Worldwide VAT, GST and Sales Tax Guide
Guatemala City GMT -6
EY
12 Street 2-25, zone 10
AVIA Tower II Office 1701
Guatemala City
Guatemala
Direct all inquiries regarding Guatemala to the persons listed below in the Costa Rica office.
Indirect tax contacts
Manuel Ramírez +502 2386 2400 (resident in Guatemala) manuel.ramirez@cr.ey.com
Rafael Sayagués +506 2208 9880 (resident in San José, Costa Rica) New York: +1 (212) 773 4761 rafael.sayagues@cr.ey.com
Guillermo Leandro +506 2208 9887 (resident in San José, Costa Rica) guillermo.leandro@cr.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Impuesto al Valor Agregado (IVA)
Date introduced 1 July 1992
Trading bloc membership None
Administered by Tax Administration Superintendence (SAT) (http://www.sat.gob.gt)
VAT rates
Standard
12%
Reduced 4%, 5%
Other
Zero-rated (0%) and exempt
VAT number format Tax identification number (NIT)
VAT return periods Quarterly, monthly, biannual
Thresholds
Registration None
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• The sale or exchange of movable goods or rights derived from movable goods
• The rendering of services within Guatemala
• Imports
• Leasing of movable and immovable property
• The award (transfer) of movable and immovable goods as a payment
• Consumption by the taxable person and consumption by the employees, executives, directors and shareholders of a company or their family members
• Certain shortages of inventory such as those derived from missing goods (e.g., shrinkage) or damaged goods, as well as destruction of inventory, if complied with the legal requirements
• The first sale or exchange of immovable assets
• Certain donations
• Contributions of immovable property to legal entities if the assets have been previously contributed to a real estate entity
Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment” rules that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in every jurisdiction where it has customers that are not taxable persons. In Guatemala, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. Transfer of going concern rules do not apply in Guatemala. As such, VAT applies to all sales of a business or part of a business capable of separate operation including assets.
Transactions between related parties. In Guatemala, there are no specific rules that indicate the value for VAT purposes for transactions between related parties. However, the Income Tax Law (ITL) will apply for VAT, and as such transactions between related parties should be valued using the arm’s-length principle. In addition, transfer pricing obligations may arise when two entities are considered as related parties.
According to the ITL, the following scenarios must be analyzed to determine if entities are considered as related parties:
A. Two persons are considered related parties, between a person resident in Guatemala and a person resident abroad, when the following cases occur:
1. When one of them directs or controls the other, or owns, directly or indirectly, at least 25% of its capital stock or voting rights, whether in the national or foreign entity.
2. When five or fewer persons direct or control both related parties, or own as a whole, directly or indirectly, at least 25% of participation in the capital stock or voting rights of both persons.
3. In the case of legal entities, whether resident in Guatemala or foreign, that belong to the same business group. In particular, it is considered for these purposes that two companies are part of the same business group if one of them is a partner or participant of the other and is in relation to it in any of the following situations:
a) Holds the majority of the voting rights.
b) Has the power to appoint or dismiss the members of the administrative body or, through its legal representative, decisively intervenes in the other entity.
c) Can dispose, by virtue of agreements entered into with other partners, of the majority of the voting rights.
d) Has appointed exclusively with its votes the majority of the members of the administrative body.
e) The majority of the members of the administrative body of the dominated legal entity are officers, managers or members of the administrative body of the dominant company or of another company dominated by the latter.
When two companies each form part of a corporate group with respect to a third company in accordance with the provisions of this subsection, all these companies form a corporate group.
In principle, the VAT withholding mechanism does not apply to transactions between withholding agents, unless the acquisition is made by credit or debit card (in such a case, the taxable person applies the VAT withholding as described above).
Domestic reverse charge. Taxable persons that acquire goods or services from local taxable persons who do not issue an invoice for such transactions (i.e., if the supplier is not registered for VAT or by any other reason), are able to issue “special invoices” on behalf of said individuals to document the operations and should withhold the applicable VAT rate. The customer then selfaccounts for the VAT.
