State, which imposes annual rentals for exploration permits, and rentals and royalties when the leased properties enter the production stage.
25. Other Taxes
Land and Property. Land and property is subject to property tax based on an official valuation and is paid quarterly at the following annual rates:
Property Value
Over Not Over Rate
Q 0 Q 2,000 0%
2,000 20,000 0.20
20,000 70,000 0.60
70,000 0.90
Stamp Tax. A 3% stamp tax is levied on the following services and
contracts:
q Contracts and all documents in which obligations are contracted and that result in payment, collection, transfer, or cancellation, except loans and transactions subject to value-added tax;
q Dividends or profits distribution.
Mercantile Tax. Profit-making companies or partnerships incorporated abroad and authorized to establish branch offices or agencies in Guatemala pay 1.5% of their net assets after deducting fiscal credits, total liabilities, and retained earnings. This tax can be credited to income tax.
Solidarity Tax. A solidarity tax of 1.5% on total income or 3% on total net assets, only effective in 1997, can be credited to income tax.
COMPUTATION OF TAXABLE INCOME
26. Capital Gains
A capital gain or loss is measured by the difference between cost and selling price. Capital losses may offset capital gains arising in the following five years.
27. Depreciation and Depletion
Depreciation is calculated on the straight-line basis at the following maximum rates:
Buildings 5%
Machinery, equipment, vehicles 20%
Office furnishings and equipment 20%
Tools, computers 25%
Others 10%?5%
Tax authorities may allow other depreciation methods, upon request, for
special cases.
Mining operations are granted a depletion allowance, subject to specific authorization by the tax authorities. Exploration costs can be absorbed in the first fiscal year or in the next five consecutive years.
28. Treatment of Dividends
Dividends paid to residents are tax-exempt. Dividends paid to
nonresidents are tax-exempt if the local company pays income tax.
29. Loss Carryovers
Operating losses can be deducted in the following two taxable profit years.
30. Transactions Between Related Parties
The tax authorities do not concern themselves with transactions between related parties, and transactions between a foreign parent company and a Guatemalan subsidiary or branch are not normally scrutinized carefully.
31. Consolidation of Income
Each legal entity must pay its own taxes.
32. Tax Periods
Only two tax periods are authorized: July 1 to June 30 and January 1 to December 31.
33. Other Matters
Inventory Valuation. For tax purposes, inventories may be valued at cost or market, whichever is lower, on the basis of FIFO, average cost, LIFO, or last purchase. Industrial articles produced are usually valued by the absorption method, which includes raw materials, direct labor, and manufacturing overhead. Direct cost (variable) is also allowed for
tax purposes.
Bad Debts. A taxpayer may either provide a general reserve for doubtful accounts of no more than 3% of the accounts receivable or deduct specific bad debts.
Employee Benefits Provisions. Provisions for employee benefits such as annual vacation and Christmas bonus are deductible. Provision for severance compen
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