The Guatemalan Tax Administration has been insisting, even saying that it is analyzing criminal actions abroad, on the taxation of digital platforms. This insistence comes, we assume, from the existence of documents of the Organization for Economic Cooperation and Development (OECD) on this matter.
Although OECD has achieved some consensus among its members and has issued some recommendations, such as the ones we will quote below, Guatemala is not a member country and, additionally, we have a very strict principle of constitutional legality, which means that the Tax Administration is constrained to strictly apply the law and not the wishes of those gods of the fiscal-state Olympus.
In summary, the OECD tax policy framework to address the IVA challenges of e-commerce is based on four fundamental pillars and we quote the document “Digital IVA Toolkit for Latin America and the Caribbean highlighting certain aspects and main recommendations”:
- Create the legal basis for jurisdictions to establish and enforce their right to apply IVA to international digital commerce, including internationally accepted rules for determining the “place of taxation” of online services and digital products by reference to the location of the customer.
- Ensure effective collection of IVA on online sales of goods, services, and digital products by non-resident online suppliers through a simplified electronic registration and collection mechanism.
- Increase the efficiency of IVA collection by requiring digital platform operators, which largely dominate global digital commerce, to collect and pay VAT on sales made through their respective platforms.
- Improve IVA compliance by non-resident online suppliers through modern strategies based on risk management and robust international administrative cooperation.
The Guatemalan IVA law establishes as taxable transactions, the rendering of services in Guatemala and the sale of goods located in Guatemala. Additionally, the country’s law on electronic commerce established that an “online” service is not understood as rendered in the place of the recipient of the service, but in the habitual place of residence of the service provider. Therefore, it is not possible, through the interpretation of an OECD document, to try to give the character of “place of taxation” to something different from what the law establishes. It is worth mentioning that the law for the recognition of electronic communications and signatures is the body that regulates the totality of the electronic commercial transactions, which indicates that:
ARTICLE 29. Location of the parties.
For the purposes of the present law, it will be presumed that the seat or place of business of a party is in the place indicated by it, unless another party demonstrates that the party that made such indication does not have any seat or business establishment in that place.
If a party has not indicated the seat or place of business, and has more than one, the one having the closest relationship to the relevant contract, having regard to the circumstances known to or contemplated by the parties at any time before the conclusion of the contract or at the conclusion of the contract, shall be considered as such for the purposes of this Law. If a natural person has no place of business, his habitual place of residence shall be taken into account.
A place does not constitute a place of business merely because it is the place:
- Where the equipment and technology supporting the information system used by a party for the formation of a contract are located.
- Where other parties can obtain access to such information system.
The fact that a party makes use of a domain name or e-mail address linked to a certain country does not create a presumption that its place of business is in that country.
This is why the access may not be considered the place of supply of the service, but rather the one expressly indicated in the online contracts or on the website.
In order for IVA to be applicable to a streaming platform, for example, an amendment to the IVA law is required, which may make the addition that the service received in Guatemala through a web platform is taxed with IVA. Meanwhile, the service received in the country through a web platform, whether streaming or live, does not make the service to be rendered in Guatemala, so there is no taxation possible.
However, if the platform is used to obtain goods, for example, a home delivery, the home delivery service as such must be taxed in Guatemala, since it is defined as a taxable event: providing services in the country. This does not mean that the platform is obliged to issue the invoice for this service, since many of these platforms provide a “facilitation” or “communication” service between the parties. It is the provider of the delivery service that is obliged to issue such invoice.
The same happens with the income tax, since the generation of taxable income, by our territorial source system, requires obtaining the income for providing the service in the country, not for providing the service abroad, as it happens now with all streaming or facilitation platforms. It is therefore erroneous to seek IVA taxation or income tax withholding in situations where the service is not provided within the national territory and, clearly, the access to a platform from the country does not make the provision of such services in Guatemala.
[1] https://www.oecd.org/tax/consumption/kit-de-herramientas-de-iva-digital-para-latinoamerica-y-el-caribe-aspectos-destacados-y-principales-recomendaciones.pdf