Properties for Sale in Guatemala

Tax and Offshore Investment in Guatemala

Tax regimes vary greatly throughout Latin America. While some countries are investor friendly, others are not so open. There are several benefits (i.e. retirement programmes, tax discounts) but also some tax obligations. In this section we provide an analysis of the different tax structure in each country where January First Real Estate lists properties. This information may be very important for you to choose you retirement destination or where to invest. Keep in mind that there are related visa and residence issues which are discussed in Visa/Residence Requirements. In case you need more information or have doubts on any of these issues, the specialised staff in January First Real Estate will be glad to answer all your questions, click here.

Real estate assets are, without doubts, one of the most secure and profitable ways of investment. There are two main reasons for this:

1. Properties always tend to increase their value in the long term.
2. They generate an income for their exploitation (rental/yields).

Taxes and Costs in Guatemala

Rental Income
The Guatemalan taxation system has historically been characterized by a low capacity to collect, partly due to a strong anti-fiscal culture arising from the lack of credibility of government institutions, an informal or underground economy and a low capability of the tax collection institutions.
Income Tax Law (La Ley del Impuesto Sobre La Renta) states that Income Tax affects any income obtained by any individual or legal entity, local or foreign, domiciled or not in the country, coming from capital investment, work or a combination of both, fundamentally in Guatemalan territory.
Withholding taxes are applicable to nonresidents. As a nonresident, having a property and deriving income from the rent of properties, the tax rate is 31% of net income.
The government of Guatemala passed a general tax reform law through Decree 18-04 of Congress enacted in 29 July 2004 and introduced substantial amendments to the Income Tax Law. The most important change is the introduction of a general 5% corporate income tax imposed on net income. Alternatively, taxpayers may opt to be subject to a 31% income tax imposed on net income. Thus, if no election is made, the 5% regime applies.
For non-residents, the 31% income tax is collected and deductions are applicable.

Expenses deductible from Income Tax:

• costs of production and sale of merchandise and services,
  
• expenses on transport and fuels
  
• bonuses of workers
  
• life, accident and medical insurance premium
  
• income of real estate
  
• depreciations
  
• donations for an amount
  
• selling expenses
  
  Depreciation Rates
  Buildings and improvements: 5%
  Furniture and fixtures: 15%
  Machinery, equipment and vehicles: 20%
  Tools and computer equipment: 25%
  Any other depreciable assets: 10%
  
  Personal deductions
  
• a total of GTQ36,000 (US$4,531) a year without need to prove anything
  
• quotas paid to Bar Associations, bond premiums, social security contribution
  
• alimony established by a Family Court
  
• donations not larger than GTQ 500,000 (US$62,931)
  
  Non-deductible costs and expenses
  
• costs and expenses not supported by corresponding legal documentation
  
• value of permanent improvements made to fixed assets’ goods.
  
• Expenses and depreciations on goods used either by practitioners or individuals
  
  

Payment of said tax is made through retention made by the foreigner’s agent or representative, or by the individuals or legal entities that contract directly with them.

Real Tax or Property Tax (impuesto unico sobre inmuebles)
This tax is collected by the local government (departments, municipalities) as an annual property tax applicable to all real estate in Guatemala. The property taxes are levied on the cadastral value of the property, as determined by the tax authorities.

Real Tax
Value of Property, GQT / Tax Rate
Up to 2,000,000 / nil
2,000,000 - 20,000,000 / 0.20%
20,000,000 - 70,000,000 / 0.60%
Over 70,000,000 / 0.90%

Value Added Tax (impuesto al valor agregado)
VAT is levied at a uniform rate of 12% and applies (among others) to the sale or rental of real estate. VAT imposed on leasing properties is based on the gross rent plus any financing charge.
VAT withheld by businesses and owed to the government may be offset in equal amount by the tax paid in other transactions. Application for reimbursement of any remaining credit may be made to the Superintendencia de Administración Tributaria.

Capital Gains Tax
Capital gains earned by nonresidents from selling Guatemalan property are subject to a flat 31% withholding tax. The taxable gain is computed by deducting the acquisition costs and improvement costs from the selling price.

Value Added Tax (impuesto al valor agregado)
VAT is imposed on the selling of immovable properties in Guatemala and the taxable amount is the selling price. This tax is imposed at the standard rate of 12%.

Living There
Guatemalan residents are subject to income tax on all their Guatemalan-sourced income.
Net income earned by residents from non-employment sources is subject to a flat 31% tax. Allowable deductions include income-generating expenses and other taxes paid. Depreciation is determined on a straight-line basis.
Rental income earned by residents from immovable properties is subject to a 5% final withholding tax on the gross amount.
Residents earning income from employment are taxed at progressive rates, levied marginally depending on the taxable income.

Income tax
Taxable Income GQT (US$) / Marginal Tax Rate
Up to 65,000 (US$8,181) / 15%
65,000 – 180,000 (US$22,656) / 20% on band over US$8,181
180,000 – 295,000 (US$37,130) / 25% on band over US$22,656
Over 295,000 (US$37,130+) / 31% on band over US$37,130

Residents can deduct allowances from their total income to arrive at their taxable income. Each taxpayer is entitled to a GQT 36,000 personal allowance. Residents are also entitled to expense allowances for contributions to the social security system, premiums for life insurance, medical expenses, certain qualifying gifts, alimonies fixed by court decision, and membership fees paid to recognized professional bodies.

Capital Gains Tax
Residents earning capital gains from selling real estate properties are subject to a flat 10% tax. The taxable gain is computed by deducting the acquisition costs and improvement costs from the selling price.

Guatemala, make your dream investment come true.