Country Name: Guatemala
Currency: Guatemalan Quetzal (GTQ)
Primary Tax Authority: Superintendencia de Administración Tributaria (SAT) – Superintendency of Tax Administration
Key Legislation:
- Income Tax Law (Ley del Impuesto sobre la Renta)
- Value Added Tax Law (Ley del Impuesto al Valor Agregado – IVA)
- Corporate Tax Law
- Tax Code (Código Tributario)
Fiscal Authority Allocation
Centralized Fiscal System:
Guatemala operates a centralized tax system, with the Superintendency of Tax Administration (SAT) overseeing the administration and collection of taxes, including corporate income tax (CIT), personal income tax (PIT), and value-added tax (VAT). Local governments collect property taxes and certain municipal fees, but the central government handles the main tax revenues.
Corporate Income Tax (CIT)
Guatemala offers two options for corporate income tax regimes, allowing companies to choose the one that best fits their business structure:
- Profits-Based Regime (Sobre la Renta Bruta): A flat rate of 25% on net taxable income.
- Gross Income Regime (Sobre Ingresos Brutos): A 5% tax on gross income.
Corporate Forms and Taxation:
- Corporation (Sociedad Anónima – SA): The most common corporate form for large businesses, subject to either the profits-based or gross income-based CIT rates.
- Limited Liability Company (Sociedad de Responsabilidad Limitada – SRL): Generally used by smaller businesses, also taxed under one of the two CIT regimes.
- Branches of Foreign Companies: Taxed at the same CIT rates as resident companies on Guatemala-sourced income.
Exemptions and Incentives:
- Free Trade Zones (Zonas Francas): Companies operating in free trade zones are exempt from CIT, VAT, and customs duties, with the goal of promoting exports and foreign investment.
- Maquila Regime: Companies involved in the assembly, manufacturing, and export of goods can benefit from tax exemptions on CIT, VAT, and import duties under this regime.
Goods and Services Tax (GST) / Value-Added Tax (VAT)
Standard Rate: 12%
Guatemala applies a VAT rate of 12% on the sale of goods, provision of services, and imports. VAT is applied to both domestic and international transactions involving the movement of goods and services.
Exemptions:
Basic food items, medicines, healthcare services, and educational services are exempt from VAT. Exports are zero-rated, allowing businesses to reclaim VAT paid on inputs used to produce goods for export.
Personal Income Tax (PIT)
Progressive Rates:
Guatemala applies progressive personal income tax rates to residents and non-residents earning Guatemalan-sourced income:
- Up to GTQ 300,000: 5%
- Above GTQ 300,001: 7%
Dividends:
Dividends are subject to a 5% withholding tax, whether paid to residents or non-residents.
Additional Mandatory Contributions
Social Security Contributions:
Employers and employees must contribute to Guatemala’s social security system, which covers pensions, healthcare, and unemployment benefits.
- Employer Contribution: 12.67% of gross salary.
- Employee Contribution: 4.83% of gross salary.
Withholding Taxes
- Dividends: 5%
- Interest: 10%
- Royalties: 15%
Withholding tax rates may be reduced under Guatemala’s double taxation agreements (DTAs).
Transfer Pricing Rules
Guatemala adheres to OECD transfer pricing guidelines. Related-party transactions must be conducted at arm’s length, and companies are required to maintain documentation to demonstrate compliance with the arm’s-length principle in cross-border transactions.
Special Tax Regimes
- Free Trade Zones (Zonas Francas): Businesses operating in free trade zones benefit from exemptions on CIT, VAT, and import/export duties for a specific period, encouraging foreign investment and exports.
- Maquila Regime: This regime offers incentives to companies in the manufacturing and export sector, providing tax exemptions and benefits to boost competitiveness in international markets.
Other Taxes
- Real Estate Tax: Property taxes are collected by local governments and generally range from 0.2% to 0.9% of the property’s assessed value, depending on the location.
- Capital Gains Tax: Capital gains are taxed at the same CIT or PIT rates (5% or 7% depending on the taxpayer’s regime), and may be reduced under certain conditions.
- Excise Taxes: Excise duties are imposed on specific goods such as alcohol, tobacco, and fuel.
Double Taxation Agreements (DTAs)
Guatemala has signed a limited number of double taxation agreements, including agreements with countries such as Mexico and Spain. These agreements help reduce withholding taxes on dividends, interest, and royalties and prevent the double taxation of cross-border income.
Local Taxes
Local municipalities in Guatemala collect property taxes and certain municipal fees. However, the central government, through the SAT, is responsible for collecting income taxes, VAT, and other major taxes.
Compliance and Reporting
Annual Filing:
Corporate tax returns must be filed by March 31st of the following tax year. Personal income tax returns are due by the same date. The tax year in Guatemala follows the calendar year.
Penalties for Late Filing:
Penalties for non-compliance or late filing include interest on overdue taxes and fines. Interest rates on unpaid taxes are generally set at 1.5% per month, with additional penalties for significant delays.
Recent Developments
Tax Reform:
Guatemala has enacted tax reforms aimed at increasing tax compliance and expanding the tax base. These reforms include the modernization of tax collection systems and increased efforts to combat tax evasion.
Transfer Pricing Enforcement:
Guatemala has strengthened its transfer pricing regulations, requiring multinational companies operating in the country to maintain detailed documentation and prove that transactions between related parties comply with the arm’s-length principle.
Digital Economy:
As part of a global trend, Guatemala is considering introducing taxes on digital services provided by foreign companies to Guatemalan consumers, including streaming platforms and online marketplaces.
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