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Guatemala - Income Tax

Guatemala - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

Employers withhold the income tax liability for all its employees, including any international delegate every month and files the returns during the 10 working days of the following month. Therefore, employers are the responsible for filing a summary return showing the withholding tax performed to all its employees. The summary tax return related with the withholdings performed to the employees during a fiscal year has to be filed on February, next fiscal year.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Guatemala? 

Residents

Employers estimate the income tax liability of the employees on January each year, based on employees’ wages. Because some deductions are available, the exact amount might vary at the end of the fiscal year.

Non-residents

No tax returns have to be filed by non-residents. The employer is responsible for withholding the income tax liability to non-residents and has to file a withholding tax return before the tax authorities. 

Tax rates

What are the current income tax rates for residents and non-residents in Guatemala?

Residents

Income tax for residents is calculated by applying a progressive tax rate schedule to taxable income as follows.

Income tax table for 2020, in Guatemalan quetzal (GTQ)

Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From GTQ To GTQ GTQ Percent
0 300,000
0 5
300,001 Over 15,000
7

Non-residents

Guatemalan-source income paid to non-resident persons is subject to a final withholding tax at a rate of 15 percent on salaries, wages, commissions, bonuses and any other remuneration. 

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Guatemala?

An individual is considered as resident if they have been living in the country/jurisdiction for 183 days in a year. Likewise, they will have to take the necessary steps in order to legally remain and work in the country/jurisdiction.

The application for a work permit will proceed once they started their request before the labor ministry. Upon receipt of the work permit, the worker should be included in the payroll and treated as a Guatemalan employee.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

 No.

What if the assignee enters the country/jurisdiction before their assignment begins?

No specific rules would have to be considered; but it is important to obtain the immigration and work permit as soon as possible. This is more important when the assignment is going to be for more than 1 year. 

Termination of residence

Are there any tax compliance requirements when leaving Guatemala?

No. It is important to evaluate the submission of a note informing the tax authorities that the delegate will be leaving the country/jurisdiction. The same could be done before the work ministry.

What if the assignee comes back for a trip after residency has terminated?

Nothing should be done.

Communication between immigration and taxation authorities

Do the immigration authorities in Guatemala provide information to the local taxation authorities regarding when a person enters or leaves Guatemala?

No. 

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

Final withholding must be performed by the employer up to the last day of the work relationship with the delegate. Also, it is advisable to file a tax return during the first 3 months of the following fiscal year. Contact your local KPMG advisor for a specific evaluation before leaving.

Economic employer approach

Do the taxation authorities in Guatemala adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Guatemala considering the adoption of this interpretation of economic employer in the future?

Up to date, there is no information available about this question.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Up to date, no applicable.

Types of taxable compensation

What categories are subject to income tax in general situations?

Typical items of an expatriate’s compensation package, which are taxable in Guatemala, include the following:

  • salary
  • bonus
  • cost-of-living allowance
  • free or below-market-value use of accommodation provided by an employer
  • reimbursement of moving expenses
  • children’s’ education allowance
  • housing allowances
  • home leave
  • Employer-provided domestic assistance.

Intra-group statutory directors

Will a non-resident of Guatemala who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Guatemala) trigger a personal tax liability in Guatemala, even though no separate director's fee/remuneration is paid for their duties as a board member?

Since no fee/remuneration is paid by the Guatemalan Company, no. Notwithstanding each specific case must be evaluated by a Guatemalan tax professional before setting up.

a)  Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Guatemala?

See comments above.

b)  Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Guatemala (i.e. as a general management fee where the duties rendered as a board member is included)?

Yes; each specific case must be evaluated by a Guatemalan tax professional before setting up.

c)  In the case that a tax liability is triggered, how will the taxable income be determined?

See comments above about nonresident tax rate.

Tax-exempt income


Are there any areas of income that are exempt from taxation in Guatemala? If so, please provide a general definition of these areas.

In general, the following may be tax exempt in Guatemala:

  • Christmas bonus
  • Fourteen bonuses.
  • Severance payments

Provision of a company car

If the employer buys the car and it is provided without any charge to the employee, it could be exempt, but the specific case should be reviewed.

Christmas bonus

This is a specific exempt income included in the income tax law of Guatemala.

Fourteen bonuses

This is a specific exempt income included in the income tax law of Guatemala. 

