Guatemala’s IUSI Reform: An Analysis of Decree 18-2026

For properties intended for housing, residential use or mixed use, the tax rate is zero per thousand (0/000).

The reform substantially shifts the thresholds. A commercial property with a registered value above Q70,000.00 is no longer automatically subject to 9 per thousand: if its value does not exceed Q500,000.00, it will be taxed at 3 per thousand; if it exceeds Q500,000.00 but not Q1,000,000.00, it will be taxed at 6 per thousand. Properties above Q1,000,000.00 keep the maximum rate of 9 per thousand. That said, the real impact of the reform will depend on the registered value, on cadastral updating and, from now on, on how the property’s use is classified.

III- Zero IUSI rate for housing, residential use and mixed use

The most consequential sentence appears at the end of the new article 11: properties intended for housing, residential use or mixed use are subject to a rate of zero per thousand (0/000). In economic terms, the result is that these properties generate no IUSI liability. Legally, however, the figure should be called by its proper name, because Congress did not add an exemption to article 11 of the IUSI Law; it set a zero-per-thousand rate within the article itself.

In principle, therefore, the reform does not by itself eliminate the formal obligations relating to registration, updating of the tax roll, filing of information, appraisals or verification of use. Nor does it prevent the tax administration from checking whether the property genuinely falls within the declared category. What it eliminates is the amount payable for as long as the zero rate applies.

IV- What does “mixed use” mean?

The IUSI Law as published in the Official Gazette does not define “housing”, “residential use” or “mixed use”. It likewise sets no occupancy percentages, no predominance rules, no mechanism for allocating value between residential and commercial areas, and no specific documents to evidence the classification. The omission is particularly relevant because the same article taxes commercial-use properties and “other uses”, yet expressly places “mixed use” within the zero rate. Nor is it possible to fill that gap through a systematic interpretation of the law, because the text currently in force neither defines nor uses those terms.

The placement of “mixed use” in the second paragraph of article 11 is decisive. If any commercial component were enough to move a property into the general “commercial and other uses” category, the express reference to mixed use would be deprived of effect. The reading that gives meaning to every word of the rule is that the legislature intended to treat a purely commercial property differently from a property in which housing and another activity coexist.

Consider someone who uses the ground floor of their home as a beauty salon and lives with their family on the upper floor. If both floors form part of the same estate, tax roll entry or real estate unit, and both uses are real and simultaneous, the property should in principle qualify as mixed use. The case fits the natural meaning of the term and, accordingly, there is a solid argument for applying the zero-per-thousand rate to the property as a whole.

The lack of legislative precision also leaves open a question we will address in a follow-up article: how should the lease of a property to a person who will use it as a home be interpreted? The use of the property is residential, even though for the owner the transaction is commercial in nature.

The Tax Administration Superintendency (SAT), the Ministry of Public Finance, the General Directorate of Cadastre and Appraisal of Real Estate and, above all, the municipalities will need to adjust records, forms and systems within the period set by the decree. That adaptation should produce public, objective and uniform criteria.

V- Article 35 Bis: municipalities may no longer condition public services on IUSI payment

The second amendment to Decree 15-98 responds to a familiar practice in various municipalities: conditioning the provision or continuity of certain municipal services on being current with IUSI payments. As a consequence, a taxpayer could find that failure to pay the tax not only triggered the ordinary consequences of default, but also blocked access to drinking water, garbage collection, street lighting, public grounds maintenance or another basic service. The service thus became an indirect collection tool.

The new article 35 Bis expressly prohibits municipalities, their agencies, municipal enterprises and decentralized or deconcentrated entities from conditioning the provision of public services on prior payment of IUSI. The reform separates two legal relationships that could previously become improperly intertwined. One is the tax obligation to pay IUSI; the other is the provision of the public service. Once the reform takes effect, tax arrears must be pursued solely through the procedures proper to the tax itself.

VI- Article 43 Bis of the Stamp Tax Law: the earmarking changes, not the burden

Article 3 of Decree 18-2026 adds article 43 Bis to the Law on Stamp Tax and Special Sealed Paper for Protocols. It covers instruments and contracts documenting the second and subsequent sales, exchanges or other transfers of real estate. Revenue generated by those transactions will be earmarked for the municipality in whose territory the property is located, once the pre-existing statutory earmarks have been deducted.

To make the allocation operational, the Ministry of Public Finance and SAT may carry out budgetary, administrative and control adjustments designed to ensure traceability. The rule also strengthens interoperability. SAT may verify and exchange information with the General Property Registry and with the municipalities regarding notarial notices received, and those institutions are required to cooperate. In addition, SAT must verify correct payment and record the geographic origin of the transaction, and adjust regulations, forms and processes accordingly.

VII- Amendment to article 87 of the Tax Update Law: income tax exemption for certain real estate gains

Article 87 of the Tax Update Law governs the exemptions applicable to capital income and to capital gains and losses. The reform adds paragraph 4, which exempts from income tax the capital gains derived from the transfer for consideration of real estate located in Guatemala. Unlike the zero-per-thousand rate provided for certain properties under IUSI, here the legislature does expressly establish a tax exemption.

The exemption does not benefit legal entities, trusts, or undivided estates that are taxed as income tax payers, nor other entities, whether or not they have legal personality, that are taxpayers of that tax. Nor does it benefit individuals registered in the Unified Tax Registry for economic activities involving the purchase and sale, subdivision, urbanization, parceling, construction for sale, development, brokerage or marketing of real estate.

In practical terms, the rule mainly favors the individual who sells a property located in Guatemala for consideration without carrying on registered real estate activities on a professional or business basis. For excluded taxpayers, gains will remain subject to the general income tax rules applicable to capital income or to business income, as the case may be.

VIII- A staggered entry into force: when do the Decree 18-2026 reforms take effect?

Because the decree was published on 28 August 2026, the income tax and stamp tax amendments will enter into force on 1 January 2027. For IUSI, by contrast, the special ninety-day period established in the decree itself must be observed.

IX- A reform with unfinished interpretive work

Decree 18-2026 offers meaningful tax relief and corrects a questionable municipal practice. The zero rate may substantially reduce the burden on households, and the new thresholds benefit a large number of commercial properties. Even so, the text leaves open questions.

“Mixed use” is undefined; there is no predominance or measurement rule, and article 11 does not limit the zero rate to a primary residence or to individuals, even though one of the recitals suggests that intent. These gaps do not authorize the tax administration to create charges, percentages or substantive requirements, but they do call for clear procedures to verify the facts.

The reform must be applied in accordance with its operative text. Where the law is silent, administrative interpretation may govern how facts are proven, but it cannot manufacture a tax obligation that Congress did not create.

At Consortium Legal we advise property owners, real estate developers and municipalities on reviewing how their properties are classified by use, calculating IUSI under the new scales, and structuring sales under the new income tax regime. If you would like to assess how Decree 18-2026 affects you, please contact us.