How does the foreign capital investment promotion law in Guatemala work?

In the next few days, Decree 46-2022 of the Congress of the Republic containing the Law for the Promotion of Foreign Capital Investment will come into force. With the new legislation, the Government of Guatemala seeks foreign investors to enjoy incentives, making the country attractive to the arrival of new companies.  

After the law comes into force (September 29, 2022), foreign individuals or legal entities whose capital is of foreign origin and who make new investments in the country may benefit from the enactment. To do this, they must acquire specific authorization from the Ministry of Economy detailing data such as the origin of the capital to be invested, the profile of the investment project, project implementation time, and estimated job creation, among others detailed by the law. 

Depending on the magnitude of the investment, the Ministry of Economy will determine the duration of the special treatment, which can range from three (3) to ten (10) years. Thus, the investor will enjoy preferential tax treatment during the said period with the guarantee that his tax status will not change, even if the legislation that regulates the taxes that apply to him during the validity of the special treatment is amended. 

However, once the special treatment in question is approved, the investor must comply with certain obligations such as the development of the investment project within the term established by the Ministry of Economy (after the evaluation of each request) and present Quarterly progress reports. In addition, the project will be subject to joint annual verification by the Ministry of Economy and the Superintendence of Tax Administration. 

Investors who currently enjoy tax incentives under the Free Trade Zone, the Santo Tomás de Castilla Free Trade and Industry Zone (ZOLIC), or the Port of Champerico Free Trade and Industry Trade Zone may apply for special treatment mentioned in previous paragraphs only for nationalized goods and services. Worth noting is that enterprises engaged in mining, energy systems, or activities in the maquila sector (goods and services authorized under Decree 29-89) may not apply for special treatment of foreign capital investment. 

Still pending are additional regulations aimed at promoting investment since various related bills are under discussion in the Congress of the Republic.