Generalities
Foreign Investment in Guatemala
Types of Guatemalan Companies

Registration of a Local Company
Registration Requirements for a Local Company
Establishing a Branch of a Foreign Company
Registration with the Tax Authority
Temporary Operations in Guatemala
Operations Requiring no Registration or Authorization
Taxation
Income Tax
Depreciation Rates
Annual Company Tax
Value Added Tax
Stamp Tax
Import Taxes

Foreign Exchange Regulations
Immigration Legislation
Trademark and Patent Legislation
Labor Laws
Banking Licenses
Financial Legislation
Environmental Legislation
Law for the Protection and Improvement of the Environment
Agreement on U.S Capital Investment Guarantee
One Step Export Bureau
Drawback Industries Law
Free Trade Zone Law
Tourism Law

Generalities:

Guatemalan law promotes foreign investment and includes provisions that recognize and guarantee private property rights equally for Guatemalan nationals and foreign investors. No restrictions are placed on foreigners for owning any amount of stock in Guatemalan business entities. Main economic sectors of Guatemala are open to both local and foreign investment and ownership; however, some restrictions apply to sectors considered to be of strategic interest, such as military and some forms of transportation.  Other than applicable taxes, no restrictions apply to remittance of profits and repatriation of capital. Guatemalan law supports an open market, respecting the entrepreneurial activity and foreign investment.

Foreign Investment in Guatemala:

Foreign investment in Guatemala is usually carried out by establishing a local company or a branch of a foreign company.

The Guatemalan Commercial Code regulates the formation of the following types of companies (Article. 10 of the Guatemalan Commercial Code):

General Partnership (Sociedad Colectiva): partners are jointly and severally liable to the full extent of their personal assets.
• Limited Liability Partnership (Sociedad de Responsabilidad Limitada): maximum of twenty partners, in which each partner is personally liable up to the amount of equity paid in.
• Limited Partnership (Sociedad en Comandita Simple): formed by two types of partners: one or more general partners who direct business and are jointly and severally liable for debts, and one or more limited partners whose liability is limited to the amount of equity paid in. The limited partners can have no management voice in the operation of the firm.
• Special Limited Partnership (Sociedad en Comandita por Acciones): same as limited partnership except shares represent equity.
• Corporation (Sociedad Anónima): equity is divided and represented in equal value shares. Responsibility of each stockholder is limited to shares held. The corporation must have a board of directors, or a sole administrator, and must hold an annual meeting whose minutes must be notarized.

No limitation exists on the number or percentage of foreigners serving on a board of directors of a Guatemalan company. Companies are required to have a legal representative, who must be a resident alien with a work permit or be a Guatemalan citizen. Shares may be made out to the stockholder's name or issued to the bearer.

Registration of a Local Company:

Establishing a local company in Guatemala is a process that takes approximately two weeks for provisional registration and a maximum of 2 months for final registration. A company may begin operations under provisional registration.

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Registration Requirements of a Local Company

Registration requirements for a local company include the following:

Its foundation by a minimum of two persons, individual or corporate, is required to form a company. To operate in most sectors of the economy, there is no requirement for a Guatemalan national to participate in the incorporation. Likewise, no restrictions are placed on foreign participation. The charter of the company must be executed in a public and notarized document.

A certified copy of the charter must be filed with the Commercial Registry (Registro Mercantil) within thirty days. The company's accountant or accounting firm must be registered with the Ministry of Finance.

After verifying compliance with legal requirements, the Commercial Registry provisionally registers the company. The company must then publish notification of the registration one time following the granting of provisional registration. The notices must appear in the Official Gazette (Diario de Centro America). If no opposition is tendered within 8 days, the Commercial Registry proceeds with final registration.

Establishing a Branch of a Foreign Company

A company legally established in a country other than Guatemala can register a branch office in Guatemala by meeting the following requirements of the Commercial Registry:

Demonstrate that it has been duly organized in accordance with the laws of the country of origin.
• Present a certified copy of its articles of incorporation, by-laws and amendments.
• Submit an authenticated copy of the minutes containing the company's decision to operate in Guatemala and to file for registration and approval.
• Appoint a representative, either a foreign resident with a work permit, or a Guatemalan citizen with sufficient authority, as specified in the company's by-laws, to conduct business and represent the company in legal matters.
• Deposit the operating capital in a legally registered bank and agree to be liable for business conducted locally.
• Agree to submit to Guatemala law and the jurisdiction of the Guatemalan courts.
• Present a declaration of commitment to fulfill all legal obligations prior to withdrawing from Guatemala.
• Establish a bond in the amount of US dollars 50,000 on behalf of the Guatemalan state for compliance of any obligations they don’t fulfill when doing business in the company.
• Present certified copies of the company's latest financial statements (balance sheets, profit and loss statement).
• All documents must be legalized by at a Guatemalan Consular Office, and then translated into Spanish by an accredited translator.
• All documents must be recorded by a registered Guatemalan notary prior to being submitted to the Commercial Registry.