Special invoices should not be issued when the local individuals are duly registered as Guatemalan taxable persons, nor in transactions of habitual nature that are performed between individuals. Notwithstanding, an exception exists over the aforementioned prohibition when the issuer of the “special invoice” determines in such document that the seller of goods or services refused to issue the corresponding invoice.
Additionally, such domestic reverse-charge mechanism should also apply in cases where taxable persons have been designated as VAT withholding agents in the local acquisition of goods and services, except in transactions between withholding agents.
Digital economy. There are no specific rules regarding the taxation of digital economy for VAT purposes in Guatemala. The general taxable events indicated in Section B. Scope of the tax should be observed whether or not they are transacted by digital means.
For electronically supplied services, supplied by a non-established business, for both businessto-business (B2B) and business-to-consumer (B2C), place of supply would not be in Guatemala, and as such no obligation for the customer to account for VAT.
For the supply of a license, no VAT is expected to apply if it is not considered as granted within the Guatemalan territory. However, the tax authorities have issued official criteria for licenses over software, which provide that such licenses granted abroad to be used in Guatemala should be subject to VAT and customs duties.
Guatemalan legislation does not distinguish between B2B vs. B2C transactions. In this regard, the same considerations are expected to apply, irrespective of whether the customer is an individual or an entity. For both types of supply, there would be no VAT due on electronically supplied services in Guatemala.
Online marketplaces and platforms. The Guatemalan tax legislation does not provide specific provisions or rules regarding the application of VAT over online marketplaces and platforms. In any case, to the extent goods are located or services are rendered within Guatemala, VAT should apply.
In June 2021, the tax authorities presented the new Digital Economy Tax Compliance Software, through which it is intended that taxable persons who engage in electronic commerce (streaming services, transport through digital applications, etc.) can have the mechanisms to fulfill their tax obligations in Guatemala, mainly from the perspective of consumption taxes (i.e., VAT). This is based on the Digital VAT Toolkit for Latin America and the Caribbean, which was developed by the Organisation for Economic Co-operation and Development (OECD), the Inter-American Development Bank (IDB), the Inter-American Center of Tax Administrations (CIAT) and the World Bank Group. However, at the time of preparing this chapter, this platform is under development and in the implementation phase, therefore, taxable persons who perform e-commerce activities are not currently obliged to register.
Registration procedures. The VAT registration process varies for entities that are newly incorporated or are branches of entities incorporated abroad.
Continuous supplies of services. For leasing and a continuous supply of services for which the customer pays periodically, the tax point is the due date for each periodic payment.
Goods sent on approval for sale or return. For goods sent on approval, the tax point is when the goods are effectively delivered. If goods are returned to the seller after being sold, the seller is required to issue a credit note to reverse the sale operation, provided that the credit note is issued within the time frame permitted by the VAT law (i.e., two months).
Reverse-charge services. The time of supply rules for supplies of reverse-charge services, i.e., the case of special invoices (see the subsection Reverse charge above) is when the invoice is issued by the local acquirer of goods or beneficiary of the services.
Leasing assets. For leased assets, the tax point is the due date for each periodic payment.
Imported goods. The time of supply for imported goods is when the goods clear all customs formalities for importation.
F. Recovery of VAT by taxable persons
Input tax is the VAT paid on the purchase of goods and services used to generate other goods and services subject to tax. A taxable person can generally recover input tax, subject to certain rules. Input tax is generally offset against output tax, which is VAT charged or collected on the sale of goods and the rendering of services. To deduct or credit input tax, certain conditions must be met.
The time limit for a taxable person to reclaim input tax in Guatemala is the month when the invoice is received or in the following two months. This is when the input tax should be recognized and reported to the tax authorities for the VAT credits to be recoverable. In this sense, duly recognized VAT credits should be recoverable until their exhaustion.
In general, input tax paid on imports or purchases of goods and services is creditable when directly related to the taxable person’s business activity.
A valid tax invoice or customs document must generally accompany a claim for input tax credit. Purchases supported by invoices issued by small taxable persons do not generate input tax credits. Payments greater than GTQ30,000 (approx. USD3,875) must be made through the banking system or using a deed from a notary public in which the payer and the beneficiary are clearly identified.
