Tax Flash

Transfer Pricing Regulation

November 2015


On December 2004, the Honduras Tax Code was reformed to create a special transfer pricing regulation, through the decree No 210-2004. Few years later, in 2011, a petition to create a Transfer Pricing Law was made in order to obtain more transparency due the complexity of this matter. On December 2011, through the decree No 232-2011, Transfer Pricing Law was promulgated introducing the scope, the concepts and the methods accepted to analyze the transaction, among others. Recently on September 2015, the Secretary of State of Honduras, through the ruling No 027-2015, carried on with the Transfer Pricing Regulation.

In order to provide you an introduction to the contents of this ruling, below you will find a brief summary of its scope and most relevant concepts:


The second article of the Ruling No 027-2015 reach any operation or transaction made by individuals or corporations, residents or domiciled in Honduras with related or linked parties, whether they are resident or not in Honduras , and those with benefits from tax privileges.

The Executive Direction of Revenue( EDR) is able to apply this Law and its regulation to value any kind of assets. In this regard, the EDR can value the price assigned to any asset, when it does not meet the arm’s length principle; whether they are sub or over estimated compared to the market’s price of those goods.

Relevant concepts

  • Arm’s length principle: is a principle that verifies that the transactions made between related parties are under similar conditions than those made for independent entities or under free market conditions.
  • Independent entities: two (2) corporations are independent when they freely define their regulations and their actions within any market, and are not related between them.
  • Related parties: the Law and its Ruling considers related or linked parties those individuals or corporations, resident or not in Honduras, that meet any the following conditions:
    - One of the parties directly or indirectly participates in the management, control or capital of the other (50% equity, control or direction).
    - Individuals, companies or enterprises resident in the country with permanent establishment abroad.
    - Permanent establishment in the country with headquarters abroad and another permanent establishment of the same company; or from an individual, company or enterprise connected with it.
    - Individual, company or enterprise enjoying exclusivity as agent, distributor or dealer for the sale of goods, services, etc., provided contractual relationship between them has unusual preferential characteristics compared with those settled with third parties in similar circumstances.
    - An individual, company or enterprise that assumes responsibility for losses or expenses of others.
    - Companies or enterprises which constitute a decision unit.
    - Individuals, companies or enterprises that settle preferential clauses, compared with those agreed with non related parties in similar circumstances.
    - When the counterpart is established in a Tax Heaven or in a Low Income Tax country, based on the Organization for Economic and Cooperation Development (OECD) publications.


The Ruling set a variety of different methods for Transfer Pricing determination, among which are:

  • Comparable Uncontrolled Price (CUP) method,
  • Resale Price method,
  • Cost Plus method,
  • Profit Split method,
  • Transactional Net Margin method, and / or any
  • Other Alternative Applicable method.

The most appropriate method of valuation will be that closely aligned to the economic substance of the transaction, taking into account the business structure, the available information, transactions and functions, and that require fewer adjustments to eliminate the differences.

Furthermore, there is a particular consideration to take into account to analyze service transactions. In this regard, individual, companies or entities who realize services transactions with related parties must comply with the following criteria:

  • The income for supplied service between related parties would meet the arm’s length principle if:
    - The service was given,
    - The service gives to the beneficiary an economical or commercial benefit, or
    - The service equals the one that any independent party would hire with a third entity, in similar conditions.
  • The income for supplied service between related parties would not meet the arm’s length principle if:
    - The service is not necessary to generate profit,
    - The service cannot be supported, or
    - The service would not be paid or given.
  • When it is possible to identify each specific service to a related party. In this case, each service would be analyzed separately.
  • When an entity give services to different related parties and those services cannot be assigned to a specific company. In this case, the amount of the service should be segmented by the number of related entities that would benefit from it.

Information remittance

As the Law is in force since September 2015, Income Tax taxpayers that perform transactions with related parties shall submit to the EID an “Annual Informative Swear Statement of Transfer Pricing”. The 2014 Transfer Pricing form must be presented within the next 90 days of the official publication of the Transfer Pricing Regulation.

Failure to comply with these form is considered a violation of tax obligations. In this regard, formal duties and penalties would apply according to the Income Tax Law.

We exhort all our Clients and Friends to bear in mind the provisions of this new Ruling when performing transactions with related parties.

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