Upon submission, the Commercial Registry will verify compliance with all legal requirements and establish that charter provisions are not contrary to Guatemalan law. Subsequently, one notice of the registration request is published on separate dates within a one-month period in the Official Gazette. If no opposition is tendered, the documents are submitted to the Mercantile Registry for approval. After verifying that the operating capital has been duly deposited in an authorized bank, the registry proceeds with registration. The company must initiate operations within a year of the date of registration. The process of filing for registration and approval takes approximately three months. 

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Registration with the Tax Authority (Superintendencia Tributaria SAT):

Registration with the SAT, Guatemala's equivalent of the Internal Revenue Service, is required to obtain the tax identification number (Número de Identificación Tributaria (NIT)). The following documents are required: 

Copy of the publication in the Official Gazette.
• Proof of the provisional registration issued by the Mercantile Registry.
• Copies of the documents filed with the Mercantile Registry.

Temporary Operations in Guatemala:   

Foreign companies may also request approval from the Mercantile Registry for temporary operations in Guatemala for a period of less than two years. A company is required to provide proof of being duly organized in its country of origin and must appoint a legal representative in Guatemala.

Operations Requiring no Registration or Authorization:

Foreign companies or individuals do not require any type of registration or approval to do the following: 

Sell or purchase from independent commercial agents legally established in Guatemala.
• Purchase orders through agents legally established in Guatemala provided such purchases are subject to confirmation or acceptance abroad.
• Open or maintain accounts in an authorized Guatemalan bank.
• Acquire real estate, with the exception of land near international borders and waterfront properties.
• Grant loans to businesses established in Guatemala.
• Draw, endorse or contest credit instruments in Guatemala.
• Participate in any legal action or proceeding before a Guatemalan court or public office.

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Taxation:

Foreign Exchange Regulations:

All foreign currency transactions must be made through approved financial institutions. A form must be filled out for all transactions involving foreign investments, remittance of dividends and repatriation of capital.

Other than the compliance with applicable taxes, no further controls and restrictions apply to the remittance of profits and repatriation of capital. The foreign currency exchange rate floats freely. 

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Immigration Legislation:

All immigration matters are regulated by Decree 22-86, which oversees the admission of immigrants and their activities. Unless otherwise exempt from visa requirements pursuant to international agreements, immigrants should apply for a visa to enter Guatemala at a Guatemalan Consulate in their country of origin. Most immigrants enter the country with a tourist visa and later apply for a resident visa should they choose to remain in Guatemala.

Trademark and Patent Legislation:

Trademark protection is acquired through registration with the Patent and Trademark Office of the Ministry of Economics. It is granted for a ten year period after which it may be renewed. To be eligible for a patent, an invention must be new, innovative, and be suitable for industrial application. Patent registration is valid for a maximum period of fifteen years.

Labor Laws:

Rights and obligations of employers and employees are governed by the Labor Code (Código de Trabajo). Remuneration for services by an employee must be paid in local currency (Quetzals) and may be based by time, task or profit sharing, or percentage on common sales or collections made by the employer. Wages must meet the minimum level established by the government. The minimum wage varies according to type of work. All payroll workers receive two annual bonuses equivalent to one month's salary: one payable at year's end (Christmas Bonus), and the other in July (July Bonus).

When an employer terminates an employee without just cause, (just cause is defined by the Labor Code and includes dangerous behavior, excessive absenteeism, disclosing commercial secrets, etc.), the employee is entitled to a severance payment calculated on the employee's income, including perquisites, and the length of time the employee has worked for the employer. Proportional Christmas and July Bonus calculations must be included in severance payment. Day shifts may not exceed eight hours per day and forty-four hours per week. Night shifts may not exceed six hours per night and thirty-six hours weekly. Foreign workers require special permission by the Ministry of Labor to work in Guatemala. Approval must be requested prior to arrival in the country. Foreign nationals may comprise no more than ten percent of the company's work force. The combined salaries of non-Guatemalan employees may not exceed fifteen percent of the non-management payroll.

Banking Licenses:

Foreign banks may establish branches in Guatemala subject to approval by the Monetary Board and the Ministry of Economics. To establish a branch in Guatemala, the foreign bank must have been in operation in its country of origin for at least ten years.

A minimum initial capital outlay of US$2 million is required for establishing a new bank, which must remain in the Guatemalan branch. Applications must be submitted to the Superintendence of Banks along with the required documents, including balance sheets, profit and loss statement, and a certificate of good standing issued by the corresponding authority of the country of origin. Branches of foreign banks are subject to the same legal regulatory framework as charter banks, as well as the jurisdiction of the Monetary Board and the Superintendence of Banks.

