UTC:
Capital City:
Language:
Population:
Currency:
Country Code:
Domain:
-6
Guatemala City
Spanish
18.3 million
Guatemalan Quetzal (GTQ)
+502
.gt
Israel-Guatemala relations
Guatemala and Israel have not signed a Double Tax Treaty. They established diplomatic relations on May 14, 1948, and since both countries have entered into bilateral agreements, highlighting the positive diplomatic and friendly relationship between the two nations. For instance, the Agreement for the Reciprocal Promotion and Protection of Investments was signed on November 6, 2006.
Furthermore, both countries are members of the World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD), showing their commitment to economic improvement by working on establishing evidence-based international standards and finding solutions to a range of social, economic and environmental challenges.
In addition, both countries have established good economic and trade relationship, as data in 2023 indicates Guatemala’s Imports from Israel were US $38.14 million; meanwhile Israel’s Imports from Guatemala in 2022 were US $4.46 million.
Details about the Embassy of Israel in Guatemala
Address: 9A Avenida, Cdad. de Guatemala 01010, Guatemala
Phone: (502) 2317-8500
Website: Click Here
Email: info@guatemala.mfa.gov.il
Details about the Embassy of Guatemala in Israel
Address: Derech Agudat Sport HaPo’el 2, 11 Floor – Tower Building Technology Park Malha, 9695102 Jerusalem
Website: Click Here
Phone: +972-2-630 7625
E-mail: embisrael@minex.gob.gt
Business Activity in Guatemala
Guatemala, known as the largest economy in Central America, has experienced notable growth due to the introduction of fiscal and monetary policies as well as an open economy. The Guatemalan government is committed to enhancing competitiveness, promoting investment opportunities, and legislative reforms for the financial sector supporting economic growth and business activity in Guatemala.
In 2017, Guatemala began the implementation of the Trade Facilitation Accord with the World Trade Organization (WTO). This project was proposed to improve trade by streamlining customs processes, eliminating arbitrary decisions, enhancing communication between the public and private sectors, and increasing transparency and predictability in international business.
Bilateral agreements between Guatemala and Israel
- Agreement for the Reciprocal Promotion and Protection of Investments.
Reciprocal Promotion and Protection of Investments
Between Guatemala and Israel is in force the Agreement for the Reciprocal Promotion and Protection of Investments which was signed on November 6, 2006. This agreement aims to enhance the economic cooperation for the mutual benefit of both nations, and recognizing that fostering reciprocal promotion and protection of investments through this Agreement will encourage individual business initiatives, ultimately leading to increased prosperity in both States.
To read the agreement in English, click here.
Applicability of the MLI
Israel have signed the “Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting” (MLI). In contrast, Guatemala has not proceeded with the signature of the MLI. Israel signed the agreement on June 7, 2017, and ratified it on September 13, 2018.
Residency for Tax Purposes in Guatemala
Residency of an Individual
For tax purposes, a foreign individual is considered a resident in Guatemala if:
The individual is in the country for a total of 183 days or less during the period from January 1 to December 31, or the individual has a fixed place of business in Guatemala, unless they provide a tax certificate from another country demonstrating otherwise.
Residency of a Company
A company is considered a tax resident in Guatemala if it is formed in Guatemala or has its headquarters or main management location there.
To read about how an individual is considered a resident of Israel, click here.
The Tax System in Guatemala
Guatemala Tax Authority is called the Superintendency of Tax Administration (SAT).
Income taxation: 5% to 7%
Taxation of companies and branches: 5% to 7 % or 25%
Vat: 12%
Capital gains tax: 10%
Withholding Tax
| Guatemala Internal tax rate | Israel Internal tax rate | |
| Personal Income tax (Tax brackets) | 0 – 300,000 GTQ – 5% over 300,000 GTQ –7% | Up to 50% |
| Corporate Income Tax | Over Profits from Lucrative Activities: 25% Simplified Optional Regime over Income from Lucrative Activities: 5% to 7 % | 23% |
| Capital Gains tax rate |
%10 | 25%-30% (plus exceptional income tax for high earners at 3%) |
| Branch tax | Over Profits from Lucrative Activities: 25% Simplified Optional Regime over Income from Lucrative Activities: 5% to 7% | 23% |
Withholding tax (Non-Resident) Dividends |
%5 | 25% or 30% |
Interest
|
%10 | 15%/25%/23% |
| Royalties | %15 | 23%-40% |
| VAT | %12 | 17% |
| Inheritance Tax | 1% to 25% | NA |
Inheritance Tax and Estate Tax in Guatemala
In Guatemala, inheritance and gift taxes are collected at different rates that increase progressively, from 1% to 25% depending on the degree of relationship and the value of the inheritance.
The declared inheritance is the market value of the property. This value is various because of the following elements: such as the spouse’s marriage portion, the debts of the deceased, the last illness and funeral expenses, the professional fees, and the testamentary expenses. Upon the testator’s death, the beneficiary becomes responsible for paying the inheritance tax.
Relocation to Guatemala
Guatemala is Central America’s largest and most industrialized country, with a sizable workforce and a historically stable economy and currency. The country produces four out of every ten products sold in the region and enjoys a 3.1% annual growth. Guatemala ranks among the top ten in Latin America and the Caribbean for macroeconomic stability (Global Competitiveness Index) and is the region’s largest exporter, with $11.6 billion in goods and a population of 16.8 million.
