|Corporate Income Tax Rate (%) (a) (b)|
|Regime on Profits from Business Activities||25|
|Optional Simplified Regime on Revenue
from Business Activities
|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)|
|Payments for Scientific, Technical and Financial Advice||15|
|Insurance and Reinsurance||5|
|News Services, Videos and Films||3|
|Net Operating Losses (Years)|
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.
d) The withholding taxes, other than the dividend withholding tax, apply to nonresidents without a permanent establishment in Guatemala. For information regarding dividends, see Dividends in Section B.
e) For details regarding the withholding tax on interest, see Section B.
Taxes on corporate income and gains
Corporate income tax. The new 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 deductions 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 circumstances in which the law imposes limits on deductibility. The taxable 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 USD3,907) 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 deductions 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. Based on World Trade Organization (WTO) agreements, this exemption is expected to expire on 31 December 2015. However, to comply with WTO requirements, the Guatemalan Congress is working on a new bill that would replace the existing benefits.
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 classified as income from capital and are subject to tax in Guatemala:
- 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
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 entities 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 incorporation 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, companies must make quarterly advance income tax payments, which are credited against the final income tax liability. In addition, taxpayers 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). 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 financial 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.
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), 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 documentation.
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 specific documentation requirements, which apply in certain circumstances. 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 USD3,907) must be made through a banking or financial institution, and the corresponding balance statement is required as part of the supporting documentation needed to consider 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 calendar month
- An operation of GTQ30,000 (approximately USD3,907) 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 considered 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 following 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 fiscal 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 country 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 corresponding to the annual income tax return.
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 un less 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.
|Buildings and leasehold improvements||5|
|Furniture, fixtures, ships and railroads||20|
|Machinery and equipment, vehicles and containers||20|
|Computer equipment and software||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 may be amortized over a minimum period of five years.
Oil and other natural resources are subject to depletion in accordance 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.
Other significant taxes
The following table summarizes other significant taxes.
|Nature of tax||Rate|
|Levies on petroleum production and
consumption; rate varies by type of fuel
USD0.61 per gallon
|Land tax; imposed annually on value of land; maximum rate, applicable to value in excess of GTQ70,000 (approximately USD9,117)||0.90%|
|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; for
immovable property, the increase in value
must be registered with the tax authorities;
otherwise the increase in value is subject
to income tax
|Import duties||0% to 20%|
|Social security tax; imposed on wages; paid by|
|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
Foreign-exchange controls. The currency in Guatemala is the quetzal (GTQ). As of 12 October 2015, the average exchange rate was GTQ7.67830 = 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-to-equity 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 transfer-pricing 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 Decem ber 2013. These rules re-entered into force as of 1 January 2015.
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.