CORPORATE TAXES
GENERAL NOTE
The information in this entry is current as of January 1998. For subsquent developments consult the contact listed above.
TAXES ON CORPORATE INCOME
A rate of 30% is applicable to a company's taxable income from
Guatemalan sources. The rate will be reduced to 27.5% in 1999 and to 25% in 2000.
CORPORATE RESIDENCE
The place of incorporation determines corporate residence.
OTHER TAXES
Stamp tax/Except for sales invoices and other minor exceptions, a stamp tax must be paid on all documents covering legal transactions that originate locally or are received from abroad. Letters of credit and acceptances involving international transfers of funds are generally exempt from the stamp tax, as are documents subject to VAT (see below).
The normal stamp tax rate of 3% is calculated on the face value of the documents or the gross value of the transaction.
Tax on interest income/Interest income earned by domiciled persons other than banks is subject to a flat 10%withholding tax. The interest so taxed is to be included by taxpayers in their income tax returns as nontaxable income.
Social security contribution/Corporations contribute 12% of their monthly payroll to social security.
Payment of incentive bonus to employees/An addition to normal
compensation is to be paid to all employees as determined by an
incentives plan commonly agreed on between the corporation and the labor force. This additional compensation (including social security) is tax exempt for the corporation. It is treated as a deductible item.
Value-added tax/A 10% value-added tax (VAT) is levied on the sale or transfer of merchandise, chattels and real estate; on nonpersonal services rendered; on the rental of goods and chattels; and on imports. The tax base is determined as follows.
1.Sale of goods-Sale price less standard commercial discount plus any other charges included in the invoice.
2.Services-Price of the service less standard commercial discount plus cost of goods used in the service.
3.Imports-Value declared for customs duties.
4.Rentals-Amount of the rent.
The following are exempt from VAT.
1.Imported machinery, equipment and other goods related to the
activites or services of legally constituted and registered
cooperatives.
2.Temprary imports. as defined, by individuals and legal persons.
3.Imports by diplomatic and consular missions accredited to the
Guatemalan government.
4.Banking services.
5.The creation, issuance, circulation, and transfer of stocks and bonds of all kinds.
6.Interest derived from bonds and other obligations issued by
mercantile partnerships and offered on an authorized stock exchage.
7.Exports.
8.Contributions and donations to nonprofit educational, cultural, benevolent, and security-service entities.
VAT charged to customers is set off against VAT paid to suppliers, and the net debit amount is paid to the tax authorities on a monthly basis. A credit amount is carried over to the following month. Refunds are made only to exporters.
Real estate taxes/Real estate taxes are assessed annually at Q3 per thousand on declared property values of from Q2,000 to Q20,000, at Q6 per thousand on values from Q20,000 to Q70,000 and at Q9 per thousand on values in excess of Q70,000.
Annual business tax/This tax is assessed at 1.5% on net assets of the corporation; no limit on the amount to be paid is established. Tax paid can be credited to the corporation's income tax. If annual business tax exceeds income tax, no reimbursement is possible. The tax will be in
force from 1995 to 1998.
The tax is to be paid on the basis of the corporation's opening balance sheet for each fiscal period. For example, for 1995, corporations with fiscal periods running from January to December pay tax based on the January 1995 balance. Corporations with fiscal periods running from July to June pay on the basis of the June 1995 balance. For the 1998
period, corporations with June to July fiscal periods only pay the business tax for six months (July to December).
BRANCH INCOME
Tax rates on branch profits are the same as on corporate profits. A 12.5% tax is withheld on transfers of profits to the head office.
INCOME DETERMINATION
Inventory valuation/LIFO is not accepted for tax purposes. Inventories are to be stated at average cost or at cost determined by the FIFO method. Conformity between book and tax reporting is generally required.
Capital gains/Capital gains taxes are equivalent to 10% of such gains as a flat tax. Tax is due with the year-end return. Capital losses can be netted only against capital gains.
Intercompany dividends/Dividends from domestic subsidiaries and other domestic corporations are not subject to taxes if Guatemala income tax has
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