By: Alexandra Haeussler
The legal certainty of investments is the predictability that investors have of the legal consequences of their actions; legal certainty is what the investor has as prohibited, ordered, or permitted by the public administration. and in the specific case of Guatemala by the Superintendency of Tax Administration -SAT-, regulatory entity and tax collector.
In Guatemala there is a lot of distrust in the application of the Law by the Public Administration, since it is no secret to anyone that it is a country with a high rate of corruption, this being an important dissuasive factor for many of the potential investors to enter the Guatemalan economy. Given this situation, the Executive Organism has promoted this project with the aim of regular conditions, authorizations, and implementation of a special treatment for capital investment projects of foreign origin, carried out by investors in Guatemala.
The scope of application of the project is aimed at investors who want to opt for special treatment for foreign capital investment, to maintain their legal status constituted for up to a period of ten years. The purpose of the special treatment is to guarantee the investor that the tax base is maintained during the determined period. This generates confidence and security for the investor.
This law initiative is addressed to:
• The type of investors: Individuals or legal entities, foreigners who make new investments with capital of foreign origin.
• Reinvestments made by foreign individuals or legal entities in the case of new projects that correspond to an economic activity other than the one already invested.
• Users of promotion laws, specifically those who qualify to operate under the promotion laws contained in the Organic Law of the “Santo Tomas de Castilla Free Zone of Industry and Commerce”, Decree Number 22-73; Free Zone Law, Decree Number 65-89; and, Organic Law of the Free Zone of Industry and Commerce of Puerto Champerico, Decree Number 27-96, regarding the goods and services that are nationalized.
The entities involved for this project are:
I. Ministry of Economy. In accordance with Decree Number 144-97 of the Congress of the Republic of Guatemala, this institution oversees enforcing what is related to the development of productive activities, internal and external trade, promotion of competition, national and foreign investment, industrial and commercial development.
II. Superintendency of Tax Administration (SAT). The involvement of the SAT will be essential as it must address the substantive issue of the constituted legal position. The foregoing, since the special treatment for foreign capital investment will generate direct effects (applicable taxes, rates, tax bases, calculation mechanisms and conditions related to the specific tax on taxes.
Requirements to apply for such special treatment
The interested parties must make the request for approval of the investment project to the Ministry of Economy, and if the requirements are met, the Ministry may request the opinions or rulings of its dependencies on the admissibility or inadmissibility of the request, to determine the feasibility of the project, which must include:
a) Type of investor.
b) Origin of investment capital.
c) Profile of the investment project.
d) Investment amount.
e) Implementation time of the investment project and its annual programming; Y
f) Notarized declaration, which stated that the investor has not been convicted in an enforceable sentence for crimes related to the tax regime. All requests for the approval of the investment project may be submitted within a period of ten years from the effective date of this Law.
This initiative contains the assumption that in case reforms are issued to the tax system, whose provisions benefit the investor could request the Ministry of Economy to issue a solvency of compliance with the obligations contained in the resolution of approval of the investment project.
In the event that the investor is unable, in whole or in part, to comply with his obligations contained in the resolution approving the investment project, due to fortuitous event or force majeure, must notify the Ministry of Economy in writing, within the term three (3) days after the circumstance is known, detailing the relevant characteristics of said event and including an estimate of the period necessary for the reestablishment of the normal execution of the obligations affected by fortuitous event or force majeure.