Initiative 5837 seeks to approve the Law for the Promotion of Employment for People Over 50 in Guatemala, whose main objective is to give people over 50 the opportunity to return to formal employment, contributing their knowledge and experience, as well as to provide companies with a tax benefit to reduce their expenses by having adults over 50 on their payroll.
I- Explanatory memorandum:
- Demographic trends in Guatemala: according to the census carried out by the National Institute of Statistics (INE) in 2018, Guatemala is experiencing two clear demographic trends:
- A higher life expectancy rate.
- A birth rate above the world average.
- Labor Market: currently, the labor market evaluates people based on age, so old age is seen as a competitive disadvantage. Hiring systems in Guatemala are designed against the hiring of older people, as there is a belief that they are overvalued or can be easily replaced by younger workers. Likewise, there is a widespread myth that people over 65 should retire, thus reducing the possibility of continuing in formal employment or even choosing to work.
- Need: the employment situation affected by the COVID 19 pandemic requires the State to adopt solutions from which both companies and employees can benefit.
- Demographic trends in Guatemala: according to the census carried out by the National Institute of Statistics (INE) in 2018, Guatemala is experiencing two clear demographic trends:
II- Relevant legal aspects:
1- Beneficiaries of the tax incentive:
The beneficiaries are employers, individuals or legal entities as taxpayers, men and women over the age of 50.
2- Tax incentives:
- Income Tax (ISR) discount for employers or individuals or legal entities under the general and specific regimes who hire or have hired men and women over the age of 50 on their payroll.
- 20% discount on the current income tax rate for employers or individuals or legal entities that have hired or hired between 15% and 25% of their workforce as people over 50 years of age.
- 30% discount on the current income tax rate for employers or individuals or legal entities that have hired or hire more than 25% of their workforce as people over 50 years of age.
3- Application of the discount:
- The discount will be applied automatically in the current tax period by the SAT for employers or individuals or legal entities, upon presentation of the quarterly payrolls that prove they are accredited to the IGSS.
- For the purposes of the annual declaration, the average of the four quarters will be applied, and the quarterly reports of the IGSS payrolls must be presented.
4- Inter-institutional coordination:
- The Comptroller General of Accounts, the SAT and the IGSS must establish digital mechanisms for the application of the discounts granted by this law.
5- Validity
- This initiative will come into force eight days after its publication in the Official Gazette.
6- Current status:
- On March 18, 2025, the bill was passed on to its first reading in the plenary session of the Congress of the Republic of Guatemala.
III- Legal Analysis
This initiative is in line with art. 239 of the Political Constitution of the Republic of Guatemala, which grants Congress the power to establish taxes, contributions and tax benefits. Likewise, in its recitals it refers to several international instruments, such as the United Nations Principles for Older Persons (1991) and the Brasilia Declaration (2007), among others.
Among its positive aspects, we can highlight that it seeks to improve equality in job opportunities in Guatemala, which is a problem that has been marked in the country. Likewise, this initiative has a positive impact on IGSS’s revenue as it encourages the formalization of jobs and the registration of employees on payrolls so that they can enjoy the tax benefit.
On the other hand, this law may have some negative aspects, as there is a possibility that the tax benefit granted by the law will create new discrimination against people under 50 years of age. Similarly, there is a risk that employers will exploit the tax benefit and commit a possible tax fraud, since in the absence of adequate control mechanisms, fictitious hiring could be carried out to enjoy the benefit granted by the law.
In conclusion, Initiative 5837 represents a positive effort to promote the labor inclusion of people over 50 through tax incentives for employers. However, its effectiveness will depend on adequate control mechanisms that prevent abuse and guarantee that the benefit translates into real employment opportunities. In addition, it would be advisable to complement the measure with training and labor protection strategies to ensure sustainable insertion into the labor market. While the reduction of income tax can encourage hiring, it is essential to evaluate its fiscal and social impact to guarantee its long-term viability.