Guatemala Puts Finishing Touches on Tax Reform

Among other measures, the bill proposed by the government examines establishing regimes for income tax and eliminating accreditation for VAT returns, a method that has encouraged evasion.

Tuesday, January 24, 2012

The new Guatemalan government has refined its proposed fiscal law reform, which includes proposals such as removing the accreditation of the VAT tax and setting different levels for the deduction of income tax.

"The workers who are employees currently can deduct up to one hundred percent of Value Added Tax (VAT) against ISR (Income Tax) through a form in which all purchases are included annually. Under this regime a deduction is allowed in the amount of Q36,000 ($4,609) per year, which is considered the minimum essential for an employed person", explains an article published by

Discussions within the government have hit several obstacles, one of the most important ones is establishing how income tax (ISR) for employees will be collected.

Pavel Centeno, Minister of Finance, explained that "the proposal seeks to equalize income tax regimes. Regimes are established for gainful employment, wage earners, income from capital (dividends, interest, rents, royalties, etc.) and for non-residents", quoted the website.

Miguel Gutierrez, a consultant for Central American Business Intelligence (CABI), considers it appropriate to eliminate the VAT that is deductable from income tax and raise the poverty line to Q42,000 per year ($5,378). That is to say, workers who earn up to Q3,500 per month ($448). That would result in the end of invoices being sold and would broaden the tax base and prevent small companies from submitting invoices with VAT charges , Gutierrez argued.

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More on this topic

Employers Promise to Support Tax Reform Bill

January 2012

Cacif, leader of the Guatemalan private sector, said that "we must all do our part" and promised a consensus with the government.

The presidents of business chambers of Guatemala met on Wednesday with President Otto Perez and Finance Minister Pavel Centeno, to hear a proposal for tax reform law, and adopted a positive approach to the coming changes.

The Pros and Cons of the Tax Reform in Guatemala

January 2012

The bill provides that no amounts may be deducted from VAT on purchases, and increases the tax base for the payment of income tax.

The Guatemalan government’s tax reform law is ready, and contains several new points: employees ability to deduct VAT from annual purchases from their taxes has been eliminated, the tax base has been increased, and the road tax for vehicles has been doubled.

Guatemala Tax Calendar for February 2011

February 2011

Detail on the ruling by the Constitutional Court regarding the deductibility of contributions to pension funds, and the February 2011 Tax Calendar.

On January 24, 2011, it was published in the Diario de Centro America, the ruling of the Constitutional Court regarding the unconstitutionality of the provision issued by the Superintendent of Tax Administration, Rudy Baldemar Villeda Vanegas, of not accepting the contributions made by customers of the Pension Fund for Retirement as a deduction in the process of determining the income tax in the year 2010.

Guatemala: What Will Be Taxed and By How Much

August 2016

The proposal raises income tax from 25% to 29% for profits of over $38 billion a year, royalties for extracting gold and silver from 1% to 10%, taxes on fuels and a tax of $0.65 tax per bag of cement.

See document by the Ministry of Finance of Guatemala with details on each tax increase.

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