The Transfer Pricing regime in Honduras was introduced in 2011, through the publication of the “Transfer Pricing Regulation Law” by Decree N°232-2011, nonetheless, the regulation stated that it would enter into force only in January 2014.
In September 2015, Agreement N°027-2015 is published, which regulates the Transfer Pricing Law. In this regulation provisions were given about filing deadline, methodology to be used, among others. Therefore, it is from this year in which taxpayers reached in the regulation are required to file an Affidavit.
Also, at the end of 2016, the New Honduran Tax Code was enacted, which amends Article 113 related to Transfer Pricing.
Transfer prices are defined as those prices or values agreed for transactions performed among related parties, which are also commonly referred to as intercompany transactions.
The Arm’s Length principle, which regulates Transfer Pricing, is based on the fact that the prices agreed for transactions among related parties must be in accordance with market value, i.e. based on prices that would have been agreed upon by independent third parties.
This principle is also regulated in the Honduran Transfer Pricing legislation, in article 3, paragraph 5 of the Transfer Pricing Law.
It is defined as one in which commercial transactions among related parties are treated as if they were carried out among independent parties.
Pursuant to Article 2 of the Law and the Regulations of said Law, the Transfer Pricing rules apply to transactions performed among an individual or legal entity resident in Honduras, with the related parties and/or those covered by Special Regimes having tax benefits.
The following are considered linked or related parties, in accordance with Article 11 of the Regulations of the Law:
Likewise, Article 12 of the Regulations establishes that participation in the management, control or capital is taken to mean as participation in the management, control or capital when any of the following situations occur:
According to Article 8 of the Law and Article 23 of the Regulations, in order to determine whether the value of transactions among related parties is in accordance with the Arm’s Length principle, five methods have been established, which are detailed below:
It should be noted that the regulation states “applicable alternative methods“, which allows the taxpayer to use a different method than those quoted above, provided that it is demonstrated that these cannot be applied in a reasonable manner and the alternative method is in accordance with the Arm’s Length principle.
Likewise, the choice of method must be the most appropriate to the specific circumstances of the transaction.
In order to be able to analyze whether a transaction is comparable, Article 19 of the Regulations sets forth certain comparability factors such as:
According to Article 17 of the Transfer Pricing Regulation Law, taxpayers within the Application Scope of Transfer Pricing must file, along their Tax Affidavit, the Transfer Pricing Affidavit to the Executive Revenue Directorate.
Likewise, Article 30 of the Regulations of the Law states the persons required to file such Affidavit:
Regarding to the filing deadline, Article 31 of the Regulation states that this regulation will depend on the closure of each taxpayer’s tax period, thus those whose closing date is December 31 will have to file from January 1 to April 30 of the following year.
In the case of taxpayers with special fiscal periods, it must be filed no later than 3 months after the end of the fiscal period.
According to Article 35 of the Regulation stipulates specific infractions related to non-compliance with Transfer Pricing rules, such as: