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Guatemala2013 Tax Guide

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Contenido

Deloitte Tax Guide

Country Profile

Legal System

Taxation System

Income Tax

Value Added Tax

Solidarity Tax

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Real Estate Tax

Stamp Tax

National Customs Law

Transfer Pricing Rules

Labor System and Social Benefits

International Trade Treaties

Our Firm

Our Services

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Following is a summary of the important tax, economic, legal, labor and business information related to Guatemala, updated as of January 2013.

It is important to indicate that the purpose of this document is to provide information at a summary level on how to do business in Guatemala. Therefore, our observations do not constitute a legal opinion and may or may not coincide with the opinions that the Superintendency for Tax Administration -SAT- (Guatemalan Tax Office), the courts and other interpreters of the law could have regarding the various aspects included in this document.

You are responsible for the tax positions that you decide to assume since this guide only provides general information on Guatemala and is not focused on any specific type of industry or activity. Therefore, the content of this document may in no way be used as a tax manual since its purpose is to be a general guide on the current tax framework in the country.

1. Tax Guide

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2. Country Profile

Location and Capital City Guatemala (nhuatl: Quau-htlemallan, place of many trees); official name is the Republic of Guatemala. It is the northernmost country in Central America, with Mexico to the north and west, Belize and the Atlantic Ocean to the east, Honduras and El Salva-dor to the southeast, and the Pacific Ocean to the south.

Other basic information is the following:

CapitalGuatemala City

AreaTotal: 108,890 Kms2Land: 108,430 Kms2Water: 460 Kms2Borders: 1,687 Kms2

LanguageGuatemalas official language is Spanish, but there are 23 Amerindian languages recog-nized as national languages.

Ports and AirportsThe most important ports are: Puerto Barrios (Atlantic), Puerto Quetzal (Pacific), San Jos (Pacific), Santo Toms de Castilla

(Atlantic) and Champerico (Pacific). There are two in-ternational airports, one in Guatemala City and another in Santa Elena in Petn

Type of GovernmentThe form of government of Guatemala is a democratic republic, governed by a presi-dent that is freely-elected for a period of 4 years.

Political SystemThe branches of the govern-ment and their main officials are:

a. Executive: The President and the Vice-President of the Republic are elected by uni-versal suffrage for a period of four years.

b. Judicial: Supreme Court of Justice.

c. Legislative: Congress of the Republic.

Political Structure Politically, Guatemala is di-vided into 22 Departments, similar to states or provinces, which in turn are subdivided into 335 Municipalities.

8 Propuesta Servicios Profesionales

Geographical Information The territory is basically moun-tainous, but up north in Petn, it is a flat, rainforest region. Two mountain ranges enter the country: one through No-quihuil in San Marcos (Sierra Madre system) and the other through Huehuetenango (Cuchumatanes system). The first mountain range of 260 kilometers runs parallel to the Pacific Ocean and becomes the central highland plateau, site of Guatemala City, An-tigua, Solol, Santa Cruz del Quich and Chimaltenango.

PopulationPopulation: approximately 15.1 million (2012)Population growth rate: 2.5% (2012)

Climate and Natural Re-sourcesClimateSeasons:Dry season from November to April; rainy season (1200-2500 mm.) from May to October.

TemperatureAverage temperature in Gua-temala City: 20 degrees C (68 degrees F)

AltitudeGuatemala City: 5,000 feet

Natural Resources Oil, nickel, rare woods, fish, rubber, hydroelectric power, coffee, bananas, sugar cane, cardamom and non-traditional products.

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Economic Information

Currency and Exchange Rate Local currency is the quetzal and the exchange rate (which is not fixed) is approximatelyGTQ.7.93 per US$ 1.00 (De-cember 2012).

Main Economic ActivitiesAgriculture Manufacturing CommerceSocial, personnel and commu-nity servicesConstructionFinancial services

IndustriesSugar, textiles and clothing, furniture, chemical products, oil, metals, gum, tourism

Agricultural ProductsSugar cane, corn, bananas, co-ffee, beans, cardamom, cattle, sheep, pigs, chickens

Economic SummaryThe agricultural sector accou-nts for approximately one-fourth of GDP, two-thirds of exports, and half of the labor

force. Coffee, sugar, bananas, and cardamom are the main pro-ducts.

The signing of the peace accords in 1996, which ended 36 years of civil war, removed a major obstacle to foreign investment.

The various trade agreements, including a free trade agre-ement between the United States and the countries of Central America promises grea-ter access to the United States and neighboring markets. In addition, there are Free Trade Agreements with: the Domini-can Republic, Mexico, Colom-bia and Chile, among others.

GDPUS$ 74 billion (2012)

Inflation Rate5.00% (2012)

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3. Legal System

Political Constitution of the Republic of Guatemala and Structure of the Legal System

The general structure of the legal system is found in article 175 of the Political Constitution of the Republic of Gua-temala, which textually states: Article 175. Constitutional hierarchy. No law can contradict the provisions of the Constitu-tion. The laws that violate or distort the constitutional mandates are null and void Ipso Jure.

The laws classified as constitutional laws require the vote of two-thirds of the Congress, plus the prior favorable opinion of the Constitutional Court, in order to amend them.

In addition, Article 9 of the Law of the Judicial Branch, Decree 2-89 establishes:Article 9. Supremacy of the Constitution and Hierarchy. The courts of justice shall always observe the principle of regulatory hierarchy and supremacy of the Political Constitution of the Republic, over any other law or treaty, except the treaties or conventions on Human Rights that have prevalence over internal law. The laws or treaties have prevalence over

regulations; the provisions that contradict a law of superior rank are not valid.

Structure of the Legal System

Sources and hierarchy of the tax laws.

Tax Code, Decree 6-91 Article 2. Sou-rces. The following are sources of tax laws and are in order of rank:

1. The Constitutional provisions.

2. The international laws, treaties and conventions that are in effect.

3. The Regulations issued by the Execu-tive Branch through Government Agree-ments.

It is necessary to be aware of the fact that the main basis of the tax law is the law and that according to the hierarchy of the law, the Political Constitution of the Republic of Guatemala is the primary source, fundamentally in articles 239, Principle of Legality and 243 that inclu-des the Principle of the Capacity to Pay.

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Main applicable laws

Tax Code, Decree 6-91 Code of Commerce, Decree 2-70 Labor Code, Decree 1441 Income Tax Law, Book I, Decree 10-

2012 Value Added Tax Law, Decree 27-92 Stamp Tax Law, Decree 37-92 Solidarity Tax Law, Decree 73-2008 Property Tax Law, Decree 15-98 Vehicle Circulation Tax Law, Decree 70-94 Organizational Law and Agreements

of the Board of Directors of the Gua-temalan Social Security Institute (Insti-tuto Guatemalteco de Seguridad Social - IGSS)

Extinction of Dominion Law, Decree 55-2010

Specific Tax on the First Registration of Land Motor Vehicles, Book II of Decree 10-2012

National Customs Law, Book III of De-cree 10-2012

Law Against the Laundering of Money and Other Assets, Decree 67 -2001

Types of OrganizationsThe legal organization most commonly used in Guatemala is the Corporation (So-ciedad Annima). However, the law per-mits some other types of organizations. Following we present a summary of the types of organizations permitted in our country:

Sole ProprietorshipAn individual may register their own bu-siness in the Commercial Registry. This legal form of doing business is common for small businesses although it is tending to disappear because of its disadvantages. According to this type of organization, the owner has unlimited liability.

This is not a recommended type of organi-zation for foreign investors.

Corporation (Sociedad Annima)As previously indicated, this is the most commonly used form of legal organization in Guatemala.

The capital is divided into and represen-ted by shares and the liability of the share-holders is limited to the amount of shares held.

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The name of the company may refer to the activity to be carried out.

The most advantageous feature of this type of orga-nization is the transferability of shares and the limi-ted liability of each shareholder.

As of June 29, 2011 Decree 55-2010 of the Con-gress of the Republic, Extinction of Dominion Law LED by its acronym in Spanish-is in effect, which eliminates bearer shares and mandates that all sha-res must be issued nominally.

The corporations that had bearer shares as of the date this Law went into effect were granted a term of 2 years to change such shares to nominal shares; otherwise such bearer shares would cause the hol-ders to lose their rights over the corporation.

General Partnership (Sociedad Colectiva)According to the law, the partners in this type of organization have unlimited liability for operations performed by the company. Therefore, this is not a common form of legal organization in Guatemala.The name and surname of one or more of the part-ners comprise the legal name of this type of com-pany.

Limited Liability Partnership (Sociedad de Res-ponsabilidad Limitada)Under this type of organization there may not be more than 20 partners. Partners have limited liability up to the amount of their capital contribution.The legal name of the company must include the complete name of one or more of the partners.

During the last years, some US Companies have chosen this type of organization to incorporate their subsidiaries in the country.

Foreign CompaniesForeign companies wishing to establish themselves in the country through branches and/or subsidiaries

must meet some basic requirements.

Foreign companies legally established in the country and intending to do business in Guatemala or that wish to establish a subsidiary must, at a minimum:

RegisterintheCommercialRegistryRegisterasataxpayerintheGuatemalanTaxOffi-ce.

Foreign InvestmentThere are no major requirements and restrictions placed on foreign capital by the Guatemalan gover-nment, since it recognizes the foreign investors full right of use, benefit and ownership of the assets they invest in, and the foreign investor is only sub-ject to the same obligations as Guatemalan inves-tors.

The Government may not directly or indirectly ex-propriate the investment of a foreign investor nor adopt measures equivalent to the expropriation of such investment, except in duly proven cases of eminent domain, national interest or social benefit.

There are no limits or any registration obligations on making foreign investments.

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Background

Guatemalan tax legislation is based on the territorial principle. With few exceptions, mainly related to withholdings at the source, almost all of the taxes apply to the activi-ties carried out within the Guatemalan territory.

The Political Constitution of the Republic of Guatemala grants the power of taxation to the Congress of the Republic. This provides certainty that no other government body can impose tax burdens on the private sector.

Income Tax Value Added Tax Solidarity Tax Property Tax Stamp Tax Specific Tax on the First Registration of Land Motor Vehicles Tax Incentive Laws National Customs Law Transfer Pricing Rules Extinction of Dominion Law Law on the Laundering of Money and Other Assets

In the case of particular industries, there are specific consumption taxes, suchas:

Tax on the Distribution of Cement Tax on the Distribution of Tobacco Tax on the Distribution of Alcoholic Beverages Tax on the Distribution of Fuels

4. Taxation System

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5. Income Tax

Currently, Guatemala applies Income Tax to resident taxpayers under one of the following regimes:

a.- Regime Over Profits from Lucrative Activities, which consists of a 25% tax on the taxable income determined on the basis of net profits.b.- Simplified Optional Regime Over Income from Lucrative Activities, which consists of a 7% tax on gross revenues (income without any type of deductions).

The tax rates indicated above are in effect as of January 1, 2013 and according to a transitory provision in the law, the current rates for the year 2013 are 31% and 6% respectively.

Simplified Optional Regime Over Income from Lucrative Activities

It consists of a 6% direct tax on gross revenues for resident taxpayers for the year 2013, and an increase to 7% for the year 2014. The mecha-nics of this temporary 6% direct tax on gross revenues is through a definitive withholdings regime that taxpayers who make payments to persons subject to this tax must make. If the payment is made by a person who does not keep complete accounting, or, if the obliga-ted person does not make the corresponding withholding, the law establishes the obligation to present to the tax office a payment equiva-lent to 7% of the Income Tax through monthly tax returns filed by the taxpayer before the tax office within the first 10 business days of the month following the issuance of the invoice. The withholdings are made by the clients of the taxpayer at the moment of paying the corresponding invoices. The withholding agent must issue to the taxpayer a proof of withhol-ding as supporting documentation for the tax withheld. The withholding agent is in charge of paying the withholdings to the Tax Office within the first 10 business days of the month

following that in which the tax was withheld. In addition to the monthly filings, the regime of the payment of the 6% tax on gross revenues requires the filing of an Annual Income Tax Return which is normally only for informational purposes since the tax obligation has been paid through the monthly filings or withholdings. . However, there is the possibility that at the end of the period it could be determined that a payment was made in excess, whose refund must be requested from the Tax Office.

The Income Tax Law does not establish that the tax office can authorize taxpayers to make direct payments of the tax instead of using the withholdings regime. However, the tax office published an agreement in the Official News-paper that allows taxpayers to request such an authorization in order to avoid having withhol-dings made and paying their tax directly. The-refore, those companies that meet the establis-hed requirements can make such a request.

This annual return is to be filed on a calendar year basis and is due by March 31st of each year.

Those highly profitable projects with effective corporate tax rates exceeding 7% of gross revenues find that the 7% direct Tax on Gross Revenues (6% in 2013) is an opportunity to re-duce their tax burden. Additionally, the lack of transfer pricing rules and tax consolidation rules between local entities, combined with the 7% direct tax rate, provide room for tax planning opportunities.

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Gross Income (total volume of income)

(-)(-)(-)

Exempt Income and foreign source incomeCapital IncomeCapital Gains

(=) Tax BasisX Rate (6% in 2013; 7% from 2014 and thereafter)(=) Tax determined (payable)

Accounting Profit

(-)(-)(+)(-)(=)

Exempt Income and Income Not Subject to TaxIncome from CapitalNon-deductible Expenses (accounting profit)Other DeductionsTaxable Income

X(=)

Rate (31% in 2013)Tax Determined (payable)

Regime Over Profits from Lucrative Activities

Taxpayers can select this regime for filing and paying the corresponding Income Tax. This regime consists of paying a 25% corporate tax that is applied to the taxable income determined on the basis of net inco-me. For the year 2013, a transitory article is applied that establishes a tax rate of 31% and in 2014 a rate of 28%, and ending with a definitive rate of 25% as of 2015.

In this payment regime, advanced tax payments must be made quarterly through a tax return filed within the first 10 business days of the month immediately following the end of each calendar quarter, and an annual tax return is filed as settlement of the tax.

Furthermore, taxpayers must write on their invoices the phrase subject to quarterly payments; make withholdings on those who sell or provide services to them; keep complete accounting; and perform an annual inventory and report their stock of inventory to the Tax Administration in the months of January and July of each year.

The tax base for individuals and legal entities domiciled in Guatemala, engaged in commercial activities, and that selected this tax regime is calculated on the basis of the accounting profit per the income sta-tement prepared in accordance with Guatemalan GAAP (equivalent to International Financial Reporting Standards IFRS-), adjusted for non-deductible expenses, exempt income, foreign source income, and some deductions or tax benefits as illustrated below:

Following is the procedure for calculating the Income Tax under this regime:

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The most significant items under non-deductible expenses are the fo-llowing:

a) Services provided from abroad when their amount exceeds 5% of gross income

b) Royalties exceeding 5% of gross income

c) Per diems and travel expenses exceeding 3% of gross income

d) Expenses deriving from the severance allowance exceeding 8.33% of salaries and wages of the period

e) Allowance for doubtful accounts exceeding 3% of the client balances and that are from the normal cour-se of business

f) Any type of inventory allowance

g) Depreciations and amortizations when they exceed the legal limits

h) Expenses that do not have the legal supporting documentation

i) Exchange losses originating from re-valuations recorded for simple accou-nting entries

j) Expenses for which the correspon-ding withholding was not made

k) Salaries and wages not accredited with the social security payroll

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l) Others established by the law.

In the foreign source income category, all income obtained abroad, such as interest from foreign bank accounts, dividends from investments made abroad, etc. qualifies as foreign source income.

It is also important to indicate that Guatemala does not allow the deduction of Net Operating Losses, so for those projects that expect to incur in losses at their start of operations, it is important to perform good tax planning.

Non-Resident Income

The law establishes different tax rates that are applicable according to the type of income it corresponds to, as follows:

1- The tax rate of 5% that is applied to:

a) Activities for the international transportation of cargo and passengers

b) Premiums for insurance, premiums for bonds, reinsurance, retrocessions and rebon ding, obtained by non-residents

c) Telephone services, transmission of data and international communications

d) Use of electricity supplied from abroad

e) Dividends, distribution of profits, earnings and other benefits.

2- The tax rate of 10% that is applied to:a) Interest paid or accredited to non-residents.

3- The tax rate of 15% that is applied to:

a) The salaries and wages, per diems, commissions, bonuses and other remunera-tions that do not imply the reimbursement of expenses

b) The payments or credits to a bank account to athletes and artists in the theater, on television and other public or acting performances

c) Royalties

d) Fees

e) Scientific, economical, technical or financial consulting

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4. The tax rate of 25% that is applied to:

Other taxed income not specified in the previous numerals.

The withholding indicated above must be paid to the Tax Office within the first 10 business days of the month following that in which such withholdings corres-pond to.

When the Guatemalan payer takes char-ge of the withholding tax, the calcula-tion is mandatory.

Income Tax for individuals who are employees

For individuals who obtain income from the rendering of personnel services as employees, net income is constituted by salaries and wages, commissions and entertainment expenses, bonuses and other similar remunerations.

They may deduct the following from their net income:

a) The sole sum of forty-eight thousand quetzales (Q. 48,000.00) for personal deductions,without need for any verification; and twelve thousand quetzales (Q.12,000.00) that may be accredited for the Value Added Tax paid on perso-nal expenses, for purchases of goods or acquisition of services, during the period of definitive annual settlement. This credit shall be proven through the presentation of a statement containing the details of the invoices,

which will be subject to verification by the Tax Administration

b) The donations that can be irrefutably verified, granted in favor of the State, universities, cultural or scientific enti-ties, and non-profit associations and foundations. The maximum deduction permitted to those who donate to the indicated entities cannot exceed 5% of the gross income.

c) The fees for contributions to the Insti-tuto Guatemalteco de Seguridad Social, to the Military Social Security Institute, and to the State and its institutions for contributions to social welfare regimes.

d) The life insurance premiums to cover risks solely in cases of death exclusi-vely of the employee, provided that the insurance contract does not pay any sum for return, reimbursement or surrender and that such policy is contracted with companies authorized to operate in the country and with foreign companies duly registered in the Superintendency of Banks, in accordance with the applicable legislation.

e) Exempt income (100% of salaries and wages for the Mid-year Bonus, Christmas Bonus and severance.

Once the tax basis is determined, the tax is calculated according to the following progressive scale: The tax payable is determined by adding to the fixed amount, the amount resul-ting from applying the corresponding percentage of tax to the tax basis for each range, according to the previous scale.

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RANGES OF TAXABLE INCOME TAX PAYABLEFrom To Fixed Amount Plus On the taxable income exceeding

1. Q. 0.00 Q. 300,000.00 Q. 0.00 5% Q. 0.002. Q. 300,000.01 And above Q. 15,000.00 7% Q. 300,000.00

For such taxpayers, the period of definitive settlement of the tax is annual, starting on January 1st and ending on December 31st of each year. In the case of periods of activity that are less than one year, the tax basis will be projected to one year and the corresponding rate will be applied according to the previous scale, in order to determine the annual tax.

This tax will be divided proportionately for the period of time that is less than one year and the result will constitute the tax payable, which cannot be greater than thirty-one percent (31%) of the tax basis.

The withholdings made must be paid to the tax office within the first 10 business days of the month immediately following that in which they correspond to.

Income from capital and capital gains

The obtaining of income from capital and capital gains and losses from elements of equity, goods or rights owned by the taxpayer is regulated in Title IV of Decree 10-2012 which is specifically for this type of income, and establishes the following tax rates:

Leasing of properties (10% of 70% of the value of the rent), applicable to those not normally engaged in real estate.

Interest 10% (except for that overseen by the SIB and Cooperatives) Dividends 5% Capital gains 10% Lotteries, raffles, etc. 10% Other cases This tax is paid within the first 20 business days of the month following that in which

it corresponds to.

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6. Value Added Tax

Value Added Tax -VAT- General Rules

In Guatemala, VAT is generated by:

a) Sales of goods made within the national territory.b) Rendering of services in Guatemala.c) Importation of goods.d) Leasing contracts.e) Transfer of real estate, only on the first sale.f) Insurance and bonding.

There are various operations that are exempt from the VAT, including:

a) Exports of goods and services b) Services provided by banks and financial institutionsc) In-kind contributions. d) Mergerse) Transfer of shares, credit instruments and any type of investment.f) Transfer of goods under trust and the return of goods placed in trust to the trustor.

The VAT rate is 12%. Specific Value Added Tax rates are applicable exclusively in the sale of used vehicles.

The tax is added to the value of the product or price of the service by multiplying this amount by 1.12. The resulting amount will be the price for the public and what the buyer will pay.

With respect to the Tax Credit Refund for exporters, the law establishes a procedure for them to request from the Tax Office a refund of the VAT paid on their inputs.

VAT withholding regime

Decree 20-2006 establishes a VAT withholding regime based on which some companies in Guatemala are registered as withholding agents.

If the customers are Guatemalan entities classified as VAT withholding agents, the withholdings do not apply.

If the customer is not classified as a VAT withholding agent, the following rates could apply:

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Category of VAT withholding agent Rate of withholding on VAT amountExporters not qualified under Decree 29-89 (Drawback and Maquila Activity Law) in the acquisition of agricultural products

65%

Exporters not qualified under Decree 29-89 (Drawback and Maquila Activity Law) in the acquisition of other pro-ducts and services

15%

Exporters qualified under Decree 29-89 (Drawback and Maquila Activity Law) in the acquisition of products and services

65%

Public Sector entities 25%Credit or debit card operators in the acquisition of fuel 1.5%Credit or debit card operators in the acquisition of pro-ducts and services 15%

Special Taxpayers 15%Other withholding agents qualified by the Tax Office 15%All the classified agents when they purchase goods or acquire services from Small Taxpayers (withholding on amount of the invoice).

5%

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7. Solidarity Tax

Liable persons

Individual persons or legal entities, trust funds, shareholding contracts, irregular corporations, de facto corporations, in the behalf of a trust, temporary or permanent branches, agencies or establishments of foreigners which operate in the country, joint tenancies, jointly owned properties, indivisible inheritances and other forms of corporate orga-nization that have their own equity, that perform commercial or agricultural activities in the national territory and obtain a gross margin of over four percent (4%) of their gross income.

ExemptionsThe most important exemptions are:

a) The institutions of the State, their decentralized or autonomous entities, and the municipalities and their enterpri-ses, with the exception of the legal entities formed with mixed capital.

b) The universities and the private and public educational centers legally authorized to operate in the country.

c) The persons subject to this tax who are commencing business activities, during the first four quarters of opera-tion.

d) The commercial and agricultural activities conducted by individual persons or legal entities that per a specific law or due to operating within the special regimes established by the Law of Promotion and Development of Export and Drawback Activities, Decree 29-89 and the Law of free Trade Zones, Decree 65-89, both of the Congress of the Republic, and their reforms are exempt from the payment of Income Tax, during the tem of the exemption that they enjoy.

e) The individual persons or legal entities and the other entities that are subject to the Solidarity Tax who pay Income Tax according to the Simplified Optional Regime over income from lucrative activities of this tax (Decree 10-2012).

f) The taxpayers who as of the date on which the Solidarity Tax established in this Law went into effect incur in ope-rational losses during two consecutive years. This exemp-tion is solely applicable for the four tax periods following the second year in which the cited losses occurred.

Tax basis, rate and payment of the tax

The tax basis for this tax is comprised of whichever is greater between:

a) One-fourth of the total net assets; or,

b) One-fourth of the gross income. (Both, taking as a basis the last Income Tax return).

In the case of taxpayers whose net assets are greater than four (4) times their gross income, they will apply the tax basis established in letter b) of the previous paragraph.

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The tax period is quarterly and shall be calculated by calendar quarters.

The tax rate for this tax is one percent (1%).

In cases of periods less than one quarter, the tax is determined in proportion to the number of days of the quarter that have transpired.

The tax must be paid within the month immediately following the end of each calendar quarter, using the means that the Tax Administration has made available to the taxpayers for this purpose.

Solidarity Tax Accreditable Towards the Income Tax or vice versa

The Solidarity Tax and the Income Tax may be accredited towards each other. The taxpayers may opt for one of the following forms of accreditation:

a) The amount of the Solidarity Tax paid during the four quarters of the calendar year, in accordance with the terms esta-blished in article 10 of the Law, may be accredited towards the payment of the Income Tax until its exhaustion during the three immediately following years, for that which must be paid monthly or quarterly, as well as for that determined in the definitive annual settlement, as applicable.

b) The quarterly Income Tax payments may be accredited towards the payment of the Solidarity Tax within the same calendar year. The taxpayers who adopt this form of accreditation may only change it with the authorization of the Tax Administration.

c) The remainder of the Solidarity Tax that is not accredited in accordance with that stipulated herein shall be conside-red as a deductible expense for Income Tax purposes, for the period of definitive annual settlement in which the three years referred to in letter a) of this section conclude.

Subsidiaries and branches with parent companies claiming Foreign Tax Credits in their home jurisdictions should determine whether the option of having Solidarity Tax or Income Tax as their primary tax in Guatemala has a negative impact on their ability to claim foreign tax credits in their jurisdiction.

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Calculation

The tax basis is the value in the tax registry according to the information of the Gene-ral Property Registry of the Republic of Guatemala.

Filing deadline

Month immediately following the end of the calendar quarter.

Taxable Event

Owning property within the territory of the Republic.

Rates

Rates are applied on the registered value of the property in quetzales (US$ 1.00 = GTQ7.93 approx.), as follows:

From 0 to GTQ. 2,000 exemptFrom GTQ 2,001 to GTQ. 20,000 2 per thousand annuallyFrom GTQ 20,001 to GTQ. 70,000 6 per thousand annually, andFrom GTQ 70,000 and up 9 per thousand annually

This tax is paid on a quarterly basis.

8. Property Tax

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9. Stamp Tax

A Tax on Special Sealed Paper for Records is established with a specific rate of ten quetzales (Q.10.00) per sheet.

The tax is determined applying the rate to the value of the acts and contracts sub-ject to the tax. The value is reflected in the document, which cannot be less than the one registered in public records, registrations, property registries or in the official listings.

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10. Tax Incentive Laws

The most important tax incentive laws are the following:

Law for the Promotion and Develop-ment of Export and Drawback acti-vities:

Companies who so wish, for the manu-facturing of products to be exported, may be classified under the Law for the Promotion and Development of Export and Drawback Activities, which grants a 1 to 2-year waiver of VAT and import taxes on raw materials, a 10-year income tax exemption, and other tax benefits.

Recently, this law has established access to call centers and shared service entities to qualify for the tax benefits of this law. Special considerations should be made on a case-by-case basis before applying for any classification.

Perhaps the most important advantage of this law is that it is not necessary to be in a specific location to obtain the bene-fits and thus companies can operate and enjoy the benefits from wherever they are located.

Free Trade Zone Laws

Commercial and manufacturing compa-nies can also opt to be located at already-established Free Trade Zones or to set up their own Free Trade Zone. The tax

benefits are similar to those described in the previous section. In addition, the Guatemalan Congress has passed legal reforms so that companies can be autho-rized as Free Trade Zone agencies in their tax domiciles, and have the same tax benefits as if they were located in a Free Trade Zone area.

Incentive Law for the Development of Renewable Energy Projects

This law provides the following tax be-nefits for the individuals or companies developing renewable energy projects:

1) Exemption from Customs Duties and VAT on the importation of machinery and equipment to be used in the project. In this case the exemption should be autho-rized by the Tax Office.

2) 10-year Income Tax exemption as of the starting date of the commercial operations.

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11. National Customs Law

National Customs Law

It has the purpose of establishing comple-mentary customs procedures and provi-sions, administrative customs violations and their penalties.

According to the content of this Law, a new regime for violations and penalties is included for all activities falling under the national customs regime and only in those cases not established in such Law shall the Tax Code be supplementarily applicable.

Administrative Customs Violation

Any action or omission that implies subs-tantive or formal non-compliance with the legal regulations, related to adminis-trative obligations in customs matters, es-tablished in the laws and legal provisions.

The customs violations could be any of the following:

a) Administrative customs violation.

b) Other administrative customs viola-tions.

c) Serious administrative violations.

Penalties established in the Law

The penalties established in the law are the following:

a) Omission of payment of tax, 100% of fines plus interest.

b) Late payment fee: when tax is paid prior to being requested, the fine is not applied.c) 250 Central American pesos for cus-toms violations.d) 500 Central American pesos for other customs violations.e) 1000 Central American pesos for other serious customs violations.f) 1000 Central American pesos for inaccurate information in the registry of importers.g) 1000 Central American pesos for late re-exportation.

Note: 1 Central American peso equals US$ 1.00. Currently, there are some Government Agreements that have granted exemp-tions from these penalties, but it is not known for how long they will be in effect.

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12. Transfer Pricing Rules

New rules included in Book I of Decree 10-2012

As of January 1, 2013 the new Transfer Pricing rules go into effect, which in general terms include the following:

Field of Application

It extends to any operations that are conducted bet-ween the person that is a resident in Guatemala and the resident abroad, and that has effects in the deter-mination of the tax basis for the period in which the operation is conducted and in the following periods.

