Honduras

Why Honduras?

Taxed territorially, pensions expressly tax-exempt, very low costs. And one of the highest violent crime rates in Latin America, according to the UK Foreign Office (FCDO).

On paper, Honduras has one of the most attractive retiree regimes in Central America: a territorial tax system, and rentiers and retirees are expressly exempt from income tax on the pensions and income on which their residence permit is based. Against that stands a finding no wording can soften: the FCDO says Honduras has one of the highest violent crime rates in Latin America and advises avoiding walking around Tegucigalpa, San Pedro Sula and the other main towns and cities of the mainland. If you still think of Honduras, you are thinking of the Bay Islands, and that is a different case from the mainland.

• ✓Territorial tax system: income from Honduran sources is taxed
• ✓Pensions and rentier income are exempt from income tax, to the extent they underlie the residence permit
• ✓Low thresholds: pensionado from USD 1,500 a month, rentista from USD 2,500, investor from USD 50,000
• ✓Non-CRS: no commitment to automatic information exchange
• ✓The catch: one of the highest violent crime rates in Latin America, in the assessment of the FCDO

Residence permits and residency options

Tax in Honduras

The Honduran tax system rests on a territorial concept of income: income from Honduran sources is taxed. Your foreign income stays outside.

On top of that comes a rule rarely found in such clarity: rentistas and pensionados are exempt from income tax on the pensions and income they receive on the basis of their residence permit, an express exemption in the migration law itself.

The progression for domestic income is 15%, 20% and 25%, and the first HNL 228,324.32 a year are tax-free. One rule missing from most overviews: from gross income of ten million lempiras, 1.5% on the gross amount if the regular progression comes out lower. Relevant for an operating business in the country, not for foreign income.

Whether your pension stays taxable at home after you move is not decided by Honduras but by your home country and its treaty position. We go through that with you.

Citizenship: the route to a second passport

The Constitution sets more than three years of uninterrupted legal residence for foreigners, counted from the residence decision, one year for Central Americans and two for Spaniards and Ibero-Americans. That puts Honduras among the faster routes in the region. The catch is in the last paragraph of Article 24: before naturalisation you must renounce your previous nationality, unless a dual nationality agreement applies.

Three years is good in legal terms. The real question is whether you want to tie three years to a country whose security situation the next section describes.

Our Honduras insider tip: Roatán

Roatán is the reason Honduras has any address at all for newcomers: English-speaking in character, its own international airport, the second-largest reef in the world on the doorstep and an international resident community that has grown over decades. The island differs markedly from the mainland in its security situation, and that difference is the honest core of the Honduran case.

The mainland looks different. The FCDO describes Honduras as having one of the highest violent crime rates in Latin America; most serious crime does not affect tourists, it says, but incidents can happen anywhere and at any time, even in tourist areas. It reports violent attacks on people in cars and buses and advises avoiding walking around Tegucigalpa, San Pedro Sula and other main towns and cities on the mainland. The Bay Islands, it adds, are generally safer than the mainland, though there have been several attacks on visitors, including on the ferries. Add protests that can happen anywhere and can turn violent.

The cost of living is at the bottom of the regional range, though noticeably higher on Roatán than on the mainland, because almost everything has to be shipped to the island.

Banking outside Honduras

Banking and your operating company belong outside Honduras. For the application, though, you need a Honduran bank account, because the procedure requires the pension to flow in through a domestic bank. This is one of the few cases in the region where a local account is a condition of the application and not just everyday infrastructure.

Non-CRS status only means that Honduran banks do not report automatically. It does not replace a return in your home country.

Who is Honduras right for, and who not?

Frequently asked questions about Honduras