Expatriate concessions

Are there any concessions made for expatriates in Guatemala?

No

Salary earned from working abroad

Is salary earned from working abroad taxed in Guatemala? If so, how?

It could be taxed in Guatemala and in order to determine how, a specific analysis should be performed, considering the length of time, conditions and activities performed, who is the beneficiary of those services (Guatemalan or foreign Company), among others. 

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Guatemala? If so, how?

Yes. Investment on the gross income obtained; for capital gains, on the gain that results from the difference between the sale price and the book value. The sale or house furniture or personal items is not taxable. 

Dividends, interest, and rental income

Only incomes obtained from activities and investments in Guatemala would be taxable; any other scenario should be evaluated separately.

Gains from stock option exercises

Only incomes obtained for activities or investments in Guatemala would be taxable; any other scenario should be evaluated separately.

Foreign exchange gains and losses

Due to Free Foreign Currency Trading, companies consider many procedures for paying the salaries to its employees. For this case, the specific scenario should be evaluated separately. 

Principal residence gains and losses

Only incomes obtained for activities or investments in Guatemala would be taxable; any other scenario should be evaluated separately.

Capital losses

Only incomes obtained for activities or investments in Guatemala would be taxable; any other scenario should be evaluated separately.

Personal use items

Personal items should not be taxable.

Gifts

Gifts should be taxable, but particular cases should be evaluated.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Guatemala? If so, please discuss?

No, see general comments above.

Are there capital gains tax exceptions in Guatemala? If so, please discuss?

See general comments above. 

Pre-CGT assets

See general comments above.

Deemed disposal and acquisition

See general comments above.

General deductions from income

What are the general deductions from income allowed in Guatemala?

The following items of expenditure may be deducted from taxable income:

  • social security contributions
  • life insurance payments
  • Donations

Additionally, resident is entitled to a personal tax allowance of GTQ48,000.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Guatemala?

The income tax law establishes that the employer is responsible for the reimbursement of the income tax withheld in excess to its employees (only during the period of time they have a work-relationship). There is a procedure for employers for recover before the Tax Authorities those amounts reimbursed to its employees. 

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Guatemala? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Could be similar to PAYE, since there is a projection of the income at the beginning of the fiscal year which is updated every month based on the real income obtained by the employee. The projection is for the full fiscal year and the income tax determined is withheld on prorate amount, for 12 months.

When are estimates/prepayments/withholding of tax due in Guatemala? For example: monthly, annually, both, and so on.

Monthly.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Guatemala? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

No.

General tax credits

What are the general tax credits that may be claimed in Guatemala? Please list below.

None.

Sample tax calculation

This calculation assumes a married taxpayer resident in Guatemala with two children whose 3-year assignment begins 1 January 2019 and ends 31 December 2021. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

 

2019
USD

2020
USD

2021
USD

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000


Exchange rate used for calculation: USD1.00 = GTQ7.70.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
  • Interest income is not remitted to Guatemala.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year ended

2019
GTQ

2020
GTQ

2021
GTQ

Days in Guatemala during year

365

365

365

Earned income subject to income tax

     

Salary

100,000

100,000

100,000

 

 

 

 

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Net housing allowance

12,000

12,000

12,000

Company car

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Total earned income

171,000

156,000

171,000

Other income

0

0

0

Total income

171,000

156,000

171,000

Deductions

14,493

13,768

14,493

Total taxable income

156,507

142,232

156,507


Calculation of tax liability

 

2019
GTQ

2020
GTQ

2021
GTQ

Taxable income as above

156,507

142,232

156,507

Guatemalan tax thereon

10,176

9,177

10,176

Less:

     

Domestic tax rebates (dependent spouse rebate)

0

0

0

Foreign tax credits

0

0

0

Total Guatemalan tax

10,176

9,177

10,176

Disclaimer:

All information contained in this publication is summarized by Aldana, Rodriguez y Asociados, S.C., the Guatemalan member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The information contained in this publication is based on Decree No. 10-2012 Income Tax Law and subsequent amendments; and the Social Security Regulations; Immovable Property Law “Decree No. 15-98”; and Estate, Gift and Wealth “Decree No. 431”.

Copyright

© 2020 Aldana, Rodriguez y Asociados, S.C., the Guatemalan member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.

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