The new Guatemalan government has refined its proposed fiscal law reform, which includes proposals such as removing the accreditation of the VAT tax and setting different levels for the deduction of income tax.

"The workers who are employees currently can deduct up to one hundred percent of Value Added Tax (VAT) against ISR (Income Tax) through a form in which all purchases are included annually. Under this regime a deduction is allowed in the amount of Q36,000 ($4,609) per year, which is considered the minimum essential for an employed person", explains an article published by ElPeriodico.com.gt.

Discussions within the government have hit several obstacles, one of the most important ones is establishing how income tax (ISR) for employees will be collected.

Pavel Centeno, Minister of Finance, explained that "the proposal seeks to equalize income tax regimes. Regimes are established for gainful employment, wage earners, income from capital (dividends, interest, rents, royalties, etc.) and for non-residents", quoted the website.

Miguel Gutierrez, a consultant for Central American Business Intelligence (CABI), considers it appropriate to eliminate the VAT that is deductable from income tax and raise the poverty line to Q42,000 per year ($5,378). That is to say, workers who earn up to Q3,500 per month ($448). That would result in the end of invoices being sold and would broaden the tax base and prevent small companies from submitting invoices with VAT charges , Gutierrez argued.

Source: elperiodico.com.gt

More on this topic

Guatemala: What Will Be Taxed and By How Much

August 2016

The proposal raises income tax from 25% to 29% for profits of over $38 billion a year, royalties for extracting gold and silver from 1% to 10%, taxes on fuels and a tax of $0.65 tax per bag of cement.

See document by the Ministry of Finance of Guatemala with details on each tax increase.

Guatemala: More Tax Regulations Suspended

February 2013

The suspension by the Constitutional Court of the application of more articles from the Tax Reform Act could cost the state more than $255 million.

The Constitutional Court has provisionally suspended two more articles of the Tax Reform Act. The first is Article 4, which includes as earned income "pensions, retirement funds and widows' pensions, in respect of an employment exercised in the country, paid or credited to any beneficiary who is resident in Guatemala", reported Elperiodico.com.gt.

Employers Promise to Support Tax Reform Bill

January 2012

Cacif, leader of the Guatemalan private sector, said that "we must all do our part" and promised a consensus with the government.

The presidents of business chambers of Guatemala met on Wednesday with President Otto Perez and Finance Minister Pavel Centeno, to hear a proposal for tax reform law, and adopted a positive approach to the coming changes.

The Pros and Cons of the Tax Reform in Guatemala

January 2012

The bill provides that no amounts may be deducted from VAT on purchases, and increases the tax base for the payment of income tax.

The Guatemalan government’s tax reform law is ready, and contains several new points: employees ability to deduct VAT from annual purchases from their taxes has been eliminated, the tax base has been increased, and the road tax for vehicles has been doubled.