Exemption rights for renewable energy projects in Guatemala

Decree 52-2003 was declared of urgency and national interest to promote the development of renewable energy projects at a time when Guatemala had a generation matrix, mainly from thermal energy sources (bunker and diesel) and, according to the renewable resources the country had, it could stop depending on imports and generate energy with clean and renewable sources.

For this reason, the Law and the Regulations of Decree 52-2003 came into force and the renewable energy generators began to apply for the incentives contained in said law:

  1. Exemption from the payment of Value Added Tax (VAT), import duties (DAI) and consular charges and duties on the importation of machinery and equipment used exclusively for power generation in the area where the renewable energy projects are located.
  2. Exemption from Income Tax (ISR) for a period of 10 years from the Delivery Initiation Date (FIE).

The incentives are granted only to individuals and legal entities that directly develop renewable energy projects and only for the portion corresponding to such project.

To apply for the incentives, the applicant must:

  • Submit an application addressed to the Ministry of Energy and Mines. During the pre-investment and construction periods, extensions may be submitted, following the same procedure.
  • Submit the general documentation of the project clearly indicating the schedule for the pre-investment, construction, and operation periods, respectively.
  • Submit a statement indicating that it has complied with the provisions of the General Electricity Law, as applicable.
  • Submit a total or partial list of materials, equipment and others associated with these periods and the type of incentive or incentives requested, specifying the period to which they correspond.

This is how the procedure is established to obtain the right of exemption for the project of generation with renewable energy sources.

Once the resolution of the Ministry of Energy and Mines is obtained, the developer of the project must present before the Superintendence of Tax Administration (SAT) the certification of the resolution and the SAT must issue the exemption resolution within 30 days from the date the request is presented.

It is at this moment, when the right to the exemption is perfected, when the SAT resolution approving the exemption is obtained. If the resolution is not issued within 30 days, the exemption will be considered approved in favor of the developer (positive administrative silence).

It should be noted that the administrative process under which these approvals are made in our system is not integrated, but rather each of the administrative entities makes its resolutions under separate procedures and, unfortunately, it is not a matter of days or weeks, most of the time it can take months.

The developer could be obliged to pay taxes related to the import or income obtained in case the resolutions of the MEM or SAT take more time than established in the project start-up schedules.

The important thing about the exemptions to which this law entitles, is that the date on which they start is retroactive and, therefore, the resolution must so state.

The recognition of the delivery start date or commercial operation date for energy projects with renewable sources is undoubtedly an important milestone in this process and is the basis for retroactively exercising the right to the exemption granted by law. This aspect must be stated in the resolution, both from the MEM and the SAT, in the sense that the right to exemptions is recognized.

Finally, we cannot fail to mention how important renewable energy projects are to comply with the sustainable development objectives. These projects promote the use of clean energy, using natural resources, so they do not generate carbon emissions to the environment, and they can issue non-emission certificates that can be sold in international markets.