Guatemala is a country with one of the lowest tax burdens in Latin America and the Caribbean. And this is very attractive for investors

An important factor for any investor is that since Guatemala is a country with territorial income taxation, taxes are only paid on what is generated in the national territory, and that Guatemala has enacted legislation on Transfer Prices that stipulates that companies with related parties abroad must conduct this study each year.

What are the main taxes?

Value-Added Tax (VAT)

Rate: 12 percent1

Payment frequency: monthly. Due date: the last business day of the following month.

Comments: This tax is payable on practically every commercial transaction, with very few exemptions and tax-free transactions. The most important one is possibly the second and subsequent sales of real property, which do not pay this tax.

Moreover, it is determined by offsetting the tax generated by sales with the tax generated by the acquisition of goods and services, which results in a tax due or tax credit for the following period.

Income Tax

On for-profit activities.

  1. Rate: 25% of profits (taxable income).

Payment frequency: annual. Due date: March 31. Installments are due in April, July and October of each year. Income-tax returns are filed annually.

  1. Rate: 7% of income (gross income).

Payment frequency: monthly through withholding2. Due date: first ten business days of the following month. An informative return is filed annually.

Comments: One of these two methods must be selected. This allows investors to choose the most favorable structure that represents the lowest tax rate. It also makes it

possible to plan adequately for taxes when a group of companies are part of a corporation.

Taxes on non-residents

  1. 5% on transportation, insurance, telephony, data transmission, international communications and dividends payable to non-residents.
  2. 3% on news feeds or the use of films, music recordings, photo stories, etc.
  3. 15% on fees, salaries, payments to artists and sports figures, financial, scientific or technical advice.
  4. 25% on other unspecified income.

Payment frequency: monthly through withholding. Due date: first ten business days of the following month.

Comments: this tax is withheld by the local Company from its foreign supplier. If the local company assumes payment of the tax, it is not deductible for income-tax purposes.

Employees (salaried workers)

Rate: 5%3 for those earning less tan Q300,000 a year.

Payment frequency: monthly through withholding. Annual return.

Rate: 7% over the excess over Q300,000 per annum (approx. US$40,000).

Payment frequency: monthly through withholding. Annual return.

Comments: Similar to a flat rate; simple and user-friendly. The employer is under the obligation to withhold and pay the tax to the Tax Administration.

Income and capital gains

  1. Rate: 5% on dividends.

Payment frequency: monthly. Due date: first ten business days of the following month.

Rate: 5% on all other income.

Payment frequency: monthly. Due date: first ten business days of the following month.

Comments: These are mainly operations that are not part of the normal corporate activity.

Solidarity Tax

Rate: 1% of income or net assets, whichever is higher4.

Payment frequency: quarterly. Due date: last business days of the following month.

Comments: Operates as a minimum income-tax payment. This tax can be credited to income tax or the other way around, depending on the method and certain conditions. This tax does not have to be paid during the first four operating quarters.

What are our main tax liabilities?

Depending on the taxpayer’s status with the Tax Administration Superintendence (SAT by its Spanish acronym), the liabilities are different. The main factors that affect taxpayer status with SAT include the level of annual sales and the tax contribution the company represents.

General liabilities include keeping legal authorized books, which mainly have to do with the company’s accounting, and more specific regulations such as submitting returns on SAT systems, issuing electronic invoices as sales documents and even withholding value-added tax on behalf of the State.

Guatemala is one of the countries of Central America with the most technical and electronic tools for filing taxes and monitoring taxpayers.

Guatemala is considered a foreign-investment friendly country, with relatively simple regulations compared with the other countries of the region, but appropriate counseling is a must when investing in a foreign country to ensure that no breaches of tax regulations are incurred or that liabilities are not created that might represent financial losses.

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