Arms length principle

For tax purposes, the arms length principle is unders-tood to be the price or amount for a specific ope-ration that independent parties would have agreed upon under conditions of fair competition in opera-tions that are comparable to those that were perfor-med.

Principle of Onerous Title

The transfers and disposals of property and rights, in their different forms and the rendering of services by individuals or legal entities and other bodies or esta-tes, that perform commercial activities, are presumed to be compensated at market value, unless there is proof to the contrary. In particular and notwithstan-ding that set forth in the previous paragraph, in all loan contracts, regardless of their nature and denomi-nation, it is presumed, unless proven otherwise, that there is minimum income from interest, which is that resulting from applying to the total amount of the loan, the simple maximum annual interest rate deter-mined by the Monetary Board for tax purposes.

Obligation to Present a Transfer Pricing Study Taxpayers must have sufficient information and analy-sis upon presenting their Income Tax return for de-monstrating and justifying the correct determination of the prices, the amounts of the considerations or

the profit margins of their operations.

In the event of an audit by the SAT, the taxpayer has 20 days to present the documentation requested. Among the information that may be requested is the following:

General description of the company, the taxpayer and its related companies;

General description of the nature and amount of the operations between companies of the group;

General description of the functions and risks of the company;

A description of the groups transfer pricing policy, if any;

Contracts for the rendering of services; Analysis of comparable operations; and Reasons for the selection of the method or

methods chosen and the specification of the value or interval of values.

Methods established in the OECD Guidelines

Comparable Uncontrolled Price Method

It consists of valuing the price of the good or service in an operation between related parties at the price of a good or service that is identical or that has similar cha-racteristics in an operation between independent par-ties in comparable circumstances, making, if applicable, the necessary corrections for obtaining the equivalency, considering the particulars of the operation.

Cost Plus Method

It consists of increasing the acquisition value or production cost of a good or service by the standard margin obtained by the taxpayer in similar operations with independent parties or entities or, in its absence, by the margin that independent parties or entities apply to comparable operations making, if applicable, the necessary corrections for obtaining the equiva-lency considering the particulars of the operation. The percentage represented by the gross profit with respect to the costs of sales is considered to be the

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standard margin.

Resale Price Method

It consists of subtracting from the sale price of a good or service the margin that the reseller applies in similar operations with independent parties or entities, or, in its absence, the margin that independent parties or entities apply to comparable operations, making, if applicable, the necessary corrections for obtaining the equivalency considering the particulars of the opera-tion. The percentage represented by the gross profit with respect to the net sales is considered to be the standard margin.

Profit-Split Method

It consists of assigning, to each related party that jointly conducts one or various operations, the por-tion of the common profits resulting from such opera-tion or operations. This allocation is made based on a criterion that properly reflects the conditions that would have been subscribed by independent parties or entities in similar circumstances. For the selection of the most appropriate criterion, the assets, sales, expenses, specific costs or another variable can be considered that properly reflects that set forth in this paragraph.

When it is not possible to allocate, according to any of the previous methods, a minimum profit to each party based on the functions performed, the profit-split method is applied on the basis of the joint resi-dual profit resulting once the first allocation is made. The residual profit is allocated based on a criterion that appropriately reflects the conditions that would have been subscribed by independent parties in simi-lar circumstances, taking into account that set forth in the previous paragraph.

Transactional Net Margin Method

It consists of attributing to the operations conducted with a related party the net margin that the taxpayer or, in their absence, third parties would have obtained in identical or similar operations conducted between

independent parties, making, when applicable, the necessary corrections for obtaining the equivalency and considering the particulars of the operations. The net margin is calculated on the costs, sales or the variable that is most appropriate based on the cha-racteristics of the operations. The most appropriate method that respects the arms length principle is applied, based on that set forth in this article and the specific circumstances of the case.

Valuation Method for Importations or Exporta-tions of Goods

Importations

In the case of importations, the price of the goods cannot be greater than its price based on internatio-nal parameters as of the date of purchase in the place of origin.

Exportations

In the case of exportations, the price of the exported goods is calculated according to research on interna-tional prices, according to the form of contracting se-lected by the parties as of the date of the last day of shipping, unless there is evidence that the operation was closed on another date. For such purposes, the only date admitted is that of the contract, but only if the contract was reported to the Tax Administration, in a term of three (3) days after it was subscribed.

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13. Labor System and Social Benefits

Work shifts and Ordinary and Extraordinary Wages

The following table summarizes the works shifts in accordance with the Labor Code and their implications with respect to the payment of ordinary and extraordinary wages.