Nondeductible input tax. Input tax may not be recovered on imports or purchases of fixed assets not directly related to the taxable person’s business activity.
Examples of items for which input tax is nondeductible
• Items (expenses or purchases) without proper supporting documentation
• Items (expenses or purchases) not registered in the VAT purchases book
Examples of items for which input tax is deductible (if related to a taxable business use)
• Any item that is related to the taxable person’s taxable business activities, which is duly documented with the proper legal documents that comply with local requirements, provided the purchase has been included in the VAT purchases book, the balance of the tax credit has been registered in the accounting books as an account receivable, and the payment in excess of GTQ30,000 (approx. USD3,875) for the purchase has been made through a financial/banking institution.
Partial exemption. Special regulations regarding the treatment of overhead expenses are not provided by the VAT law. However, in cases where a business performs both taxable and exempt
electronic invoice regime, FACE, should migrate to the FEL regime before 31 December 2020. With effect from 1 July 2022, individuals and legal entities registered in the General VAT Regime must join the FEL. Incorporation of taxpayers to the FEL is mandatory when taxpayers are notified by the tax administration either directly or through the publication of resolutions.
The obligation for small taxpayers to issue electronic invoices came into effect on 2 June 2023. During a meeting with certain commercial sectors and the tax authorities, they agreed that the use of paper invoices will continue as long as taxpayers demonstrate “material inability for electronic invoicing”. It was emphasized that this extension is for one year and only applies to small taxpayers that comply with the condition of having material impossibility to issue electronic invoices.
In accordance with Section 30 of the Regulations of the VAT Law, Governmental Agreement Number 5-2013, invoices, special invoices, debit and credit notes, must comply at least with the following requirements, data and characteristics:
• Identification of the type of document
• Series and correlative number of the document
• As applicable to each type of document, according to the legislation in force, the following phrases:
– It does not generate right to tax credit
– Direct payment, resolution number and date – Subject to quarterly payments
– Subject to definitive withholding
– For the special agricultural taxpayer regime, as applicable, the phrases:
– “With form of payment on gross sales”
– “With form of payment on profits, not withholding”
– For the small taxpayer electronic regime and the special agricultural taxpayer electronic regime, the phrase: “Do not withhold” and the number of the resolution of incorporation to the regime. Full name and surname and trade name of the issuing taxpayer, if any, in the case of an individual; corporate name and trade name, in the case of a legal entity
• Tax identification number (Número de Identificación Tributaria [NIT]) of the issuing taxpayer
• Address of the establishment or office where the document is issued
• Date of issuance of the document
• Full name and surname of the acquirer, if an individual; name or company name, if a legal entity
• NIT of the acquirer; if the latter does not have a NIT, the issuer must include the unique identification code (Código Único de Identificación [CUI]) of the personal identification document (DPI) or the identification number of a foreign natural person or foreign legal entity; the words final consumer or the acronym “CF” may be included in documents evidencing sales of goods or rendering of services of less than Q2,500. In cases of force majeure and duly justified by the issuers, upon their request, the tax authorities may authorize that the application of the provisions of this numeral may be carried out progressively, establishing for such purpose the corresponding mechanisms and terms
• Details or description of the sale, service rendered or leases and their respective values
• Discounts granted, if any
• Charges applied in connection with the transaction
• Total price of the transaction, including tax where applicable
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Guatemala. As such, full VAT invoices are required.
Self-billing. Self-billing is allowed in Guatemala. Taxable persons that acquire goods or services from local individuals who do not issue an invoice for such transactions are able to issue “special invoices” on behalf of said individuals to document the operations and should withhold the applicable VAT rate.
allows the tax authorities to obtain invoicing and VAT information in real time. Taxable persons may be required to adhere to said regime; however, they may also voluntarily apply and implement as desired.
Also, the FEL regime establishes the obligation for registered taxable persons to use the electronic system for the registration of their accounting books, purchasing and sales books, and other auxiliary records determined by the tax administration for 100% of their operations. For further details, see the subsection Electronic invoicing above.
