Guatemala is an attractive destination for investment due to its strategic geographical location (close to important markets such as the United States, Mexico, and Central America), skilled labor force, effective monetary policy, and national treatment for foreign investors.
However, before deciding to invest in the country, it is necessary to determine the minimum legal requirements that will allow operations to be started in an effective, legal, transparent manner that is appropriate to the minimum needs of the investment.
The most common types of companies that are usually chosen are the following:
I- Corporation
This is a commercial legal entity whose capital is represented by registered shares that can be transferred. The liability of the shareholders is limited exclusively to the amount of their respective contributions, exempting them from any obligation to respond personally for the company’s social obligations. This company is characterized by the confidentiality of the identification of its shareholders and the lack of publicity in this regard. The identification of each shareholder is recorded in internal company records, which are eminently private, giving this corporate structure a greater degree of confidentiality in this regard.
II- Limited Liability Company
It has substantial differences from a corporation. In this type of company, the capital is not divided into shares, but into contributions, which are not represented by securities. The transfer of these contributions is subject to legal and statutory restrictions and generally requires the consent of the other partners, who are expressly identified in the entity’s articles of incorporation, which, due to their registration requirement, are publicly available. The liability of each partner in this company is limited to the value of their contribution.
III- Foreign Branch
Applies to those entities or legal persons previously incorporated abroad and seeking to carry out activities within Guatemalan territory and, therefore, to have that same legal personality recognized in Guatemala. In this scenario, the branch does not constitute a new legal person, but rather an extension of the foreign entity. Once duly registered, it will be subject to the national legal system and current regulations and will therefore be bound by and assume the same rights and obligations that Guatemalan law provides for all other legal entities.
Regardless of the type of company chosen for foreign investment, the tax regime and taxes to be observed will be the same. Among the main ones we can mention: Value Added Tax (VAT); Income Tax (ISR); and Solidarity Tax (ISO).
In principle, there are no restrictions on the activities that can be carried out by companies legally incorporated in Guatemala or those operating as foreign branches, provided that their ordinary business is not contrary to express prohibitive laws or public morals or order. Consequently, foreign investment can cover any type of lawful commercial activity.
It is also important to emphasize that, regardless of the type of company chosen to start operations in the country, there are minimum requirements that must be considered prior to registering with the entity, which are as follows:
- Legal representative: There are no limitations or restrictions regarding the nationality of the legal representative, who may be a Guatemalan national or a foreigner. However, the representative must have a Tax Identification Number (NIT) issued by the Superintendency of Tax Administration (SAT), which is an essential and mandatory requirement for registering their appointment in the relevant public registries.
- Tax domicile: The company or branch must have a tax domicile within Guatemalan territory, which must be supported by a utility bill (water, electricity, or telephone receipt) showing the exact address for the registration process.
- Authorized accountant: The company or branch must have a public accountant duly registered with the Superintendency of Tax Administration (SAT), who will be responsible before said authority for compliance with tax and accounting obligations in the country.
Once all the prerequisites have been met, the shareholders, partners, or foreign entity must formalize the incorporation or registration process before a Guatemalan notary, who will be responsible for registering the legal entity with the General Commercial Registry of the Republic and the Superintendency of Tax Administration.
Subsequently, and with the proper registration of the company or branch, it will be necessary to process the relevant permits and authorizations, in accordance with the economic activity and business line of the company. Among the most common are:
- Environmental license: This will be required for any natural or legal person whose activity may cause an environmental impact. This procedure is handled by the Ministry of Environment and Natural Resources (MARN).
- Registration as an employer with the Ministry of Labor and the Guatemalan Social Security Institute (IGSS): Mandatory for any company that will hire workers. Registration is mandatory from the moment the first employee is hired.
- Health Registrations: Applies to companies operating in sectors related to food, cosmetics, pharmaceutical products, or the animal industry. These are processed with the Ministry of Public Health and Social Assistance (MSPAS) and/or the Ministry of Agriculture, Livestock, and Food (MAGA), as appropriate.
Every investment, business, and commercial activity is different and has its own particularities. That is why specialized legal support is essential to ensure that the investment is made and carried out in strict compliance with current and applicable legislation.
As attorneys and legal advisors, we understand the importance of protecting our clients’ interests and investments, as well as ensuring and guaranteeing legal certainty in their operations, providing all the support and professional assistance necessary to start their operations in Guatemala in a safe, legal, efficient, and peaceful manner.