Guatemala provides fast access to markets and strong regional connections. Mexico City and Miami are just a two-hour flight away, and the country has three international ports, one on the Atlantic and two on the Pacific forming the second-largest port system in the region after Panama. Guatemala also has two international airports served by 22 passenger and 11 cargo airlines, along with trade agreements with 12 countries, making a great place to relocate and invest.
Moreover, Guatemala has a Jewish population that resides in the capital, Guatemala City, organized into three main groups: German, Sephardi, and East European. Each group has own institutions. The Instituto Albert Einstein, a Jewish school established in 1957, is authorized by the Ministry of Education.
Real Estate Taxation in Guatemala
Individuals or legal entities engaging in property transactions in Guatemala are obligated to pay taxes associated with the buying and selling process. Some of these taxes include: Value Added Tax; Income Tax; Single Property Tax.
Real estate tax is assessed at GTQ 2 per thousand on declared property values from GTQ 2,000 to GTQ 20,000, at GTQ 6 per thousand on values from GTQ 20,000 to GTQ 70,000, and at GTQ 9 per thousand on values in excess of GTQ 70,000. First sale and resale of property are subject to VAT under the stamp tax regime. The stamp tax rate is 3% on the face value of documents or the gross value of the transaction.
Transfer of Funds from Israel to Guatemala
According to section 170(a) of the Israeli income tax ordinance, any transfer of payment to a non-Israeli resident is subject to 25% of withholding tax. The tax authority can allow, under certain circumstances, to reduce or dismiss the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.
Due to the fact that both countries have a tax treaty with each other, one can submit a declaration form (2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax), and under certain circumstances, there is a possibility to transfer the payment without the withholding tax and the approval of the Tax Authority.
In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our office handles the requirements of the foreign banks, such as an accountant’s approval regarding the payment of taxes and examines additional actions required in light of the uniform standard of CRS between the countries – automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.
The banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.
For more information on money transfers abroad, click here.
Main Types of Business Entities in Guatemala
Limited Liability Company
The Limited Liability Company can consist of multiple partners who are only responsible for their own invested capital, and their assets are not at risk for company debts. The company’s assets are the only ones accountable for social obligations, and, if needed, amounts exceeding the agreed-upon contributions in the social contract. A maximum of 20 partners is permitted.
General Partnership
In a general partnership, known as ‘Sociedad Colectiva’ in Guatemala, all partners share unlimited liability, meaning they are personally responsible for the company’s obligations, including taxes and dealings with governmental authorities. The company name must include the full name of one partner or the last names of two, followed by ‘Ltda.’ or ‘Cía Ltda.’ This type of business structure is common among small businesses where trust between partners is essential. It requires at least two partners and can have up to a maximum of 20.
Corporation
Incorporated with capital divided and represented by share certificates, by a minimum of 2 (two) shareholders. Regarding liability, shareholders are only responsible for the subscribed capital, limiting their accountability to the total amount individually invested. Capital is represented by registered shares. These shares can be freely transferred, but the method of transfer depends on the rules set in the articles of incorporation. Contributions to form capital can be made in cash.
Foreign Branch
A Foreign Company Branch is a third type of business entity in Guatemala, meant for companies legally established abroad that want to operate in the country by opening branches or agencies. These branches must comply with Guatemala’s Commercial Code and other relevant laws. The company must appoint a permanent legal representative in Guatemala with broad authority to handle business matters. A bond of at least $50,000 in Quetzales must be secured, as determined by the Mercantile Registry.
The Entrepreneurship Corporation
Known in Guatemala as the Sociedad de Emprendimiento, this type of business is a new form of legal businesses in the country, that follows simplified registration procedures. It is established by one or more natural persons, whose responsibility is limited to their contributions represented in shares. The entrepreneurship corporation can only earn up to five million Quetzals (Q5,000,000) gross on a yearly basis, otherwise it is will be qualified for one of the other entities.
Incentive Laws in Guatemala
Guatemala has implemented a range of incentive aimed at enhancing the climate for foreign investment. These measures not only contribute positively to the investment environment but also instill a sense of security for foreign investors. Through these efforts, the country seeks to foster a more welcoming and stable atmosphere, ensuring that foreign businesses feel confident and supported when considering investment opportunities within Guatemala’s borders.
The government of Guatemala issued the Law of Promotion and Development of Export Activities and Drawback Industries, also known as “maquila”, to stimulate the production of goods in regions controlled by Customs authorities for export outside the Central American region. It pertains to external exporters and drawback activities. Exporters are entitled to operate under any of the three systems provided by the statute, such as the temporary admission system. These systems offer tax incentives, including exemptions from taxes, import duties, and VAT on machinery and equipment, as well as VAT suspension on temporary raw material imports and a ten-year income tax exemption on profits.
The Santo Tomas de Castilla Free Trade Zone (ZOLIC) near the state-owned port allows the creation of special economic development zones outside its customs area. Businesses in these zones receive a 10-year income tax break, along with exemptions on VAT, customs duties, and other import charges for goods like raw materials, machinery, and equipment. Additionally, there is a VAT exemption for transactions within the zone when goods are exported. These incentives are open to both local and foreign investors involved in manufacturing, commerce, and services.
