Page 84 - STRATEGY Magazine (G)

GUATEMALA: TAX SYSTEM
Rising Through the Ranks:
Top Ratings for Guatemala’s Tax System
Guatemala is ideal for importing and exporting due to its location and free trade agreements with the United States and its neighbors in Central America. Knowledge of its taxation laws are a must for those who invest within its territories.
In March 2015, Guatemala signed a Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Mexico. The treaty includes
clauses regarding exchange of information and anti-avoidance. The convention is the first treaty
of its kind for Guatemala. Gener- ally speaking, the republic has
a taxation system that is based on the territorial princi-
ple, as recorded in the Constitution and upheld by Congress. Nearly all taxation laws are derived from activities
within Guatemala’s borders
and are not associated with monies from other territories.
INCOME TAX
The income tax is imposed upon any corporation or individual, regardless of nationality, that procures a profit by means of work or the investment of capital. The rate is 5 percent of the first Q30,000 and 7 percent for the exceeding amount.
Dividend income is also levied at the same 5 percent; howev- er, capital gains are subject to a higher tax rate of 10 percent. This includes income from leased properties, interest, and any winnings from lotteries, raffles, or drawings. For those engaged in real estate ventures and who have effectively been paid or were accredited on a rental account, the leasing of any property is taxed at a rate of 10 percent, based on 70 percent of the value of the rent.
Commercial operations must report taxes quarterly in addi- tion to the annually filed return. Such operations are deemed to be lucrative activities and are subject to a tax rate of 25 percent. Taxpayers in this regime must promptly file a return at the conclusion of each quarter, creating an advanced tax payment schedule based on these quarterly amounts. The annual return is then to be filed no later than March 31 of the following calendar year. The Tax Administration requires that these tax payments reflect the verbiage “subject to quarterly payments” on their invoices, and all inventory must be reported to the Tax Administration in January and July of each year. Guatemala does not allow for the deduction of net operating losses, and tax- payers must plan accordingly. Tax payers may request that the Tax Administration not enforce any withholdings so that the tax payers may pay their taxes directly, though certain estab- lished requirements must be met in order to do so.
Non-residents may also be subject to additional tax obligations
depending on the activity that rendered the income. Scentific, economical, technological, or financial consulting is levied at 15 percent. Payments to bank accounts of athletes and artists are also levied at 15 percent, as are all other types of royalties and fees. Non-residents who receive income for the transmission of data will pay 5 percent as a tax on income.
VALUE ADDED TAX & PROPERTY TAX
Guatemala’s value added tax (VAT) is imposed upon the sale, lease, or barter of any moveable or immoveable object in the national territory and is obligatory to individuals and legal entities alike. This assessment includes activities related to importers and exporters, those who purchase goods or services, and the adjudication or withdrawal of property by the taxpayer or the owner. The standard rate for VAT is 12 percent of the total invoiced amount.
For property tax, the Republic of Guatemala’s General Property Registry sets the value of the property and assesses
a tax rate thereof. A value of up to Q2,000 is exempt from the tax. From Q2000.01 to Q20,000, the rate is 2 per thousand. From Q20,000.01 to Q70,000, it is 6 per thousand, and from Q70,000.01 and up it is 9 per thousand. Taxes are due quarterly and the property must be owned within the territorial limits of the Republic of Guatemala.
SOLIDARITY TAX
Though currently considered a temporary tax, the Guatemalan government has no intention of eliminating the solidarity tax in
82 STRATEGY
SPECIAL REPORT