With the hope of getting exemptions reinstated, maquila sector union representatives are calling on a thousand companies to avoid the payment of the income tax until the exemptions are reactivated.
The Superintendency of Tax Administration (SAT) confirmed in early January that both administrators and users of free zones and maquilas (by decree 65-89 and 29-89 respectively) must pay income tax (ISR) for the fiscal year 2016.
The transfer of three Korean operations operating in the country and an uncertainty in fiscal terms for the new period, have kept the sector in suspense.
Historically Guatemala has been one of the most competitive countries in the textile industry, but the legislative backlog in extending incentives to maquila companies and free zones regimes, and the departure of three Korean companies in the country in the last year, have placed the sector in a state of uncertainty.
While the Investment and Employment Law Project is still waiting in congress, the new Minister of Economy announced that they are preparing a "plan B" to maintain incentives for the productive sector.
At least four months before the expiration of the Law on the Promotion and Development of Exports and Maquila Activities, it has been announced that the aim of the alternative plan is to maintain the tax benefits enjoyed up until now by exporting companies, mainly textiles and maquila.
In the first quarter of the year textile exports generated revenues of $192 million, 7% more than in the same period in 2014.
A report by the Bank of Guatemala indicates that as of February articles of clothing were the second most exported product. During 2014 this sector generated approximately $1.5 billion in exports, representing a growth of 12.6% in export volume.
The guild is once again insisting on the urgency of the government passing the law which grants tax incentives to the maquila industry so that they can remain competitive in the global market.
Once the Investment and Employment Decree 4644 is approved, there would come into effect "... Tax incentives for the maquila industry, with terms of exemptions from income tax up to 15 years for taking up residence in the capital and 25 for those in the departments."
Although in recent years the more expensive bunker fule has been less and less used to generate electricity, the energy cost for manufacturers has increased by 44%.
Data from the Wholesale Market Administrator (AMM) shows that the energy generated from renewable resources went from covering 47.3% of demand in 2007 to 60.8% in 2012. Besides this electricity generation with bunker fuel decreased going from 36.4% to 20% in the same period.
Between January and May, recycled plastic exports generated revenues of $2.2 million.
Jalil de Leon, executive director of the union of plastics companies attached to the Chamber of Industry of Guatemala (CIG), said that the domestic industry is also taking advantage of this market, a sector which reported growth of 12% in terms of the volume of what is recycled and transformed. "Because of the interest shown in the industry, new businesses have also opened up in order to engage in the activity. We can say that so far this year, 5% more companies have been reported," he added.
After a tough first semester 2012, which saw a significantly decline in orders from the main market of the Guatemalan textile industry, the recovery began in June.
According to an article in Prensalibre.com the manager of the Garment and Textile Committee (Vestex) of Agexport, Alejandro Ceballos, said that during the first five months of the year economic uncertainty in the U.S., high international prices of cotton, and problems caused by the implementation of the new Customs Act, meant that purchase orders steadily declined.
The rising costs in China have caused companies like this north American firm to look once again towards the isthmus to buy their clothing.
Carlos Arias, president of the Committee on Textiles and Clothing (Vestex) of Guatemala, said during a forum at the latest Apparel Sourcing Show 2012, that JC Penney have indicated that their purchases from the isthmus will rise by 30%.
The recovery of the textile industry in Guatemala has exacerbated the problem of lack of personnel with the necessary qualifications, so much so that employers are having to look outside the country.
The clothing and textiles sector in Guatemala requires intermediate managerial staff in the areas of supervision, leadership and production, and social responsibility, a type of manpower which is in shortage in the country, reports Siglo21.com.gt.
The Guatemalan Exporters Association is a private non-profit entity, established in 1982; that represents, promotes and develops non traditional exports of Guatemalan companies.
Operates in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Guatemala
Phone: (502) 2422-3400
As part of the Agritrade Platform, Guatemala will participate for the 27th time in PMA Fresh Summit, the most important international trade show and convention of fruits and vegetables in the United States, which will take place at Anaheim Convention Center, California from October 17th to 19th.
Generates business opportunities by linking supply and demand of goods and services between Central America and the rest of the world.
Operates in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama
Phone: (506) 225 4786