Whether looking for new investment opportunities in a country different from your own or planning to move your business to a new market, one of the first factors to consider is the foreign accounting and tax system. For those interested in expanding their business to Guatemala, companies or interested parties must understand all the accounting and tax requirements needed to operate.
To support your company incorporation and ongoing operations in Guatemala, be aware of and comply with the following accounting and tax requirements.
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Accounting regulations in Guatemala
In January 2009, Guatemala adopted the International Financial Reporting Standards (IFRS) accounting regulations. However, it took the country a few years for its local professionals to receive the necessary training to apply them. Currently, the use of these standards is mandatory and generally known.
International Financial Reporting Standards have a wide range of general and specific regulations for the labor industry, different lines of business, and possible operating risks, among other aspects. It is important to promptly identify the rules applicable to the business in which you want to invest, so they may be taken into account at the moment you must present your financial statements.
This review must be carried out directly by the accounting/financial team in charge, together with the investor or, in the case of companies that are expanding, its main executives.
Requirements for tax in Guatemala
When making the decision to enter or expand into Guatemala, it is important to be aware of its unique tax system.
The Guatemala Tax Administration (SAT – Superintendencia de Administración Tributaria) is the regulatory body in charge of collecting taxes generated/paid by individuals and companies nationwide.
Companies in Guatemala need to declare direct and indirect taxes to the SAT. The main ones are the value added tax and the income tax, which must usually be declared every month.
Income tax
This is a tax on the income or profits obtained by individuals and companies that are either national or foreign entities/assets, and whether they are Guatemalan residents or not. It is regulated by Decree 10-2012 and is applicable every time taxable income is produced.
Value added tax (VAT)
This is the tax that generates the most money for the State. It is paid by every person who buys a good or acquires a service. Decree 27-92 regulates this tax. The VAT rate is 12% of the value of each product or service and is always included in the prices of everything bought in Guatemala. Taxpayers registered in the General Regime are required to report monthly VAT paid on their purchases and VAT collected on their sales.
For a list of all the main taxes in Guatemala that vary according to the different needs and lines of business, you can visit the official page of the Guatemala Tax Administration.
Common Questions when understanding accounting and taxation in Guatemala
Based on our extensive experience these are the common questions and doubts from our clients when looking to understand accounting and taxation in Guatemala.
The corporate income tax rate in Guatemala is 25% for profits or a range of 5% or 7% for gross income depending on the regime under which the company is registered.
In Guatemala, companies are taxed as indicated by the Guatemalan Tax Administration, which states that there are two ways of calculating income tax: the system on profits from lucrative activities and the optional simplified system on income from lucrative activities. In the first one, the tax is determined and paid at the end of each quarter, without prejudice to the final liquidation of the tax at the end of the period. The tax rate is 25% on net income.
The IRS in Guatemala is called the Superintendencia de Administración Tributaria, SAT or in English The Tax Administration, and is responsible for implementing the fiscal and customs legislation in Guatemala
As stipulated in the Code of Commerce, all companies must prepare financial statements in accordance with generally accepted accounting principles (Guatemalan GAAP); however, this does not refer specifically to IFRS, and the Code does not define Guatemalan GAAP either. Therefore, companies prepare financial statements based on the Tax Legislation Decree No. 10 of 2012.
The equivalent of a CPA in Guatemala is a Certified Public Accountant and Auditor (CPA) formally registered with the College of Public Accountants and Auditors of Guatemala (CCPAG).
In Guatemala, companies are required to prepare financial statements following generally accepted accounting principles (Guatemalan GAAP), as per the Code of Commerce. However, it doesn’t specifically mention IFRS. Instead, companies base their financial statements on Tax Legislation Decree No. 10 of 2012. Medium and large-sized companies must present annual audited financial statements based on income tax rules. These are considered special purpose statements. Companies can also choose to use IFRS or IFRS for SMEs with approval from the tax administration.
Build your business in Guatemala with Biz Latin Hub
Before moving your business to Guatemala, be sure to determine the specific accounting, finance, and tax requirements to ensure proper compliance. The professionals you work with during this process must be duly trained to perform the work necessary in a foreign environment.
For this reason, most foreign investors find themselves in need of hiring a local provider of professional accounting and tax services for their company.
In Guatemala, our Biz Latin Hub team has personnel trained in all areas related to the implementation of new businesses in different industries. We are ready to assist your company formation, hiring, commercial representation, accounting and other legal needs to ensure you can begin operations as quickly as possible and in full compliance with local regulations.
Reach out to our team today for personalized assistance.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
