Please direct all inquiries regarding Guatemala to the persons listed below in the San José, Costa Rica, office of EY. All engagements are coordi nated by the San José, Costa Rica, office.
Guatemala City GMT -6
EY +502 2386-2400
5th Avenue 5-55, Zone 14 Fax: +502 2385-5951 EuroPlaza World Business Center
Building I 7th Floor Guatemala City Guatemala
Principal Tax Contact
Rafael Sayagués
+506 2208-9880 (resident in San José, New York: +1 (212) 773-4761 Costa Rica)
Costa Rica Mobile: +506 8830-5043
US Mobile: +1 (646) 283-3979
Efax: +1 (866) 366-7167
Email: rafael.sayagues@cr.ey.com
Business Tax Services
Lisa María Gattulli +506 2208-9861 (resident in San José, Mobile: +506 8844-6778 Costa Rica) Email: lisa.gattulli@cr.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Juan Carlos Chavarría +506 2208-9844 (resident in San José, Mobile: +506 8913-6686 Costa Rica)
International Mobile: +1 (239) 961-5947
Email: juan-carlos.chavarria@cr.ey.com
Manuel Ramírez +502 2386-2435 (resident in Guatemala City, Mobile: +502 4151-0866 Guatemala)
International Mobile: +1 (239) 628-6036 Email: manuel.ramirez@cr.ey.com
International Tax and Transaction Services – Transfer Pricing
Luis Eduardo Ocando B. +507 208-0144 (resident in Panama)
Panama Mobile: +507 6747-1221
US Mobile: +1 (305) 924-2115
Fax: +507 214-4300
Email: luis.ocando@pa.ey.com
Paul de Haan (resident in +506 2208-9800 San José, Costa Rica)
Email: paul.dehaan@cr.ey.com
Business Tax Advisory
Juan Carlos Chavarría
+506 2208-9844 (resident in San José, Mobile: +506 8913-6686 Costa Rica)
International Mobile: +1 (239) 961-5947
Email: juan-carlos.chavarria@cr.ey.com
Tax Policy and Controversy
Rafael Sayagués
+506 2208-9880 (resident in San José, New York: +1 (212) 773-4761 Costa Rica)
Costa Rica Mobile: +506 8830-5043
US Mobile: +1 (646) 283-3979
Efax: +1 (866) 366-7167 Email: rafael.sayagues@cr.ey.com
Global Compliance and Reporting
Lisa María Gattulli
+506 2208-9861 (resident in San José, Mobile: +506 8844-6778 Costa Rica)
Email: lisa.gattulli@cr.ey.com
International Tax and Transaction Services – Transaction Tax Advisory Antonio Ruiz +506 2208-9822 (resident in San José, Mobile: +506 8890-9391 Costa Rica)
Rafael Sayagués
International Mobile: +1 (239) 298-6372
Email: antonio.ruiz@cr.ey.com
+506 2208-9880 (resident in San José, New York: +1 (212) 773-4761 Costa Rica)
Costa Rica Mobile: +506 8830-5043
US Mobile: +1 (646) 283-3979
Efax: +1 (866) 366-7167
Email: rafael.sayagues@cr.ey.com
People Advisory Services
Lisa María Gattulli
+506 2208-9861 (resident in San José, Mobile: +506 8844-6778 Costa Rica)
Email: lisa.gattulli@cr.ey.com
A. At a glance
Corporate Income Tax Rate (%) (a)(b)
Regime on Profits from Business Activities 25
Optional Simplified Regime on Revenue from Business Activities 7 (c)
Capital Gains Tax Rate (%) (a) 10 Branch Tax Rate (%) (a)(b)
Regime on Profits from Business Activities 25
Optional Simplified Regime on Revenue from Business Activities 7 (c) Withholding Tax (%) (d)
Dividends
10 (e)
Operating Losses
(a) For details regarding the Regime on Profits from Business Activities and the Optional Simplified Regime on Revenue from Business Activities, see Section B.
(b) Subsidiaries and branches are subject to the same tax treatment (that is, as independent taxpayers separate from their parents and headquarters). (c) See Section B for further information.
The withholding taxes, other than the dividend withholding tax, apply to nonresidents without a permanent establishment in Guatemala. For informa tion regarding dividends, see Dividends in Section B.
(e) For details regarding the withholding tax on interest, see Section B.
