VAT, GST and Sales Tax in Guatemala

Summary

Name of the tax Value-added tax (VAT)
Local name Impuesto al valor agregado (IVA)
Date introduced 1-Jul-92
Trading bloc membership None that affect VAT
Administered by Tax Administration Superintendence (SAT) (http://www.sat.gob.gt)
VAT rates
Standard 12%
Reduced 5% on gross sales for small taxpayers with annual turnover of less than GTQ150,000 (approximately USD19,973) (no input tax recovery)
Other Exempt, zero-rated, and a fixed amount on used vehicles
VAT number format Tax identification number (NIT)
VAT return periods Monthly
Thresholds
Registration None
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions:

  • The sale or exchange of movable goods or rights derived from movable goods
  • The rendering of services within Guatemala
  • Imports
  • Leasing of movable and immovable property
  • The award (transfer) of movable and immovable goods as a pay­ment
  • Consumption by the taxpayer and consumption by the employ­ees, executives, directors and shareholders of a company or their family members
  • Certain shortages of inventory such as those derived from miss­ing goods (for example, shrinkage) or damaged goods
  • The first sale or exchange of immovable assets
  • Certain donations
  • Contributions of immovable property to legal entities if the assets have been previously contributed to a real estate entity

Who is liable

Any business entity or self-employed individual that carries out taxable activities on a regular or periodic basis must register for VAT. Taxable persons whose annual turnover does not exceed GTQ150,000 (approximately USD19,973) may elect to be taxed under a simplified VAT regime.

Group registration. VAT grouping of separate legal entities is not allowed in Guatemala. Legal entities that are closely connected must register for VAT separately.

Small taxpayers. Small taxpayers with annual turnover of up to GTQ150,000 (approximately USD19,585) may apply for a sim­plified regime. Under the simplified regime, taxpayers pay tax at a rate of 5% based on their gross taxable sales without a right to credit or deduct VAT input tax (see Section F). Small taxpayers will be subject to VAT withholding when engaging in commercial activities with VAT withholding agents. In all cases where VAT is not withheld, small taxpayers must declare and pay the VAT within the next calendar month. In addition, taxpayers operating under this regime are exempt and shall neither declare nor pay income tax.

Non-established businesses and tax representatives. A “non-established business” is a business that has no fixed establish­ment in Guatemala. A non-established business must register for VAT if it supplies goods or services in Guatemala. To register for VAT, a non-established business must take the following actions:

  • Appoint a tax representative
  • Provide the tax authorities with a copy of its Articles of Incor­p oration, legalized by a Guatemalan consulate, together with an official translation in Spanish

Reverse charge. If a non-domiciled individual renders an occa­sional, temporary service in Guatemala (or performs another taxable activity) without being registered for VAT, the local ben­eficiary of the service may be able to issue a “special invoice” for VAT withholding.

Large taxpayers may be designated as VAT withholding agents for payments made relating to the acquisition of goods and ser­vices. This measure also applies to other special taxpayers expressly qualified as withholding agents (for example, export­ers, government entities, and credit card operators). VAT with­holding generally applies to the following (certain exemptions regarding minimum amounts may apply):

  • Regular exporters (minimum monthly average exports of GTQ100,000 [approximately USD13,316]): 65% of VAT gener­ated from the purchase of agricultural and cattle products, and 15% of VAT generated for other acquisitions
  • Drawback entities: 65% of the VAT generated
  • Government entities (excluding municipalities): 25% of the VAT generated
  • Credit and debit card operators: 15% of the VAT generated on transactions carried out by affiliated entities
  • Gas stations: 1.5% withholding on the gross amount of acquisi­tions of gasoline
  • Special taxpayers: 15% of the VAT generated
  • Other withholding agents: 15% of the VAT generated

In principle, the VAT withholding mechanism does not apply to transactions between withholding agents, unless the acquisition is made by credit or debit card (in such case, the taxpayer applies the VAT withholding as described above).

Registration procedures. The VAT registration process varies for entities that are newly incorporated or are branches of entities incorporated abroad.

Newly incorporated legal entities. Registration before the tax authorities should be performed simultaneously to registration before the Mercantile Registry. The tax ID certificate should be issued along with the certificate of registration. This process should be carried out directly by the notary public engaged for the incorporation of the entity, either in person at the Mercantile Registry or electronically through the following website: https:// minegocio.gt/. A tax ID number should be assigned once the new entity has been registered, a process that takes approximately five business days once a complete application has been filed.

