Legal Entity Regulatory Compliance in Guatemala: a Guide

A map of Guatemala and some of its main cities. If you are planning to enter the market you will need to understand financial regulatory compliance in Guatemala
A map of Guatemala and some of its main cities. Financial regulatory compliance in Guatemala

If you are interested in entering the Guatemalan market, you will need to get to grips with financial regulatory compliance in Guatemala.

Because  failure to comply with financial regulations can result in legal issues or financial penalties that could diminish your company’s standing in the eyes of local authorities and adversely affect your business. 

Financial regulatory compliance fits in with what is more broadly referred to as corporate compliance, which is often covered by a third party provider under the name of corporate secretarial services.

For anyone interested in starting a business in Guatemala, the following guide to financial regulatory compliance in Central America’s largest economy by  gross domestic product (GDP) will be of interest.

If you are already active in Guatemala and need assistance with compliance, contact us today to discuss how we can support you.

With Mexico and Belize on its northern border and El Salvador and Honduras to the south, Guatemala has a strategic location as the gateway between North and Central America. 

Not only do any goods traveling over land between Central and North America have to pass through the country, but with a landmass spanning the width of the Central American isthmus, Guatemala also has high-volume ports serving both the Pacific Ocean and Caribbean Sea.

Guatemala is the largest economy in Central America, with GDP reaching $76.71 billion in 2019 (all figures in USD). While the services sector is the largest contributor, accounting for approximately 63% of that figure. 

Guatemala also has a sizable manufacturing sector, responsible for around 22% of GDP, while the country’s agricultural sector contributes 10% — more than double that of neighbors Mexico and El Salvador, reflecting the ongoing importance of agriculture to the economy. 

Major export products include bananas, coffee, and garments, while Guatemala also has significant hydrocarbon and mineral deposits. The country is also home to a growing tech sector, which is expected to contribute significantly to post-pandemic economic recovery.

Guatemala has a reputation for high levels of crime and insecurity, however it has made massive strides to improve the situation over recent years, with the intentional homicide rate slashed in half between 2009 and 2019.

That radical improvement has seen a concomitant rise in interest among investors, with foreign direct investment (FDI) almost doubling during the same period to reach $966.8 million in 2019.

It is in the context of this rapidly growing and evolving market that investors must navigate financial regulatory compliance in Guatemala.

A snapshot of the market in Guatemala, where you will need to comply with financial regulatory compliance regulations
A snapshot of the market in Guatemala. Financial regulatory compliance in Guatemala

Entity regulatory compliance in Guatemala: key responsibilities

While financial regulatory compliance in Guatemala can vary based on the type of company you have, the following aspects of corporate compliance are generally applicable to all.

Holding an annual general meeting (AGM) of shareholders
The general assembly of shareholders is the highest corporate body of any company and is attended by the shareholders registered in the ‘minutes book of the general shareholders,’ or their representatives or agents. Its operation and powers are regulated under corporate law in Guatemala, as well as the company’s bylaws. Under the terms of financial regulatory compliance in Guatemala an AGM must be staged at least once per financial year, and for most companies it must be held within four months of the close of the financial year on December 31.

Sword declaration to the national tax authority (DGI)
Each year, upon the closing of the corporate books, each company must make a sworn declaration to the national tax authority in Guatemala.

Filing and payment of value-added tax (VAT)
VAT must be filed on a monthly basis, by both companies and individuals. The current rate of VAT in Guatemala is 12% on the value of most goods and services, and companies charging VAT must report the total amount of VAT they have charged each month.

Corporate income tax (IRAE)
Corporate income tax, known as Income from Economic Activities (IRAE), must be filed periodically. Depending on the company and the regime under which it operates, that can be monthly, quarterly, or annually.

Withholding tax
Withholding tax must be paid on a monthly basis.

Additional salary bonuses
Many employees are eligible for two annual bonuses, each equal to one full month of pay. The first one is due in July, while the second must be distributed in two parts. The first half is paid out in the first half of December, while the second half is paid in January, however many companies pay it all in December.

Statutory contributions
As part of financial regulatory compliance in Guatemala, companies are obliged to pay all health, pension, occupational risk, and unemployment contributions to the relevant government agencies within 20 days of the salary payment to which they correspond.

Note that a company is not obliged to enroll with the national social security program if it has two or fewer employees, in which case this provision would not apply.

Biz Latin Hub can assist you with financial regulatory compliance in Guatemala

At Biz Latin Hub, our local team of corporate legal and accounting experts is able to assist you with financial regulatory compliance in Guatemala, as well as a range of other back office services. We offer company formation, accounting & taxation, legal services, hiring & PEO, and visa processing among a comprehensive portfolio of corporate solutions, meaning that we can provide a tailored package of integrated back-office services to suit your needs in Guatemala, or any of the other 17 markets around Latin America and the Caribbean where we have teams in place.

Contact us now for a free consultation or quote.

Or read about our team and expert authors

Key services offered by BLH including legal services, accounting & taxation, hiring & PEO, due diligence, tax advisory, and visa processing
Key services offered by Biz Latin Hub. Financial regulatory compliance in Guatemala

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