Foreign branches do not require a board of directors; however, at least one officer in charge of the branch must be domiciled in Guatemala. This officer must be a resident alien or a Guatemalan citizen.

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Financial Legislation:

All loan agreements must be signed and witnessed by a licensed Guatemalan attorney. Loan agreements secured by mortgages or pledges must be signed in a legalized public document before an attorney and duly registered in the Property Registry (Registro de la Propiedad). The Guatemalan Commercial Code provides for several types of notes and drafts, which include: promissory notes, bills of exchange, debentures, and checks. Notes and drafts are negotiable and their transaction involves a few simple procedures. The negotiation and transfer of instruments payable to the bearer is effective upon delivery of the instrument. Instruments payable to a specific name or account are negotiated by endorsement and delivery.

Environmental Legislation:

An environmental impact study is required before beginning any construction, industrial project, or other activity that could modify or disturb the environment. The study must be carried out by qualified technicians, either companies or persons approved and certified by the National Commission on the Environment (CONAMA), and submitted to CONAMA. Stiff fines for non-compliance are applicable.
 

Law for the Protection and Improvement of the Environment: (Decree 68 – 86):

Guatemalan legislation prohibits the emission and discharge of polluting matter or agents that may affect the environment. It also prohibits the storage of contaminating or radioactive materials, as well as those products or materials not freely and legally marketed in their countries of origin. The importation of human or animal wastes, treated or untreated, is banned. 

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Agreement on the U.S Capital Investment Guarantee (Decree 1 545)

The Overseas Private Investment Corporation (OPIC) provides investment guarantees for qualifying U.S. investment projects in several countries. Guatemala is a participant in this program, and upon approval by the Guatemalan Government, the qualifying project is eligible for guarantees by OPIC covering losses resulting from inconvertibility of currency or expropriation. Parties choosing to be covered by the agreement must first apply to OPIC and then submit their application to the Ministry of Economics.

The covered investment may be in cash or in capital goods. An investment is considered to be of U.S. origin when classified as such by the Government of the U.S. or OPIC. In the case of cash investments, the money must be exchanged through one of the authorized banks in the country.

One Step Export Bureau:

Procedure for exporting Guatemalan Products were greatly simplified by the establishment of the One-Step Export Bureau (Ventanilla única de Exportaciones) at the Ministry of Economics. The bureau brings together in a single office all organizations and institutions associated with the export activities. Export permits are routinely issued in a matter of hours.

Drawback Industries Law (Decree 29 – 891):

The Drawback Industries Law encourages the manufacture of goods for export to countries outside Central America and regulates the drawback industry under specific classifications. The law offers temporary exemption from tariffs and Value Added Tax on imported raw materials, samples, machinery, equipment and other items. Approval by the Ministry of Economics is required to obtain the benefits granted by this law.

In addition to traditional incentives and tax holidays, the Drawback Industries Law allows single business to qualify as a stand-alone free trade zone anywhere in the country.

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Free Trade Zones Law (Decree 65 – 89):

A free trade zone is defined as an area of land especially designated and subject to a special customs classification, in which individuals and enterprises manufacture or merchandise goods for export or re-export, or engage in foreign trade services. A free trade zone may be established anywhere in the country by private as well as public enterprises. Private enterprises need approval by the Ministry of Economics. Incentives provided by the Free Trade Zone Law include:

For manufacturing and service firms established in a free trade zone:

Full tax exemption is permitted on imports for equipment, machinery, tools, raw materials, inputs, seem-finished products, containers, and packaging used for manufacturing or rendering of services.

Full income tax exemption is also allowed for a twelve-year period, on income from the manufacture or rendering services originating in the free trade zone.

Value Added Tax exemption on goods transferred between free trade zones within Guatemala.

For businesses located within the free trade zone engaging in commercial activities:

Exemption from taxes, custom duties or import charges on commodities and components stored in the free trade zone for their commercialization,

Full income tax exemption, for a five-year period, on income derived from commercial activities within the free trade zone.

Exemption of Value Added Tax, on goods transferred inside and between free trade zones in Guatemala.

Tourism Law (Decree 1701 and its reforms, Decree 22-71, Decree 22-73 and Decree 68-85):

The Tourism Law contains important provisions to encourage and develop the tourism industry including the following tax incentives, available for a ten-year period to investors in this sector.

Exemption from all duties and import taxes on raw materials, construction materials, operating machinery, electrical appliances, vehicles, ships, cutlery, furniture and entertainment equipment, not produced in Guatemala or Central America.

Exemption from real estate taxes on new construction and the expansion of existing structures. 

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