Branches of entities incorporated abroad. Registration should be carried out directly at one of the agencies authorized by the tax authorities. The following documents are required:

  • ID of a legal representative of the company
  • Letter signed by the accountant accepting his or her registration before the tax authorities as the taxpayer’s accountant
  • Document that proves the individual’s authority to represent the company
  • Notarized copy of the articles of incorporation of the company
  • Utility invoice (water, electricity or phone services) from the registered fiscal and business address
  • The information regarding the income tax regime election, inventory method, Solidarity Tax election and quarterly pay­ments election, if applicable

Whenever the information in these documents or any information that is part of the VAT registration changes, the taxpayer must amend its registration within 30 days.

Late-registration penalties. A taxpayer that fails to register for VAT on a timely basis cannot offset VAT credits generated from purchases that are included in inventory at the time of registration.

The tax authorities may impose penalties and interest for late VAT registration.

Digital economy. There are no specific rules regarding the taxa­tion of digital economy for VAT purposes. The general taxable events indicated in Section B should be observed whether or not they are transacted by digital means.

Deregistration. Taxpayers that will no longer develop commercial activities in Guatemala should, after the legal procedure to liqui­date the entity has been completed, deregister for VAT purposes by filing form SAT-2175 and any other required documentation with the tax authorities.

VAT rates

In Guatemala, the standard VAT rate is 12%. The standard rate applies to the supply of all goods or services, unless a specific measure allows an exemption. A 5% rate on gross sales applies to small taxpayers, which are those with annual turnover of less than GTQ150,000 (approximately USD19,973). Under this scheme, no input tax recovery is permitted.

The 12% VAT rate applies to sales of vehicles and motorcycles when the transaction and the model of the vehicle or motorcycle corresponds to one of the following:

  • The current year
  • The year prior to the current year
  • The year following the current year

For used vehicles, including motorcycles, a fixed amount of VAT applies ranging from GTQ200 to GTQ1,000 (approximately USD26 to USD133), depending on the year of manufacture.

The first registered sale of a real estate property is subject to 12% VAT but no stamp tax; the second and subsequent sales are exempt from VAT but subject to a 3% stamp tax.

Exports of goods and services are zero-rated (taxed at a 0% rate) which makes input VAT recoverable (see Section F).

In addition to supplies that are subject to tax, some supplies are exempt, which means input VAT is not recoverable.

Examples of exempt supplies of goods and services

  • Transfer of assets in a merger
  • In-kind contributions of movable property to a legal entity
  • In-kind contributions of immovable property if the property had not been previously contributed to a real estate entity
  • Supplies by cooperatives to their members
  • Low-value retail sales of meat, fish, seafood or shellfish, fresh fruits and vegetables, cereals and basic grains in cantonal and municipal markets with a maximum sale value of GTQ100 (approximately USD13)
  • Certain financial services
  • Education
  • Certain insurance and reinsurance transactions

Option to tax for exempt supplies. Not applicable.

Time of supply

The time when the taxable event is considered to be completed and VAT becomes due is called the “tax point.” For a supply or exchange of goods, the tax point is the earlier of the issuance of the invoice or the delivery of goods. For a supply of services, the tax point is when the invoice, receipt or other document related to the transaction is issued. If no invoice is issued, the tax point is at the time of payment.

Leasing and continuous supplies of services. For leasing and a continuous supply of services for which the customer pays peri­odically, the tax point is the due date for each periodic payment.

Imported goods. The time of supply for imported goods is when the goods clear all customs formalities for importation.

Other tax points. The tax point for insurance and bonds is when the premiums or quotas are received, and for shortages of inven­tory, it is when the shortage is discovered.

Recovery of VAT by taxable persons

A taxable person may recover input tax. Input tax is VAT paid on the purchase of goods and services used to generate other goods and services subject to tax. Input tax is generally credited against output tax, which is VAT charged or collected on the sale of goods and the rendering of services. To deduct or credit input tax, certain conditions must be met. Input tax may be deducted or credited in the month when the invoice is received or in the fol­lowing two months.

In general, input tax paid on imports or purchases of goods and services is creditable when directly related to the taxpayer’s busi­ness activity.

A valid tax invoice or customs document must generally accom­pany a claim for an input tax credit. Purchases supported by invoices issued by small taxpayers do not generate input tax credits.

Payments in excess of GTQ30,000 (approximately USD3,995) must be made through the banking system or using a deed from a notary public in which the payer and the beneficiary are clearly identified.

Nondeductible input tax. Input tax may not be recovered on imports or purchases of fixed assets not directly related to the taxpayer’s business activity.

