Special value-added tax regimes in Guatemala

By: Alejandra Fuentes-Pieruccini

Changes to Government Agreement 125-2022 Regulation

The “Law of Simplification, Update, and Tax Incorporation,” regulated in Decree 7-2019, aims to facilitate the management and control of taxes in Guatemala. Government Agreement 125-2022, published on May 26, 2022, in the Official Gazette, contains the regulation of the law.

The law includes two “Special Regimes” for the Value Added Tax (VAT), namely:

  1. The Special Regime for Agricultural Taxpayers
  2. The Electronic Regime for Small Taxpayers and Special Agricultural Taxpayers

These regimes are added to the Small Taxpayer Regime of the Value Added Tax, which was previously contemplated in the Value Added Tax Law. The objective of these regimes is to simplify tax management for reporting and payment purposes. These regimes are simpler in that taxpayers registered under them are not required to declare or pay Income Tax.

In the case of agricultural taxpayers, individuals whose business activity is in the agricultural sector and whose annual sales do not exceed Q3,000,000.00 can register under this regime. They are required to pay a monthly 5% tax on gross sales for breeders of cattle, horses, pigs, and goats. For buyers, sellers, and feedlot operators, a 5% tax is levied on profits. The recently published regulation defines profit as the difference between income from the sale of cattle, horses, pigs, and goats, minus the purchase costs taxable under the Special Agricultural Taxpayer Regime.

In the case of electronic regimes, the Tax Administration is obliged to establish a platform for tax collection and control. Unlike the non-electronic regime, the tax rate will be 4%. In this case, the taxpayer must register a bank account with the Tax Administration and authorize the monthly deduction of the corresponding tax based on reported income.

The regulation expands the requirements for taxpayers to register under the special regimes regulated by the law. For electronic regimes, it is stipulated that taxpayers must use any means other than cash and require purchasers of their goods and services to make payments through banking channels.

Additionally, the law states that the Tax Administration must promote the banking integration of taxpayers registered under these special regimes and take relevant administrative measures to facilitate payment by taxpayers, ensuring that it can be carried out in an agile manner and in accordance with the means it deems appropriate, particularly electronically. In this regard, the regulation establishes that the Tax Administration must use electronic systems to facilitate this and empowers it to issue internal provisions aimed at achieving its objectives.