B. Taxes on corporate income and gains
Corporate income tax. The Income Tax Law (ITL) provides that income derived from activities rendered or services used in Guatemala is considered Guatemalan-source income and must be classified and taxed under one of the following categories:
• Income from business activities
• Income from employment
• Income from capital
Corporate income tax rates. Income from business activities is income derived from ordinary or occasional trade or business. Companies that generate income from business activities may choose to be taxed under one of the following tax regimes:
• Regime on Profits from Business Activities, which applies on a net income basis (authorized expenses are deductible)
• Optional Simplified Regime on Revenue from Business Activities, which applies on a gross receipts basis (no deduc tions are allowed)
Under the Regime on Profits from Business Activities, companies may deduct expenses incurred to generate taxable income or to preserve the source of such income, except in specific circum stances in which the law imposes limits on deductibility. The tax able income is subject to tax at a rate of 25%. In addition, a 1% Solidarity Tax applies (see Section D).
Alternatively, companies may elect to be taxed under the Optional Simplified Regime on Revenue from Business Activities. Under this regime, companies are subject to income tax on their “taxable income,” which is understood to be the difference between gross income and exempt income. The first GTQ30,000 (approximately USD3,897) of taxable income is subject to tax at a rate of 5%, and the exceeding amount is subject to tax at a rate of 7%. No deduc tions are allowed. Taxpayers that choose to operate through this scheme are subject to final withholding tax.
Companies operating under the Drawback Regime, the Free Trade Zone Regime or the Santo Tomas de Castilla Free-Trade and Industrial Zone (La Zona Libre de Industria y Comercio de Santo Tomás de Castilla, or ZOLIC) Regime benefit from a 100% income tax exemption for income earned from export activities. However, on 31 March 2016, the Emerging Law for the Preservation of Employment (Decree No. 19-2016) entered into force. The purpose of the law is to limit access to benefits for taxpayers under the Drawback Regime and the Free Trade Zone Regime.
Income from capital and capital gains. Income from capital (other from dividends; see Dividends) and capital gains generated in Guatemala are taxed at a rate of 10%, regardless of the regime elected by the taxpayer. The following types of income are clas sified as income from capital and are subject to tax in Guatemala:
• Royalties (if not part of the taxpayer’s ordinary trade and busi ness)
• Income from leasing and subleasing (if not part of the taxpayer’s ordinary trade or business)
• Interest and other types of returns derived from investments that are received by residents or nonresidents with permanent establishment in Guatemala (if not part of the taxpayer’s ordi nary trade or business)
Under the ITL, the following gains are subject to capital gains tax in Guatemala:
• Gains derived from the transfer of shares issued by resident entities
• Gains derived from the transfer of shares issued by foreign enti ties that own immovable or movable property located in Guatemala
• Gains derived from the transfer of movable or immovable assets, lottery tickets, raffle tickets or similar items or from the incorpo ration of assets located in Guatemala into the taxpayer’s property
Administration. The statutory tax year runs from 1 January through 31 December.
Companies operating under the Regime on Profits from Business Activities must file an annual income tax return and make any payment due within three months after the end of the tax year. Companies operating under the Optional Simplified Regime on Revenue from Business Activities must file an annual information tax return within three months after the end of the tax year. Interest and penalty charges are imposed for late payments of taxes.
Under the Regime on Profits from Business Activities, compa nies must make quarterly advance income tax payments, which are credited against the final income tax liability. In addition, taxpay ers that are qualified as Special Taxpayers must file the annual income tax return together with financial statements audited by a certified public accountant or an independent audit firm.
Companies operating under the Optional Simplified Regime on Revenue from Business Activities settle their tax through final withholding payments made by the payer. They must file a monthly tax return in which they separately determine the total amounts of gross income, exempt income, income subject to withholding tax and income subject to direct payment (companies may be required to make direct payments of tax if they are transacting with persons not required by law to make withholdings or if they have been previously authorized by the tax authorities). The tax return must be filed within the first 10 business days of the month following the month in which the tax was generated.
Dividends. Dividends are taxed under the category of “Income from Capital.” A 5% withholding tax is imposed on all dividend distributions made, regardless of the beneficiary’s country of residence.
Interest. In general, a 10% final withholding tax is imposed on interest paid to nonresidents. However, withholding tax is not imposed on the following types of interest payments:
• Interest payments made by local banks to banks and financial institutions domiciled abroad (that is, entities licensed and regulated in their country of origin)
• Interest payments made by local taxpayers to multilateral institutions abroad
• Interest payments made by local taxpayers to banks and finan cial institutions domiciled abroad that are authorized to operate in the country by the Guatemalan Law on Banks and Financial Groups
Foreign tax relief. Guatemala does not grant relief for foreign taxes paid.
