Guatemala has launched a series of proposals, pending approval, to make taxpayers more compliant with the State’s tax obligations. Thus, the five measures target numerous taxes and tax declarations, including certain tax exemptions in Free Trade Zones.

New Tax Changes

The first changes concern income tax (ISR) for individuals and legal entities. In this way, a reduction in income tax rates for individuals in certain brackets is proposed, with the aim of encouraging consumption and investment in the country. There are also plans to introduce a new simplified regime for small taxpayers. Thus, those with an annual income of less than 300,000 quetzales will be able to pay taxes more easily under a reduced scheme. Similarly, the rate will be increased to 28% – previously 25% – for companies with annual revenues of more than 100 million quetzales. On the other hand, basic products – foodstuffs, medicines and hygiene products – will be exempt from this rate, while the percentage of application will be increased for luxury products.

Fiscal Incentives 

The Free Zone regime continues to encourage foreign investment in this region, although it increases their supervision. Companies must continue generating employment and maintain initial investment conditions to continue receiving the benefits. A new fiscal incentive scheme will be established for companies operating in these zones, with a 100% income tax exemption for the first five years of operation and a 50% exemption for the following five years. 

Improvement in Tax Supervision 

The digitalization of tax processes continues to be a priority for the Superintendency of Tax Administration (SAT). This reform would introduce mandatory electronic declarations for all legal entities, as well as for individuals above a yet unknown income threshold. It would also introduce stricter requirements for electronic invoicing and mandatory digital inventory and sales control systems for companies in certain sectors. As a result, companies will have to invest in technological infrastructure to comply with the new electronic reporting and invoicing obligations, while tax authorities will be able to track transactions more efficiently. 

Finally, national institutions aim to prevent tax evasion and have suggested stricter measures. The first measure involves enhancing tax audits with more thorough reviews to identify potential evasion cases, as well as the creation of an early-warning system to detect inconsistencies in tax filings and possible data manipulation. The latest update corresponds to increased international cooperation in exchanging tax information with other countries, enabling the detection of transnational tax evasion cases. 

These tax reforms reflect an effort by the Guatemalan government to modernize the tax system, making it fairer, more efficient, and transparent. Companies will need to adapt to new regulations and procedures, while citizens will benefit from a system that promotes equity. 

Tax obligations in Guatemala are numerous and complex as soon as you start operating in the country. Therefore, if you need to manage your company’s accounts and operations, do not hesitate to contact us.

Auxadi can become your ideal partner. We offer a one stop shop value added outsourcing services in the areas of accounting and reporting, tax compliance, payroll management and representation services, among others.