Ruben Fuentes
Senior Associate
Guatemala
rfuentes@blplegal.com

On August 31, 2022, Decree No. 40-2022, which contains the Law on Incentives for Electric Mobility, entered into force. Under this regulation, the aim is to promote the use of vehicles powered by electricity or hydrogen. Part of the objectives of the law above includes the mitigation of greenhouse gas emissions.

The law establishes interesting aspects for investors interested in the sector since it establishes tax incentives for various activities and sectors. Thus, the tax incentives are summarized in:

Exemption from the Import Value Added Tax (VAT) or the Value Added Tax (VAT) of the first sale, as well as the Specific Tax on the First Registration of Terrestrial Motor Vehicles (IPRIMA) applicable to the sale of an electric vehicle electric motorcycle or powered by hydrogen for all uses, imported, assembled or produced in Guatemala.

Exemption from the Import Value Added Tax (VAT) or the Value Added Tax (VAT) of the first sale as well as the Specific Tax on the First Registration of Terrestrial Motor Vehicles (IPRIMA) applicable to the sale of cable car, funicular , electric train, light rail, tram or trolleybus, for all uses, imported, assembled or produced in Guatemala.

Annual regressive exemption from the tax on the circulation of land, sea and air vehicles, only for electric vehicles, hybrid vehicles, heavy or unique hybrid vehicles, electric motorcycles, hydrogen-powered vehicles, cable cars, funiculars, electric trains, light trains, trams or trolleybus for public transport services, collective transport and uses.

Exemption from Income Tax (ISR) for the assembly and/or production of electric vehicles, hybrid vehicles, electric motorcycles, hydrogen-powered vehicles and electric transportation systems carried out in Guatemala.

Exemption from Value Added Tax (VAT) and Income Tax (ISR) applicable to the pc transport service and collective transport through electric vehicles, hybrid vehicle, hydrogen-powered vehicles and electric transport systems.

Exemption from the Import Value Added Tax (VAT) or the Value Added Tax (VAT) of the first sale applicable to the import or sale of specific components of the electric vehicle, electric motorcycle, electric transport system or vehicle powered by hydrogen, cable car, funicular, electric train, light rail, tram or trolleybus.

Exemption from the Import Value Added Tax (VAT) or the Value Added Tax (VAT) of the first sale applicable to the import or sale of a charger for an electric vehicle or motorcycle.

It is important to mention that the aforementioned tax exemptions are valid for ten (10) years from August 31, 2022. After that period, all activities will have the ordinary tax treatment.

In the same way, the law establishes facilities for obtaining operating and operating permits for companies interested in providing the electric vehicle charging service, hydrogen vehicle charging service, or charging service for the electric transportation system. These activities are approved by the Ministry of Energy and Mines through a special procedure.

In addition, the distributor or marketer of vehicles powered by electricity is also allowed to be a provider of the corresponding battery charging service. This allows a company to provide all the services. In the case of hydrogen-powered vehicles, the companies that provide the tank loading service must comply with a specific regulation issued by the Ministry of Energy and Mines.

The tax advantages offered by the law may be attractive for investors interested in the electric or hydrogen-based mobility sector, especially because they will enjoy tax stability until August 30, 2032. It is important to mention that this law does not establish prohibitions on companies that already enjoy other tax incentives to apply to exempt activities related to electric or hydrogen-based mobility.

Various complementary law initiatives aimed at promoting investment through tax incentives are currently being discussed before the Congress of the Republic.

Ruben Fuentes
Senior Associate
Guatemala
rfuentes@blplegal.com