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8.1.1. Corporate Income Tax

The standard corporate tax (‘CIT’) rate for companies is 25%. However, a number of other rates apply as follows:

  • Solidarity contribution – It is a surcharge which is levied on companies with net taxable income exceeding HNL 1 million, at the rate of 5% of net taxable income
  • Income Tax Installment– It is levied at 1% of the gross income in respect of the companies either having gross income exceeding HNL 100 million in previous tax year or have incurred losses in 2 consecutive years or in 2 out of 5 years. Certain companies are exempted from the levy. The said tax can be credited against the CIT or solidarity contribution or asset tax liability, subject to certain conditions
  • Net Asset Tax –The net assets tax applies to the total value of assets in the balance sheet less reserves for accounts payable and any accumulated depreciation allowed under the income tax law and other deductions allowed by law. It is a 1% tax of the net asset value of the company. The Net Asset Tax applies on the total net value over HNL 3,000,000. The net assets tax is applicable in lieu of the corporate income tax when the corporate income tax is less than the amount due for net asset tax. Resident companies in pre-operative period and companies operating in free trade zone are exempt from asset tax. It is not applicable to non-residents.
  • Capital gains tax – It is levied at a rate of 10%.
  • Resident withholding tax (‘WHT’) –
    • Dividend income received by resident companies are subject to WHT at 10%
    • Tax authorities have the right to withhold 3% on certain imports as an advance tax payment towards CIT in cases of non-compliance, subject to certain conditions

Alternative Minimum Tax

Resident companies with gross income in a tax year greater than HNL 300 million are required to pay an alternative minimum tax. The alternative minimum tax is levied at rate of 1.5% of gross income when the CIT is lower than minimum tax.

However, the minimum tax is reduced to 0.75% for companies engaged in cement industry