C. Determination of trading income
General. Under the Regime on Profits from Business Activities, expenses incurred to generate taxable income, including local taxes, other than income tax and value-added tax (VAT) when such taxes are not considered to be a cost, are deductible. The tax authorities are empowered to deny deductions if they determine that any of the following circumstances exist:
• The expenses are not considered necessary to produce taxable income.
• The expenses correspond to a different fiscal year.
• The expenses are not supported by the appropriate documenta tion.
• The taxpayer did not withhold the corresponding tax, when appli cable.
The expenses must be registered in the taxpayer’s accounting records.
Documents issued abroad that support the deduction of expenses may be subject to a 3% stamp tax.
The deductibility of expenses is also conditioned on the reporting and payment of withholding taxes and on the satisfaction of spe cific documentation requirements, which apply in certain circum stances. This documentation includes, among others, the following items:
• Valid invoices authorized for local operations
• Invoices or receipts issued abroad
• Notary Public deeds
• Payrolls reported to the social security authorities
• Customs returns for the importation of goods including the tax receipts
In general, payments on transactions valued over GTQ30,000 (approximately USD3,897) must be made through a banking or financial institution, and the corresponding balance statement is required as part of the supporting documentation needed to con sider the payment deductible. Operations not made through the banking system must be documented through a Notary Public deed.
For these purposes, the law provides that a single transaction may be considered to include the following:
• All payments made to a single source or provider during a cal endar month
• An operation of GTQ30,000 (approximately USD3,897) or above that involves partial or split payments to the same provider or person
In both of the above cases, taxpayers should use the payment or documentation methods listed above. Otherwise, the expense may not be deductible for income tax purposes and may not be consid ered a tax credit for VAT purposes. This requirement is known in Spanish as “Bancarización.”
The deduction for royalties, payments for financial or technical advice and professional service fees for services rendered from
abroad to local taxpayers is limited to 5% of the taxpayer’s gross income.
Interest is deductible for income tax purposes if all of the follow ing conditions are satisfied:
• The loan proceeds that give rise to such interest must be used to generate taxable income.
• Payments must be documented and correspond to the same fis cal year.
• The taxpayer must comply with the obligation to withhold the corresponding tax, if applicable.
• The deductible amount may not exceed the value calculated by multiplying the interest rate set by the Guatemalan Monetary Board by a total of three times the “average net asset” amount reported by the taxpayer in the annual tax return. “Average net asset” is defined as the sum of the total net worth of the previous year and the total net worth of the current year (values declared in the annual income tax returns), divided by two.
• Loans issued abroad must be obtained from banks or financial institutions that are registered and monitored by the state entity in charge of bank supervision in the country of origin. They must also be authorized for financial intermediation in the coun try in which the loan is granted.
• The interest rate on foreign-currency loans may not exceed the maximum simple annual rate set by the Monetary Board, minus the value of the quetzal exchange rate variation in relation to the currency in which the loan is expressed, during the period cor responding to the annual income tax return.
Deductibility of expenses on airline operations. In January 2020, Decree 2-2020 of the Guatemalan Congress took effect. It allows airlines engaged in international transport services to deduct the costs and expenses generated outside of Guatemala that are necessary to provide these services in the country.
Taxpayers established abroad that carry out international air transportation activities both ways between Guatemala and other countries, and whose operations are performed by branches, agencies or other permanent establishments in the country must apply the general deductibility rules of the income tax law and also deduct a proportion of the overall costs and expenses reported by the parent company in accordance with a specific formula that should be automatically calculated by the electronic system provided by the tax authorities when preparing the elec tronic tax return for corporate income tax purposes.
The Decree mentioned above indicates that the airline should support the information for the calculation of the proportional deductible expense with the audited financial statements of the parent entity, which must be prepared in accordance with international accounting rules, duly apostilled and translated into Spanish. The Decree also provides that taxpayers (branches, agencies or permanent establishments) that are unable to provide this documentation may apply the presumption that the taxable base is 15% of their gross income and, accordingly, such taxable base should be subject to the 25% income tax rate.
Inventories. Inventories are valued at cost. The acquisition cost may be computed using various valuation methods provided in the
income tax law. No deviation from these methods is allowed unless previously authorized by the tax authorities.
Cattle may be priced at cost or sales price.
