INDIVIDUAL TAXES
GENERAL NOTE
The information in this entry is current as of January 1998. For subsequent developments consult the contact listed above.
TERRITORIALITY AND RESIDENCE
Guatemala taxes its citizens and resident or nonresident individuals on their compensation attributable to services rendered in Guatemala and on other Guatemalan-source income.
GROSS ICNOME
Employee gross income/Nonresident aliens are taxed on salary earned for work done in Guatemala regardless of where payment is made and regardless of whether it is remitted. They are not taxed to the extent that their compensation relates to services performed outside Guatemala. Quantifiable fringe benefits, such as housing allowance, living allowance, house, tax reimbursement, etc.. are considered taxable income.
Capital gains and investment income/Guatemalan-source capital gains are taxed at a flat rate of 10%. Capital gains and investment income from outside the country are not taxed by Guatemala. Capital losses be netted only against income.
A nonresident alien's income from a Guatemalan source is subject to income tax withholding at varying rates:
· Interest-10%,except when the related foreign exchange proceeds are sold directly into the Guatemalan banking system.
· Dividends-10%, except when taxpayers have paid corporate income tax.
· Salaries and professional fees-10%.
· Rents, royalties and technical services-30%; the rate will be reduced to 27.5% in July 1998 and to 25% in July 1999.
DEDUCTIONS
All individuals, including resident aliens, can deduct the following in determining taxable income.
1. Q36,000 personal deduction.
2. Social security contributions(4.5% of salary)
3. Life insurance premiums.
4. Medical expenses(excluding medicine).
TAX CREDITS
An income tax credits is granted for value-added taxed paid on goods purchased and services contracted for one's exclusive personal use, up to the VAT rate(10) of net income).
Resident aliens cannot take income taxed paid to foreign countries or governmental units as a credit against their tax liability in Guatemala.
OTHER TAXES
Social security taxes/The taxpayer's share of social security taxes is 4.5% of compensation, without a maximum limit.
Other taxes on income/Interest income earned by domiciled persons is subject to a flat 10% income withholding tax.
TAX ADMINISTRATION
Returns/Husbands and wives cannot file joint returns. The tax year for individuals runs from July to June 30.
Payment of tax/Income tax must be withheld from salaries, rentals, royalties, fees for technical professional or scientific activities, or any
kind of individual services.
Tax rates
TAXABLE INCOME TAX ON PERCENTAGE
OVER NOT OVER COLUMN1 ON EXCEES
(COLUMN1)
0 Q 65,000 ……………………－ 15
Q 65,000 180,000……………………Q 9,750 20
180,000……………………………………… 32,750 25
INDIVIDUAL TAX CALCULATION
Assumptions
Resident alien husband and wife, two children; one spouse earns all the
income. Individual tax amounts are in local currency.
Tax calculation
Gross taxable income:
Salary…………………………………………………………Q120,000
Incentive bonus……………………………………………864
120,864
Deductions:
Personal deduction……………………………… 36,000
Insurance premiums……………………………… 6,000
Social security……………………………………5,400 47,400
Net taxable income………………………………………… Q73,464
Income tax assessment:
Fixed tax on 65,000………………………………9,750
On excess(20% of 8,464) ……………………… 1,693 Q 11,443
Less-Value-added tax credit(Note 1) ……………………(6,000)
Tax to be paid……………………………………………………Q 5,443
Note:
1. The law permits a credit for VAT paid up to 10% of the total income, it is possible to use 100% of this credit. To claim it the taxpayer must have supporting documents, such as invoices. In the example above, 50% of the taxpayer's t
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