Examples of items for which input tax is nondeductible

  • Items (expenses or purchases) without proper supporting docu­mentation
  • Items (expenses or purchases) not registered in the VAT pur­chases book

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Any item that is related to the taxpayer’s taxable business activities, which is duly documented with the proper legal documents that comply with local requirements, provided the purchase has been included in the VAT purchases book, the balance of the tax credit has been registered in the accounting books as an account receivable, and the payment in excess of GTQ30,000 (approximately USD3,995) for the purchase has been made through a financial/banking institution.

Refunds. If the amount of input VAT recoverable in a month exceeds the amount of output VAT payable, the taxpayer obtains an input VAT credit. The credit may be carried forward to offset output tax in subsequent VAT periods.

Qualified exporters may claim a refund of VAT paid on inputs. The Bank of Guatemala (central bank) maintains a registry of qualified exporters.

To qualify for the registry of exporters, the taxpayer must provide the Bank of Guatemala with documents that prove it satisfies one of the following conditions:

  • It exports 50% or more of its gross sales.
  • It exports less than 50% of its gross sales, but it is not able to fully offset its input tax credit related to its exports against its output tax generated from domestic supplies.

Taxpayers registered as exporters may file a refund request with the Bank of Guatemala within 30 business days following the end of the period for which the refund is claimed. No refunds are granted for amounts of up to GTQ10,000 (approximately USD1,331). For refund requests greater than GTQ10,000, the Bank of Guatemala partially refunds the VAT paid by exporters in the following percentages:

  • 75% of refund amounts of up to GTQ500,000 (approximately USD66,578)
  • 60% of refund amounts greater than GTQ500,000

The remaining 25% or 40% is carried forward to the future peri­ods, or the exporter may request a refund directly from the tax authorities.

Qualified taxpayers may also request VAT refunds based on an opinion issued by a registered certified public accountant.

A nonqualified exporter may request a 100% VAT refund from the tax authorities directly if the exporter is not able to credit VAT on inputs against VAT on outputs.

Partial exemption. Not applicable.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

Guatemala does not refund VAT incurred by foreign or non-established businesses unless they are registered as Guatemalan VAT taxpayers.

Invoicing

VAT invoices, credit notes and debit notes. A taxable person must generally provide a VAT invoice for all taxable supplies made. VAT invoices, credit notes and debit notes must be authorized by the tax authorities. An invoice is generally necessary to support a claim for an input tax credit. If the nature of the business makes it impractical for a taxpayer to issue tax invoices, the tax authorities may authorize the use of cash registers and other computer­ized systems to issue receipts instead of invoices.

A VAT debit note must be used to increase the VAT chargeable if the value of a supply increases for any reason. A VAT credit note must be used to reduce the VAT charged and claimed on a supply if the value is reduced for any reason (for example, the granting of a discount, a change in the price or a return of the goods). A debit note or credit note must include the same information as a tax invoice.

Companies and individuals qualified by the tax authorities as Special Contributors must register as Authorized Issuers of Electronic Invoices (Emisores de Facturas Electrónicas, or EFACE) with the tax authorities. Accordingly, as of March 2013, they must issue their invoices through electronic means (Facturación Electrónica, or FACE).

Exports. Exports of goods and services are zero-rated. However, to qualify as zero-rated, exports must be supported by customs documents that give evidence of the outbound process. Suitable evidence also includes export invoices and bills of lading.

Foreign-currency invoices. VAT invoices must be issued either in Guatemalan quetzals (GTQ) or in US dollars (USD). However, invoices issued in US dollars must show the exchange rate used on the date of the transaction.

VAT returns and payment

VAT returns. VAT returns are generally submitted monthly. VAT due must be paid in full by the end of the month following the month in which the return is submitted.

Special schemes. None.

Electronic filing and archiving. Tax forms should be prepared and filed online at the following website: https://declaraguate.sat.gob. gt/declaraguate-web/. Once the tax returns are filed, the payment can be made either through an online banking system tool named “Bancasat” or physically through authorized banks.

Annual returns. There are no annual VAT returns.

Penalties

Nonpayment of VAT results in a penalty equal to 100% of the unpaid amount. If the penalty is paid voluntarily by the date required by the VAT authorities, the penalty is reduced to 50%.

Violation of formal duties. The late filing of VAT returns is subject to a penalty ranging from GTQ50 (approximately USD6.65) per day, up to a maximum of GTQ1,000 (approximately USD133). If the return is filed voluntarily, the late-filing penalty may be reduced to 85% of the original amount.

Tax fraud. Tax fraud occurs when information has been altered in a manner that causes the tax authorities to incorrectly compute the amount of tax due. The penalty consists of 100% of the amount of the tax plus imprisonment from one to six years.

The tax fraud penalty may not be imposed together with penalties for late payment.