Purchases and sales report. Section 57 “D” of the VAT law determines that taxpayers classified by the tax authorities as special must submit electronically at least every six months a detailed report in chronological form of the purchases and sales made in said six-month period. Said report shall contain, at least, the following requirements:
• NIT of the buyer or seller
• Name of the buyer or seller
• Amount of the purchase or sale stated in the invoices
• Date of the purchases or sales stated in the invoices
To support these regulations, the tax authorities previously implemented the electronic tool (i.e., AsisteLibros).The purpose of which is to carry out the operation and electronic delivery of books of purchases and services acquired, and sales and services rendered. The tool automatically registers invoices issued to local taxpayers and must be used by taxpayers qualified as: large special, medium special and regional special. However, the tool has recently been modified and no longer allows the segmentation or separation of invoices that are considered as belonging or not to such taxpayers.
Regarding this issue, the tax authorities acknowledge that the AsisteLibros tool is still under development and have recognized that several day-to-day scenarios of taxpayers were not considered, such as segmenting invoices that do not correspond to them, for certain reasons. For this reason, the tax authorities have unofficially communicated to some taxpayers that currently it is not relevant or necessary that there is congruence between what is indicated in the tax returns and the report of purchases and sales of AsisteLibros. In this sense, the tax authorities stated that temporarily taxpayers must only comply with submitting such report of purchases and sales through the tool and receive the proof of submission of the corresponding information, to support compliance with this formal obligation.
J. Penalties
Penalties for late registration. A taxable person that fails to register for VAT on a timely basis cannot offset VAT credits generated from purchases that are included in inventory at the time of registration. The tax authorities may impose penalties and interest for late VAT registration.
Penalties for late payment and filings. Nonpayment of VAT results in a penalty equal to 100% of the unpaid amount. If the penalty is paid voluntarily by the date required by the VAT authorities, the penalty is reduced to 50%.
The late filing of VAT returns is subject to a penalty ranging from GTQ50 (approx. USD6.50) per day, up to a maximum of GTQ1,000 (approx. USD129). If the return is filed voluntarily, the latefiling penalty may be reduced to 85% of the original amount.
Penalties for errors. If the tax authorities detect that the taxable person made an error in the determination of its tax liability, they could summon such taxable person to remedy the corresponding mistake by paying the omitted tax plus interest at the maximum rate determined by the Monetary Board. The penalties for late payment should be calculated by applying the amount of tax to be paid, per the 0.0005 factor, per the days of delay. This is the formula used by the tax
authorities to determine the factor of tax due. Such penalties are for late payments of VAT and any other errors at the time of reporting.
If the taxable person accepts the calculation error, a 40% discount will apply over interest payments and an 80% discount will apply over the late payment penalty.
The late notification or failure to notify the tax authorities of changes to a taxable person’s VAT registration details will be subject to a fine equivalent to GTQ50 (approx. USD6) for each day of delay, with a maximum penalty of GTQ1,500 (approx. USD190). For further details, see the subsection Changes to VAT registration details above.
Penalties for fraud. Tax fraud occurs when information has been altered in a manner that causes the tax authorities to incorrectly compute the amount of tax due. The penalty consists of 100% of the amount of the tax plus imprisonment from one to six years.
The tax fraud penalty may not be imposed together with penalties for late payment.
Personal liability for company officers. For tax purposes, company officers or directors cannot be liable for errors and omissions in VAT declarations and reporting. However, the legal representative, partners and other officers of a company could be subject to criminal implications and penalties for tax fraud if they are duly convicted by judicial authorities.
Statute of limitations. The statute of limitations in Guatemala is four years. This is the period during which the tax authorities may be able to review and audit the tax information and documentation of a taxable person (tax returns, invoices, etc.) and identify errors or payment omissions.
Additionally, there is no time limit regarding voluntary error correction in tax returns. However, fines and penalties may be reduced if the errors are corrected before an inspection or audit process is carried out by the tax authorities. On the contrary, if the tax authorities determine such errors during an inspection or audit process, fines and penalties should be higher as previously provided.