Guatemala City

Taxation in Guatemala City, Guatemala

What are the tax rates in Guatemala City, Guatemala? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Guatemala City, Guatemala.

Personal taxation in Guatemala City

Effective personal income tax rate

Annual income$25,000$40,000$80,000$125,000$200,000
Rate5%5%6%6%7%

Teleport city rankings for personal income tax

Personal taxation puts Guatemala City in position 1 of all Teleport Cities.
WORSTBEST

Basis

Resident individuals are subject to income tax on Guatemala-source income. Nonresident individuals are taxed via withholding on their Guatemala-source income.

Residence

An individual is considered a resident of Guatemala if he/she remains in the country for more than 183 days during the calendar year or if his/her center of economic interests is located in Guatemala.

Filing status

Joint filing is not permitted. Each individual must file a return, except for those under an employment contract where employer has withheld tax on behalf of the individual.

Rates

Individuals engaged in a trade or business are taxed the same as corporations. Personal income from employment is taxed at progressive rates ranging from 5% to 7%. Nonresident individuals are taxed via withholding at a flat rate of 15% on Guatemala-source employment or professional services income.

Deductions and allowances

In addition to a personal allowance of GTQ 48,000, individuals earning income from employment may deduct a several items categorized as personal deductions in the law.

Taxable income

Individuals involved in trade or business are taxed the same as corporations. Income from employment is taxed via withholding by the employer.

Capital gains

Capital gains are taxed at a rate of 10%.

Other taxes on individuals

Real property tax

Real estate tax is imposed annually at progressive rates up to 0.9%.

Inheritance/estate tax

Inheritance tax is levied at progressive rates, depending on the degree of relationship between the deceased and the beneficiary.

Compliance for individuals

Penalties

Individuals are liable for a penalty of up to 100% of any unpaid tax liability.

Filing and payment

The tax return must be filed by the third month after the close of the previous tax year. Individuals who derive only employment income in an amount of GTQ 48,000 or less are not required to file a return.

Corporate taxation in Guatemala City

Teleport city rankings for corporate income tax

Corporate taxation puts Guatemala City in position 72 of all Teleport Cities.
WORSTBEST

Residence

A corporation is resident in Guatemala if it is incorporated in accordance with Guatemala law, has its fiscal domicile or corporate headquarters in Guatemala or is a branch of a foreign company in Guatemala.

Taxable income

A company that elects to be taxed under the net income regime is required to calculate taxable income by adjusting book net income for foreign-source income, exempt income, passive income and nondeductible expenses. Under the optional regime, taxable income is calculated as gross revenue less foreign-source, passive income and exempt income.

Basis

Guatemala operates a territorial system under which income tax is levied only on Guatemala-source income. A resident company can opt to be taxed under one of two regimes: (1) the simplified optional regime on gross revenue (gross receipts tax); or (2) the regime based on net income (traditional corporate income tax). Under the optional regime, tax is levied on monthly gross revenue at a rate of 5% or 7%, whereas under the net income regime, tax is levied on net profits from trade or business activities at a rate of 25%.

Other taxes on corporations

Stamp duty

Stamp tax is levied on various documents at a rate of 3%, as well as on certain transfers of real estate.

Social security

Both the employer and the employee pay social security taxes. The rate is 12.67% for the employer and 4.83% for the employee.

Payroll tax

See under “Social security.”

Real property tax

Real estate tax is imposed annually at progressive rates up to 0.9%.

Compliance for corporations

Penalties

Penalties are imposed for late filing, failure to file, underreporting or tax avoidance/evasion.

Rulings

A taxpayer may request a ruling on the tax consequences of a transaction in which it has a direct interest. The tax authorities must issue a binding ruling no later than 60 business days after submission of the request.

Filing requirements

The annual income tax return is due three months after the close of the previous tax period (i.e. 31 March).

Other taxation in Guatemala City

Value added tax

Filing and payment

The VAT return must be filed on a monthly basis.

Rates

The standard VAT rate is 12%.

Taxable transactions

VAT applies to most sales of goods, the provision of services, leases, imports and the first transfer of a real estate.

Anti-avoidance rules

Rate

The rate is 5% to 7% on gross revenue under the optional regime and 25% under the net income regime.

Transfer pricing

Transfer pricing rules apply to any transaction between a Guatemalan resident taxpayer and a nonresident related party where the transaction affects the calculation of the taxable income of the fiscal year and subsequent fiscal years. The transfer pricing rules are aligned with the OECD guidelines, and there is a sixth transfer pricing method for commodities.

Losses

Net operating losses may not be carried forward or back. Capital losses may be carried forward two years to offset against capital gains, but may not be carried back.

Alternative minimum tax

A solidarity tax (ISO) is applicable to companies that opt for the net income regime. The rate is 1% on total assets or gross revenue, whichever is greater.

Investment basics

Accounting principles/financial statements

IFRS or tax basis (corporate income tax law-based accounting criteria). Financial statements must be filed annually.

Principal business entities

These are the stock corporation, limited liability company and branch of a foreign entity.

Withholding tax

Royalties

Royalties paid to a nonresident are subject to a 15% withholding tax.

Dividends

Dividends paid to a nonresident are subject to a 5% withholding tax.

Branch remittance tax

Remittances by a branch to its foreign head office are subject to the same treatment as dividends, i.e. they are subject to a 5% withholding tax.

Other

A 25% withholding tax is levied on other types of Guatemala- source income not specifically covered by the tax law.

Interest

Interest paid to a nonresident is subject to a 10% withholding tax. Exemptions are provided for the banking and finance sectors.

Technical service fees

Technical service fees paid to a nonresident are subject to a 15% withholding tax.