Guatemala Tax & Business Guide - Deloitte

Basic facts
Population 12.7m Inflation 8.8% (2005)*
Main languages Spanish, Amerindian languages GDP per head US$2,110*
Currency Quetzal (GTQ) GDP growth 3.1% (2005)*
Economic communities WTO
GDP sources 22.7% agriculture, 18.8% industry, 58.5% services
*Economist Intelligence Unit.
Political environment

Guatemala is a democratic presidential republic.

Oscar Berger of the centre-right Gran Alianza Nacional (GANA) allianceÛcomprising the Movimiento Reformador (MR), Partido de Solidaridad Nacional (PSN) and Movimiento 17 (M-17)Ûtook office as president in January 2004. Presidential, congressional and municipal elections are due in November 2007.
Foreign trade and investment
Exports US$3.9bn (2005)* Imports US$7.8bn (2005)*
*Economist Intelligence Unit.

Major exports: Coffee, bananas, sugar and oil.

Primary export markets: US, El Salvador, Nicaragua and Costa Rica.

The government welcomes foreign capital and places no legal restrictions on the repatriation of profits. Foreign investors may own any company, partially or wholly, and enjoy complete management freedom.
Business and financing
Business forms Sociedad an€nima, Sociedad de responsibilidad limitada

The most common form of business organisation is the sociedad an€nima (ie stock company), which must have at least two shareholders and may be wholly owned by non-residents. The other main corporate form is the sociedad de responsibilidad limitada (ie limited liability company), which is limited to 20 partners and whose managing director must be a resident of Guatemala.

Businesses operating as a branch must deposit operating capital with an authorised bank.

Establishment of a firm (whether resident or non-resident) requires registration with the Ministry of Finance within a month of the investment.
Labour environment
Unemployment rate Not recorded Minimum wage GTQ 42.46 (daily)

The unemployment rate to January 2005 was estimated at more than 40%, which does not include a large number of under-employed. There has been an increase in employment in the informal sectors of the economy, and there are shortages of skilled manual workers, managers and information technology (IT) professionals.

The level of unionisation is low.

The minimum daily wage for agricultural workers is GTQ 42.46; for non-agricultural workers it is GTQ 43.64.

Guatemala requires that 90% of a firmÌs workforce consist of nationals and that no less than 85% of its payroll be paid to nationals. Exceptions are made, however, for technical personnel.
Taxation
Corporate tax
Main rate 31% of net income

Guatemala operates a territorial system where income tax is levied only on Guatemalan-source income. Resident companies may opt to be taxed under one of two regimes: the general regime, where a flat 5% tax is imposed on gross income of each month; or the optional regime, where tax is levied at a rate of 31% on net taxable income. An asset tax is also imposed, amounting to 2.5% of the income or net assets of the previous year. The asset tax may be credited against corporate income tax liability.
Individual tax
Progressive rates to 31%

Resident individuals are subject to income tax at progressive rates ranging from 15% to 31% on their Guatemalan-source income. Non-resident individuals are taxed via withholding at a flat rate of 31% on their Guatemalan-source income. Employment and professional services income is taxed at progressive rates ranging from 10% to 31%, generally via withholding at source. Other income is taxed at a flat rate of 31%.
Capital gains
Gains are taxable

Capital gains are taxed at 10% under the general regime and 31% under the optional regime.
Indirect tax
Standard rate 12%

Value-added tax (VAT) applies at a 12% standard rate to most transactions. Exemptions include basic foodstuffs, certain financial services and sales of some low-cost housing. Exports are zero-rated, and exporters may obtain a refund of 60% (or 75% for smaller amounts) of input tax paid. A simplified regime applies for small taxpayers.
Tax administration and compliance
Tax year Calendar year

The fiscal year corresponds to the calendar year for both companies and individuals. Companies are required to make quarterly advance payments of tax under the optional regime. A final payment is due at the time the tax return is filed. Employment income is taxed by withholding. An alternative regime is available for small-business taxpayers.
Additional tax information
Withholding taxes Dividends and Interest 10%, Royalties 31%. Interest paid on loans from foreign financial institutions and brought into a Guatemalan bank is exempt from withholding tax.
Tax treaties Guatemala has not concluded any double-tax treaties.
Dividends Dividends are not taxable if the distributing company has paid income tax in Guatemala; otherwise, the dividend is taxed at 10%.
Revenue protection There is no transfer-pricing or anti-tax-haven legislation.
Groups There are no provisions for group taxation.
Incentives Export promotion; mining; assembly operations.
Other taxes Asset tax, Import duties, Inheritance and gift tax, Property tax, Tax on alcoholic beverages.