Guatemala is one of the countries most benefited by its geographical position and cultural diversity, which allows it to have an attractive climate for foreign investment. During the last years, it has had a great advance worldwide due to the creation of more agile mechanisms to open businesses and improve its competitiveness indexes; however, in 2017, it went down several positions in the World Bank’s (1) Doing Business Index, which assesses the ease of doing business in 190 countries.

Due to that reason, a series of legal reforms were enacted in recent months, in order to achieve the development of different sectors, which included changes in the processes of opening businesses, through the Amendments to the Commercial Code, in accordance to Decree 2-70 (2); as well as the search for legal mechanisms to make easier obtaining credits, through the creation of the Factoring Law, which was approved in January 2018and became effective on August 21, 2018. There are other initiatives pending for approval in the Congress, which seek the economic growth of a range of sectors, including tourism, trade, energy, construction, agriculture and cattle raising, manufacturing and services, in order to achieve an increase in productivity.

The applicable Legislation for foreign investment and fiscal incentives in Guatemala includes a variety of regulations that allow the investors to enjoy security and legal certainty about their capital. Among the main provisions that apply in the country it is important to mention the following:

a) Foreign Investment Law and its Regulations (Decree 9-98 of Congress and Governmental Agreement 893-2018): These are the main legal instruments that regulate foreign investment, guaranteeing foreigners the right to participate in any type of economic activity in Guatemala without any limitation regarding the percentage of acquisition and control of the investment; only establishing limitations for the following activities:

  • Forestry: Its exploitation is destined to Guatemalan companies or national citizens;
  • Insurance: It is prohibited for foreign companies to have national branch offices for this purpose;
  • Professional Services: It is not allowed for foreign companies to provide services for which a University Degree is required.

b) Free Trade Zone Law, Decree 65-89: It mainly includes the regulations applicable to companies that produce goods for export or re-export without transforming or modifying the original product, as well as companies related to international trade services, with the following incentives:

  • Exemption from taxes, customs duties and import charges to the free zone of machinery, equipment, tools, raw materials, supplies, packaging, among others used for the production of goods and services;
  • Exemption from Income Tax for a period of up to ten (10) years;
  • Goods transactions in free zones are exempt from Value Added Tax (VAT);
  • Total exemption from the Tax Stamp Tax and Special Sealed Paper for Protocols, when applying a swap or transfer of real estate used in the user’s activity.

c) Law for the Promotion and Development of the Exporting and Maquila Activity, Decree 29-89: It establishes incentives for the importation of primary goods to be processed for export in Guatemala; especially for the production, transformation, assembly, and processing of industrial goods related to the garment and textile industry, as well as the provision of services linked to technologies, including call centers. Some of the benefits are:

  • Suspension of customs duties and taxes on imports, including Value Added Tax (VAT), on raw materials, semi-finished products, materials, packaging, packaging and labels, for up to one (1) year.
  • Suspension of payment of customs duties and taxes, including Value Added Tax (VAT), on samples, instructions, patterns, and others, for up to one (1) year.
  • Exemption from Income Tax that is obtained from the export of goods manufactured or assembled in the country, for a period of ten (10) years.
  • Exoneration of customs duties and taxes on imports, on machinery, equipment, parts, components and accessories, necessary for the production process.

d) Emerging Law for the Conservation of Employment, Decree 19-2016: In 2016, a series of reforms were issued to the Free Zones Law and to the Law of Promotion and Development of the Exporting and Maquila Activity, through Decree 19-2016. Regarding the same, it is important to highlight the elimination of a series of activities that could not be produced or commercialized from Free Trade Zones, including:

  • Exploitation, commercialization, or storage of crude oil, fuel, as well as natural gas or its derivatives;
  • Fishing and raising marine species or fresh water;
  • Recreation centers and hotels;
  • Forestry, wood exploitation;
  • Sugar cane, refined and molasses;
  • Coffee, parchment and gold, among others.

e) Initiative of Law 5174: Since 2016, there is an Initiative of Law tending to modify the Reforms arisen with the Emerging Law for the Conservation of the Employment, taking into consideration that such regulation puts in risk the current operation of several companies in the Regime of Free Zone and closes opportunities to the country for foreign investment, placing Guatemala at a competitive disadvantage compared to other countries. It is our understanding that, currently, the Congress is still discussing the same, and it will probably be submitted for approval in the coming weeks.

f) Renewable Energy Law, Decree 52-2013 and its Regulation: These grant tax benefits to companies that develop energy projects with renewable sources, including:

  • Tax Exemption, as well as the Value Added Tax, VAT, and import duties on machinery, equipment, parts and accessories, for a period of ten (10) years;
  • Extension of Income Tax for a period of ten (10) years.

g) National Tourist Promotion Law, Decree 25-74, and its Regulation: This legislation would have the purpose of empowering the Guatemalan Tourism Institute “INGUAT” to organize tourist areas within the national territory, and to grant the status of National Tourist Interest Centers to those places that fulfill the requirements established by the entity; granting a series of benefits also to investments, works, constructions, facilities, services or activities related to tourism, for ten (10) years, such as:

  • Reduction up to 50% of the tax for incorporation or expansion of companies that have related activities;
  • Exoneration of all taxes and duties on imports, as well as, charges and surcharges for raw materials, construction materials, equipment, appliances, vehicles, or any kind of utensil or furniture, as well as entertainment and amusement equipment and devices for the users of the mentioned facilities;
  • Exemption on the payment of one hundred percent (100%) of the Income Tax, when the profits come from new constructions or facilities, for a period of two (2) years;
  • Other prerogatives previously granted by the Congress, Decree 1701.

Many of the fiscal prerogatives given in the Tourism Sector Law were eliminated by the Law on the Suppression of Exemptions, Exemptions and Deductions, Decree 117-97.

For more information, please contact LatinAlliance Guatemala, Attorneys at Law, to the following e-mail address: