsory for businesses with 10+ employees

1.5%

Collective Capitalization Pillar

1.6%

Income tax

Domiciled individuals will be subject to 1.5% tax on gross income equal to or greater than HNL 10 million when the progressive income tax for individuals is less.

Taxable Income (HNL*):

Gross income

0.01 to 199,039.47
199,039.48 HNL to 303,499.90 HNL
303,499.91 HNL to 705,813.76 HNL
705,813.77 and beyond

Progressive tax rate

Exempt
15%
20%
25%

Business Regulation in Honduras

Honduras’s business regulations are governed by the Honduras Labor Code and reforms along with the National Program of Employment Per Hour. Businesses must adhere to the country’s bylaws that are overseen by the Secretariat of Labor. All employment contracts and agreements must be presented in written or verbal form. Verbal contracts cover temporary work of no more than 60 days, domestic services, agriculture, and work that does not exceed 200 Lempiras in value. Written contracts must include the personal details of employees and be signed by at least two witnesses. The type of work performed, contract duration, salary, and working hours are added to written employment contracts.

In Honduras, both limited-time and determined-time employment contracts are provided. The standard working hours in Honduras are 8 hours per day and 44 hours per week. Hondurans typically work a 6-day week, with Sunday being a holiday. Employers must pay social security contributions, including severance and overtime pay. When a new employee is hired, they are entitled to a 60-day probationary period. If you are starting a business in the country, 90% of the workforce must be Honduran. Failure to adhere to the Honduran Labor Code will lead to a fine.

Benefits of Doing Business in Honduras

Honduras is a favored location for trade and shipping because of its central location. It takes under 4 hours to reach the United States, making for rapid shipping options and ease of travel. The country has ports accessing the Pacific and Atlantic Oceans, making for streamlined national and international trade. Businesses in Honduras can benefit from a 15% VAT exemption on medicines, agricultural chemicals and machinery, and staple foods as per Decree 005-2014.

Employers can take advantage of exemption from fiscal and municipal tax if their businesses are located in tax-free zones. Tax incentives include the Free Trade Zone (ZOLI), the Temporary Import Law (RIT), and the Industrial Zone for Processing Exports (ZIP). Companies in Honduras are protected by the Constitution of the Republic, in which securities of your choosing can be transferred internationally, and you can establish subsidiaries and branch offices without restrictions.

Downsides of Doing Business in Honduras

Honduras relies heavily on US exports and expatriate remittances. More than 20% of the country’s GDP consists of remittances. The country has a high unemployment rate; however, agriculture, which accounts for around 14% of its GDP, is based on a dedicated and hard-working labor force.

In Honduras, businesses can establish a legal entity of their choosing; however, there are long waiting periods concerning regulatory approval and obtaining the relevant licenses. Businesses are encouraged to invest in regions with minimal energy interruptions, but this can be overcome with the use of generators. The government and private businesses are currently seeking ways to manage climate change according to the country’s development strategy.

Business Expansion Options in Honduras

Honduras is a preferred choice for new businesses and entrepreneurs looking for economical and hassle-free expansion into the country. Honduras does not apply restrictions on business entities, making it easier for employers to establish the desired company structure. Some of the legal options for doing business in Honduras include:

Honduras Employer of Record (EOR)

The Honduras EOR becomes the official legal employer of your Honduras team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground.

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. They may also provide additional services, such as Honduras talent acquisition and visa support.

Learn more about EOR in Honduras

Recruitment Agencies

Recruitment agencies in Honduras help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Honduran labor laws.

For businesses looking to grow in Honduras, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

Learn more about Recruitment Agencies in Honduras

Honduras Professional Employer Organization (PEO)

If you are not looking to establish a company in Honduras, you have the option of hiring a PEO (professional employer organization) or an EOR (employer of record). These services focus on streamlining your HR processes, such as administration, recruitment, payroll, and employee benefits. The difference between a PEO and an EOR is that the PEO is limited in terms of its legal representation. PEOs can act as co-employers, but they cannot manage employee performance or negotiate contracts on your behalf. An EOR in Honduras is a registered business and can, therefore, undertake a wider range of services, including onboarding and offboarding, negotiating employee benefits, and maintaining compliance with the country’s Labor Code and bylaws.

Partnering with a professional employer organization (PEO) allows companies to employ local staff in Honduras without the need to establish a legal entity. This approach is quicker and less expensive, making it ideal for businesses testing the Honduras market or those with limited operations. PEOs handle administrative tasks and ensure that companies comply with Honduras regulations, reducing the complexity and risk associated with hiring local employees.

Learn more about PEO in Honduras

Subsidiary Incorporation

Honduras allows investors and entrepreneurs to register a company that will best serve their needs. Before proceeding with an entity such as a private company or branch, always be aware of the laws and regulations specific to that region to remain compliant.

Setting up a subsidiary in Honduras means that the parent company maintains control over the business. The company must have two directors and two shareholders of national or international standing. A local registered address must be presented to incorporate the company.

An LLC (limited liability company) is the most popular type of business in Honduras. It must have two shareholders and two directors who may consist of any nationality. Before you can start a business, you must have a registered physical address.

The documents to establish subsidiaries in Honduras include the Articles of Incorporation, proof of registered address, the company’s tax identification number, bank reference, and proof of identity.

Branch Registration

Registering a branch in Honduras requires that businesses follow the country’s corporate laws. The Honduras branch (“sucursale” in Spanish) requires a minimum share capital of $1,300 and must operate according to the activities of the parent company. To register a branch, a Honduran citizen must be assigned as a registered agent. If you are unsure as to which documents are required to open a branch in the country, it is best to speak to a lawyer who specializes in Honduran corporate law.

Business Opportunities in Honduras

Honduras is a popular choice for businesses looking to build a productive workforce in a country with a growing economy. Despite setbacks such as political instability and the impact of the pandemic, Honduras continues to focus on the development of infrastructure and foreign capital investment.

Business Opportunities	Reasons
Textiles and Garment Manufacturing	Competitive labor costs, proximity to the US market, established industry
Agriculture and Agribusiness	Fertile land, favorable climate, opportunities for export-oriented production
Tourism and Hospitality	Natural attractions, growing interest in eco-tourism and adventure tourism, untapped potential
Infrastructure Development	Government initiatives to support infrastructure development, increasing foreign investment
Renewable Energy	Abundant solar, wind, and hydropower resources; government support for renewable energy projects

Honduras’ textile and garment manufacturing sector offers significant opportunities due to competitive labor costs, proximity to the U.S., and a skilled workforce. The agriculture sector also presents strong potential, with fertile land and favorable conditions for exporting crops like coffee, fruit, and vegetables.

In tourism, Honduras’ natural attractions and growing interest in eco-tourism create opportunities for sustainable tourism initiatives. Infrastructure development, driven by government support and foreign investment, is another key area, particularly in transportation, energy, and telecommunications.

Honduras also has abundant renewable energy resources, such as solar, wind, and hydropower, with increasing government backing for green projects.

Combined with trade agreements, a strategic location, and improving business conditions, Honduras is an attractive destination for investors looking to tap into its growth potential.