Taxation in Guatemala is all but excessive; the country’s revenue from tax, at 12.3% of GDP, is one of the lowest in the region according to the OECD. However, as an expat in Guatemala, you will need to get familiar with the local tax system in order to make sure you fulfil your legal obligations. Here is a cheat-sheet to taxation in Guatemala.
Tax residence in Guatemala
Guatemala's tax legislation is based on the principle of territoriality. In other words, taxes are levied on all activities carried out within the Guatemalan borders, and only on these.
However, the distinction between residents and non-residents for tax purposes is important insomuch as it affects the income tax rate: revenue from Guatemalan origin claimed by non-residents is subject toà income tax at a flat rate of 15%, whatever the source and the nature of the income, while Guatemalan tax residents benefit from a much lower, and proportional income taxation rate.
A foreign national will be considered to be a tax resident in Guatemala after living permanently in the country for more than a year.
Good to know:
While tax residents are required to file a tax return, non-resident employees are exempt from this obligation, as their income tax is automatically withheld at source by their employer.
Income tax in Guatemala
As of 2017, the income tax rate for residents is calculated as follows:
- from GTQ 0 to GTQ 300,000 : 5%
- over GTQ 300,001 : 7%
The taxable income encompasses all types of compensation, including wages, salaries, bonuses, allowances (for example for housing, children's education, etc), domestic assistance or accommodation provided by an employer, etc..
Additionally, employers are required to make contributions to the national social security system for each employee on the payroll, at a rate of 12.67% on the total wages paid to all employees.
Other types of taxes in Guatemala
The taxation rate on corporate income is fixed at a flat 25% since 2015 (down from 31% in 2013).
Moreover, the payment and distribution of dividends, earnings and profits are subjected to an additional income tax of 5%.
Capital gains from transactions on furniture and real estate properties are taxed at a rate of 10%, and owners of real estate are required to pay annually a special real estate tax at the following rates:
- Property worth up to GTQ 2m: 0%
- Property worth GTQ 2,000,001 to 20m: 0.2%
- Property worth GTQ 20,000,001 to 70m: 0.6%
- Property worth over GTQ 70m: 0.9%
Finally, value-added tax (VAT) is levied on all goods or services exchanged locally or imported, at a rate of 12%. Exported goods and services are exempt from VAT in Guatemala.
Useful link:
Centralamericadata (latest news and updates on the tax legislation in Guatemala)
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