Guatemala payroll and tax overview.

Foreign Direct Investment In Guatemala

The Guatemalan legal structure promotes investment and includes provisions that recognize and protect private property rights for both national and foreign investors. Additionally, Guatemalan law favours foreign investment under the grounds of the Foreign Investment Law.

Guatemala's economy is dominated by the private sector, which generates about 85% of GDP. Guatemala has the largest economic market in Central America, with a US$50.3 billion GDP for 2012, representing 27.8% of the region's total GDP. Such economic growth continues based on a State policy to promote development; an approach that has fostered the simultaneous endeavors of the public and private sectors, in this way facilitating the economic boom and access to key global markets. The latest studies on investment banking highlight Guatemala's great economic stability throughout its history.

Registering A Company and Establishing an Entity In Guatemala

Registering a Local Corporation in Guatemala includes the following requirements: 

•  A minimum of two persons, individual or corporate, is necessary to form a corporation.
• There are no restrictions on the origin of the parties.
• The charter of the corporation must be executed in a public deed.
• A certified copy of the public deed must be filed at the Commercial Registry within thirty days of the corporation's chaffer.

The Procedure of Registering a company is as follows: 

• Check the proposed company name online and obtain a letter from a Guatemalan notary public. To open bank account takes 1 day with a cost of QTZ 0.5 for each name.
• Deposit the subscribed capital in a bank and obtain a receipt - This will take 1 day and accrues no charge
• A notary public draws the deed of constitution - Complete the forms required by the Commercial Registry and the tax authority and pay the registration fees online .This is an online procedure of less than one day
• Obtain the provisional registration of the new company before the Mercantile Register; the Tax Identification Number; the Edict; the Registration of the legal representative appointment and the authorization to print invoices
• Publication of the edit in Diario de Centro America and opposition to the provisional registration of the company by affected third parties
• Obtain the definitive registration, the commercial license, the Social Security Number and the Authorization for social and accounting books

Business Banking In Guatemala

It is not mandatory in Guatemala to have an in-country bank account to process payroll. Banks typically open 9am to 5pm Monday to Friday and 9am to 1pm on Saturdays.

Working Week And Working Hours In Guatemala

Some companies work from Monday to Friday and others to Saturday to complete 44 working hours. Government offices usually open 8am to 4pm, Monday to Friday.

Basic Facts about Guatemala

General information

Full Name: Republic of Guatemala

Population: 15,438,384

Capital: Guatemala City

Major Languages: Spanish

Monetary Unit: Quetzal

Main Exports: Coffee, sugar, petroleum, apparel, bananas, fruits and vegetables, cardamom

GDP Growth: 301% approx

Internet Domain: .gt

International Dialing Code: +502

The tax year in Guatemala is January to December.

The Key (Legislative) Authorities in Guatemala are:

• Tax Office (Superintendencia de Administracion Tributaria)
• Ministry of Labor
• IGSS – Social Security Institute
• Ministry of Labor

Income Tax In Guatemala

According to Guatemalan law, taxable income is all income generated by capital, property, services, and rights invested or used in the country as well as income derived from any type of activities taking place in Guatemala.

All individuals, corporations and businesses, domiciled or not in Guatemala, are subject to income tax. Income tax filing must be presented 90 days after the end of the accounting year. For companies the fiscal year ends in December or June. Individuals must file by June 30 of each year.

Income tax deduction applies whenever a person earns more than US$375.00 per month. Every individual is entitled to deduct for his income tax charge all the VAT paid for his personal purchases. However total purchases cannot exceed his total salary The income tax is 15% for earnings up to US$8,125 and goes up to 31% in a progressive scale.

The typical penalty for late payment of taxes is 50% fine and for social security there’s an annual interest charges of 18%. Monthly contributions are to be paid to the tax authority on the 10th of each month.

Social Security In Guatemala

Social Security In Guatemala Social insurance system covers all employees, including agricultural workers. Public sector employees are covered by a separate program. The pensions for old age, survivorship, and disability are funded by a small contribution from employees and larger contribution from employers, while 25% is covered by the government. Retirement is set at age 60.

Cash and medical benefits are provided for sickness and maternity for employees of firms with more than five workers. Free medical care is provided for those receiving pensions.

Social Security Contributions:

• Social Security Employer contribution 12.67%
• Social Security Employee withholding 4.83%

Employers must contribute to the social security system (IGGS) with an overall percentage of:

• Social security 10.67%
• INTECAP 1.00%
•  RTRA 1.00% Monthly Social Security contributions are to be paid to the Local Authority on the 20th of each month

Reporting Tax In Guatemala

Yearly

• In March each year a list of all employees should be presented to the Ministry of Labor with total salary and positions.
• Also in March of each year a liquidation of income tax for employees has to be presented before the Tax Office.

Monthly

Every month a list of all salaries paid subject to social security has to be presented. This list determines the amount to be paid to social security from employer and employees.

New Employees In Guatemala

For social security purposes employees are simply added to the monthly report sent to the social security. New employees that have never been reported to social security have to apply for identification and a social security ID number. For income tax withholdings, the employee is subject to taxes whenever the person starts to earn above US$250 a month, in which case if applicable a withholding is made and sent to the tax office.

Every employee earning above US$250 a month has to apply on its own for a Tax ID number The deadline for new starters to be registered with the authorities is 30 days after the company is duly registered in the Mercantile Register and after two months in the Social Security Institute.

The following Information is required to register the New Start:

• Company Name
• Employee’s Name
• Social security number of every employee
• Amount of salary
• Date of start for every employee
• Payments during the month (every 15 days, weekly or monthly)

Leavers In Guatemala

The company only provides the person with a certification indicating the income tax amounts withheld during the year (only when applicable since not all employees are subject to income tax). The social security is informed of any leaver simply by stating in the monthly list sent to them that the person has left the company.