The Honduras Tax Administration Service (Servicio de Administración de Rentas or SAR) approved and published on 7 January 2026 the updated progressive income tax table for individuals, effective for the 2026 fiscal year. The new table revises exemption thresholds and tax rates for Honduran residents, affecting the calculation and withholding of income tax (Impuesto sobre la Renta or ISR).1
WHY THIS MATTERS
The updated tax table increases the income threshold for exemption, resulting in relief from personal income tax obligations for more Honduran citizens in 2026. This adjustment is expected to benefit over 200,000 taxpayers, with a fiscal impact estimated at HNL 500 million. For global mobility managers, payroll teams, and HR leaders, the changes may require updates to payroll systems, withholding calculations, and compliance monitoring to check alignment with the new thresholds.
Background
Previously, the ISR progressive tax table set lower exemption thresholds and tax rates, as determined annually by SAR in accordance with Article 22 of the Income Tax Law (ISR), amended by Decree No. 20‑2016.2 The annual update reflects inflation and aims to promote tax equity for lower-income individuals.
Key Highlights
The SAR has released the 2026 Progressive Income Tax Table for individuals, raising exemption thresholds and adjusting rates based on a 4.98 percent inflation rate recorded at the close of 2025. The revised table is expected to benefit over 200,000 taxpayers by exempting monthly salaries up to HNL 22,360.36 from income tax, with corresponding adjustments for higher income brackets. The table is calculated using official data from the Central Bank of Honduras (Banco Central de Honduras or BCH) and forms part of SAR’s annual mandate to promote equity.
- Exemption increase: Individuals earning a monthly salary up to HNL 22,360.36 (annual net taxable income up to HNL 228,324.32) are exempt from ISR during 2026.
- Updated tax rates:
- 15 percent for monthly salaries from HNL 22,360.37 to 32,346.18.
- 20 percent for monthly salaries from HNL 32,346.19 to 70,805.06.
- 25 percent for monthly salaries of HNL 70,805.07 and above.
- 15 percent for monthly salaries from HNL 22,360.37 to 32,346.18.
- Calculation basis: The net taxable income does not include the deduction of HNL 40,000.00 for medical expenses; the monthly salary calculation adds this deduction and divides the total by twelve.
Legal basis: Update mandated under Article 22 of the ISR, as amended by Decree No. 20‑2016.
KPMG INSIGHTS
The increase in exemption thresholds is intended to provide relief to lower-income taxpayers and reflects inflationary adjustments, as mandated by law.
In light of the changes, the entities might wish to consider the following:
- Organizations could review payroll processes to help maintain accurate ISR withholding under the new thresholds.
- Companies could communicate these changes to mobile employees, particularly those assigned to Honduras, to clarify the effect on net pay.
- Employers could verify that the deduction for medical expenses is accurately reflected in net taxable income calculations.
If assignees and/or their programme managers have any questions or concerns about the scope of the update, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax professional or a member of the GMS tax team with KPMG in Honduras (see the Contacts section).
ENDNOTES:
1 Servicio de Administración de Rentas de Honduras (in Spanish), “Actualización de la Tabla Progresiva 2026,” published on 7 January 2026.
2 Secretaría de Finanzas (SEFIN), Ministry of Finance (in Spanish), “Decreto No. 20-2016 Reforma Artículo 22 Ley Impuesto sobre la Renta,” published on 16 March 2016.
RELATED RESOURCE
Also discussed in TaxNewsFlash, Honduras: Updated 2026 withholding table for income tax, published on 9 January 2026.
Contacts
Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Honduras.
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