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 is foreseen that 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 body and collector of taxes.
In Guatemala there is a lot of distrust in the application of the Law by the Public Administration, because it is no secret to anyone that it is a country with a high rate of corruption, this being an important deterrent factor for many potential investors to enter the Guatemalan economy. Faced with this situation, the Executive Branch has promoted a bill in order to regulate the conditions, authorizations and implementation of special treatment for capital investment projects of foreign origin, carried out by investors in Guatemala.
The scope and scope of the project are aimed at investors who want to opt for special treatment for foreign capital investment, in order to maintain their constituted legal position for up to a period of ten years. The object of the special treatment is to guarantee the investor that the tax base is maintained during the determined term. This generates confidence and security to the investor.
This initiative of Law is addressed to:
- The type of investors: Individual or legal persons, 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 development laws, specifically those who qualify to operate under the development laws contained in the Organic Law of the “Santo Tomas de Castilla Industry and Commerce Free Zone”, Decree Number 22-73; Law on Free Zones, Decree Number 65-89; and, Organic Law of the Free Trade 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:
- Ministry of Economy. In accordance with the Law of the Executive Branch, Decree Number 144-97 of the Congress of the Republic of Guatemala, said institution is in charge of enforcing what is related to the development of productive activities, internal and external trade, promotion of competition , and national and foreign investment, industrial and commercial development.
- Superintendency of Tax Administration (SAT). The involvement of the SAT will be essential since it must address the substantive issue of the constituted legal position. The foregoing, since the special treatment for the investment of foreign capital will generate direct effects (applicable taxes, rates, tax bases, calculation mechanisms and conditions related to the specific tax on taxes.
Requirements to qualify for said special treatment
Interested parties must apply for the approval of the investment project before the Ministry of Economy, and if the requirements are met, MINECO may request the opinions or rulings of its departments on the admissibility or inadmissibility of the application, to determine the feasibility of the project, which should include:
a) Type of investor;
b) Origin of investment capital;
c) Profile of the investment project;
d) Amount of investment;
e) Implementation time of the investment project and its annual programming; and
f) Notarial deed of affidavit, through which it is stated that the investor has not been sentenced in an enforceable sentence for crimes related to the tax regime. All applications for the approval of the investment project may be submitted within a period of ten years from the effective date of this Law.
Said initiative contains the assumption that in case reforms to the tax system are issued, whose provisions benefit the investor, the same may request the Ministry of Economy to issue a solvency of compliance with the obligations contained in the resolution approving 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 a fortuitous event or force majeure, he must notify the Ministry of Economy in writing, within the term of three (3) business days from the knowledge of the circumstance, detailing the relevant characteristics of said event and including an estimate of the period necessary for the restoration of the normal execution of the obligations affected by a fortuitous event or force majeure.
In conclusion, said bill is very favorable for the country's economy, since applying special treatment to foreign capital investment is beneficial to all in the current context, to compete in attracting investment with other Latin American countries and generate more employment opportunities that allow the economy to take off after these years of undeniable recession as a result of the global pandemic COVID 19.