International taxes in Guatemala: What you need to know

Over time, Guatemala has transformed itself into an attractive destination for foreign investment in Latin America. It is the largest economy in Central America and thanks to its low public debt and stable currency, its GDP is expected to grow by over three percent in 2023.

These helpful conditions make it an ideal time to consider doing business in Guatemala. However, like most new international markets, there are specific local rules and regulations that you must understand and follow in order to be successful.

One of these factors is international taxes in Guatemala and how they may affect your plans to enter this emerging Latin American market. Meeting your local and international tax obligations is important when doing business in Guatemala.

Read on to learn more about international taxes in Guatemala and how to cooperate with one professional employers' organization in Guatemala can benefit your business.

How do international taxes work in Guatemala?

Companies are subject to international tax rules for income they generate from their foreign operations and sales. Tax treaties between nations determine which country has the right to collect tax revenue.

To prevent companies from exploiting loopholes to reduce their total tax liabilities, anti-avoidance measures are implemented.

In Guatemala, corporate and personal taxes are enforced through a territorial system. This means that only income from Guatemala is subject to taxation.

As a result, individuals and companies resident in Guatemala are required to pay income tax only on their Guatemalan income. On the other hand, non-residents are taxed via withholding tax on their Guatemalan income.

To be considered a resident of Guatemala, a company must either be incorporated under Guatemalan law with its tax domicile or headquarters in Guatemala or be a branch of a foreign entity conducting business in Guatemala.

Do you have to pay international tax in Guatemala?

As mentioned above, companies are subject to income tax only on their income from Guatemala. Dividends and other income payable abroad are taxed separately through withholding tax (WHT).

Non-residents can operate in Guatemala with or without a permanent establishment (PE) accordingly, the income tax treatment varies depending on the circumstances described below:

• Non-residents with PE will be subject to income tax by choosing one of the two payment methods established for residents.
• Non-residents without PE will be subject to WHT, with special rates depending on the type of services provided.

Guatemala corporate tax rates are:

• System on earnings: 25 percent on net income.
• Simplified optional system: 7 percent of gross income.
• Heading corporate income tax: 10 percent

Does Guatemala have any tax treaties?

No, Guatemala has no tax treaties in effect as of January 2023. This includes no double taxation treaties, which exist in other Latin American countries.

Enlisting the services of a local consultant can help your business comply with Guatemala's tax, legal and employment regulations, thereby preventing potential problems.

6 Benefits of Working with a PEO in Guatemala

If you are considering starting a business in Guatemala, partnering with a Professional Employer Organization (PEO) can be a great way to overcome your initial challenges.

PEOs can help businesses improve productivity, profitability and expansion by providing payroll, benefits and HR services and assisting with compliance issues under both international and local laws.

For example, a PEO can help you manage your international tax compliance in Guatemala.

Here are six benefits of working with a PEO in Guatemala:

1. Risk protection: By using the services of a PEO, you can rely on their legal experts to minimize potential legal disputes and take responsibility for your employees
2. Talent Acquisition: With a team of HR specialists, a PEO in Guatemala can quickly find the most qualified personnel for your business needs.
3. Quick setup: Since a PEO is already a legally recognized entity, working with one can allow for faster market access.
4. Cost savings: Using a PEO can eliminate the costs and time involved in establishing and maintaining a legal entity in Guatemala.
5. Immigration assistance: A PEO can provide guidance and support to foreign employees applying for work visas.
6. Time planning: Outsourcing payroll to a PEO frees up valuable time and resources, allowing you to focus on other critical aspects of your business.

According to the National Association of Professional Employer Organizations (NAPEO), companies that partner with PEOs are experience a growth rate it is almost 10% faster than its competitors.

Not all PEOs are created equal, so make sure you do your research and partner with a reputable provider with a proven track record of success.

Biz Latin Hub can support your business in Guatemala

At Biz Latin Hub, we have a team of specialists who can provide you with tailored services to meet your business needs in Guatemala.

Our extensive range of Legalaccounting and back-office solutions allow us to serve as your primary point of contact, helping to simplify and accelerate your entry into the Guatemalan market.

Talk to our team of local experts today about international taxes in Guatemala, business formationand how to find the best talent in the region.
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