No provisions for deterioration or obsolescence are allowed. The destruction of inventory is considered a deductible expense if it is certified by an inspector from the tax authorities or by a Notary Public.
Provisions. Provisions for bad debts of up to 3% of credit-sales balances are deductible (excluding bad debts guaranteed by pledge or mortgage). Reserves for severance compensation of up to 8.33% of payroll costs are also deductible.
Tax depreciation. Straight-line depreciation is allowed, subject to the following annual maximum rates.
Asset Rate (%)
Buildings and leasehold improvements 5
Plantations 15
Furniture, fixtures, ships and railroads 20 Machinery and equipment, vehicles and containers 20 Computer equipment 33.33 Tools, porcelain, glassware and certain animals 25 Other items that are not specified 10
Goodwill can be amortized over a minimum period of 10 years. Other intangible assets related to intellectual property rights may be amortized over a minimum period of five years.
Oil and other natural resources are subject to depletion in accor dance with the level of production and the remaining reserves.
Relief for losses. Under the Regime on Profits from Business Activities and the Optional Simplified Regime on Revenue from Business Activities, net operating losses cannot offset taxable income in prior or future years.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate
Value-added tax 12% Levies on petroleum distribution; rate varies by type of fuel USD0.16 to USD0.61 per gallon
Land tax; imposed annually on value of land; maximum rate, applicable to value in excess of GTQ70,000 (approximately USD9,093) 0.9%
Revaluation tax; imposed on the increase in value resulting from a revaluation of immovable property and other fixed assets by an authorized third-party adjuster 10% Import duties 0% to 20%
Social security tax; imposed on wages; paid by Employer 12.67% Employee 4.83%
Nature of tax Rate
Solidarity Tax (ISO); imposed on legal entities subject to the Regime on Profits from Business Activities; tax rate applied to the higher of 1/4 of net assets or 1/4 of gross income; newly organized entities are not subject to ISO during their first four quarters of operations; entities that have a gross margin of lower than 4% of its gross income or incur losses for two consecutive years are not subject to the tax 1%
E. Miscellaneous matters
Foreign-exchange controls. The currency in Guatemala is the quet zal (GTQ). As of 31 December 2021, the average exchange rate was approximately GTQ7.71912 = USD1.
Guatemala does not impose foreign-exchange controls. The exchange system is regulated through the banks.
Debt-to-equity rules. Guatemala does not impose any debt-toequity requirements.
Anti-avoidance legislation. The tax law contains general measures to prevent tax fraud and similar conduct.
Transfer pricing. Effective from 1 January 2013, official transferpricing rules apply to transactions with related parties resident abroad. However, Decree 19-2013 of the Guatemalan Congress suspended the application of the transfer-pricing rules as of 23 December 2013. These rules re-entered into force as of 1 January 2015. The Income Tax Law provides the following two formal obligations:
• Annex to the Annual Income Tax Return on related parties must be filed no later than 31 March of each fiscal year.
• Annual preparation of the Transfer Pricing Study is needed when formally required by the tax authorities.
Online Electronic Invoice regime. On 20 March 2018, the Board of Directors of the tax authorities issued Agreement 13-2018, which entered into force on 23 May 2018. This agreement contains the new Online Electronic Invoice regime, which pro vides rules regarding the issuance, transmission, certification and storage by electronic means of invoices, credit and debit notes, receipts, and other documents authorized by the tax authorities.
On 3 April 2019, the Guatemalan Congress approved Decree 4-2019, which entered into force on 30 October 2018. The Decree introduced amendments to the Value Added Tax Law related to the Online Electronic Invoice regime. Under the amendments, taxpayers operating under such regime are required to keep an electronic accounting system for recording operations and supporting documentation with respect to the taxpayer’s ordinary trade or business.
Monthly bank reconciliation. In the last quarter of 2021, the tax authorities gave notice to taxpayers of a new tax requirement model. Under this model, as of 2022, the information requests
for tax audits will include the submission of monthly bank reconciliation as determined in such model. Such reconciliation will allow the tax authorities to obtain the following infor mation at the income and expense level:
• Accounts receivable and payable with domestic and foreign clients and suppliers
• Accounts receivable and payable with shareholders
• Accounts receivable with employees
• Advance payments made by and to customers and suppliers
• Interest earned and paid
• Transfer of funds (incoming and outgoing) between bank accounts
F. Tax treaties
Guatemala signed a double tax treaty with Mexico in March 2015, which is not yet in effect. The treaty will enter into effect after both countries complete their respective legislative approval processes.