Consideration Day Shift Mixed Shift Night Shift

Timeframe 6am to 6pm Overlapping of day and night shifts

6pm of one day to 6am of next day

Work hours per day to be compensated as ordinary wages

8 7 6

Work hours per week to be compensated as ordi-nary wages

44, equivalent to 48 for wage calculation 42 36

Hours to be compensated as extraordinary wages (extraordinary wage is equal to 150% of hourly ordinary wage)

As of the 9th hour As of the 8th hour As of the 7th hour

Maximum of work hours in one day, including or-dinary and extraordinary hours

12 12 12

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7th Day WageAccording to the Political Constitution of the Republic of Guatemala, the employer is obligated to grant one day off for each ordinary day worked.

Incentive BonusIn addition to the ordinary and extraordinary wages, employers are obligated to pay an Incentive Bonus. This bonus has the particularity that it is not subject to Social Security taxes and does not accumulate as a basis for the calculation of the Christmas bonus, annual bonus or severance. The law establishes a mini-mum amount of GTQ250 monthly (US$ 32)

Complementary BenefitsBenefit Description Proportion in

Relation to Sa-lary for Accrual Purposes

Subject to Social Security Taxes (12.67% for em-ployer, 4.83% for employees)?

Increases the basis of the se-verance calcula-tion?

Ordinary Wages 100% Yes Yes

Extraordinary Wages

Yes Yes

Social Security Contributions

12.67% a/ - -

Incentive Bonus No No

Christmas Bonus An average of ordinary wages calculated from December to November that is payable 50% in December and 50% in January. Most employers pay 100% in December.

8.33% Yes Yes

Annual Bonus (Bono 14)

An average of ordinary wages calculated from July to June that is payable in July.

8.33% Yes Yes

Vacation 15 business days per year worked (conservative calcula-tion of a provision is 21 days / 365 days, considering that the 15 vacation days will result in three calendar weeks of vacation)

5.75% No No

Severance Average of the ordinary and extraordinary monthly wa-ges for the last six months per year worked. (there is no universal severance)

8.33% b/ No No

Total 143.41%

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a/ Currently the Social Security liability falls on both ordinary and extraordinary wages.

b/ This is just a representative number since the actual calculation of severance is based on ordinary as well as extraordinary wages. In addition, the amount of severance must include a percentage of the annual bonus, Christmas Bonus and economic advantages. Normally, the amount of severance would be 146% of the ordinary and extraordinary wages (100% of average of ordinary and extraordinary monthly wages, 8.33% for the Christmas Bonus, 8.33% for the annual bonus plus 30% of Economic Advantages).

Economic Advantages

Economic advantages consist of all the economic benefits granted by the employer, which the employer has no legal obligation to grant. According to Guatemalan Labor law, these advantages constitute 30% of the monthly ordinary wages. However, this percentage may be modified between the employer and the employee in the labor contract by either raising, lowering, or eliminating them completely (subject to inter-pretation).

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International Business InstrumentsCurrent Status

December, 2012

14. International Trade Treaties

Instruments Caractersticas Fecha y nmero de acuerdo a aproba-cin por el Congreso

TLC CON REPBLICA DOMINICANA

The Central American countries and the Dominican Re-public agreed to negotiate a free trade agreement that includes goods, services and investment and that results in the elimination of tariffs in a single stage for the entire tariff schedule, except for justified exceptions.

MAY 18, 2000DECREE 26-2000

FTA WITH MEXICO Open the Mexican market to the countrys export pro-ducts, providing new trade opportunities for Guatemalas current and potential supply of exports, both in the area of goods as well as in the area of services.

NOVEMBER 29, 2000DECREE 86-2000

DR-CAFTA The general objectives of the Treaty are to drive the economic and social development of the region through the consolidation of the economic liberalization that has been achieved up to now, and promote the continua-tion of such process that is aimed at economic growth; advance in the forging of an open economy.

MARCH 15, 2005 DECREE 31-2005

FTA WITH COLOMBIA The basis of the treaty lies in the 53% of the industrial goods that will be free of tariffs with El Salvador and Guatemala, and 55% withHonduras. Five years afterward, 63% of the industrial products will have access without tariffs to the Salva-dorian and Guatemalan markets. In 10 years, over 70 percent of the industrial products will be free of tariffs with Guatemala and El Salvador, whereas with Honduras that proportion will be 87%.

SEPTEMBER 2009 DECREE 32-2009

FTA WITH CHILE The purpose of the agreement is that it become a tool that increases and diversifies the commercial exchange of goods and services, considering that Guatemala is cu-rrently the largest market for Chile in Central America in highly diversified manufacturing and is highly attractive for local small and medium-sized enterprises.

NOVEMBER 16, 2009DECREE 37-2009

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Our Firm

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Founded in 1895, it is now the leading pro-fessional services firm in the world in terms of revenue and headcount. According to the global revenues of the last fiscal year, Deloit-te had aggregate member firm revenues of US$31.1 billion and employed over 193,000 professionals worldwide.

During the last five years, Deloitte has been the fastest growing professional services firm.This leadership is based on a combination of organic growth, strategic acquisitions, a focus on quality and strong investment in emerging markets.

It is thus that it provides services to 80% of the most important multinational compa-nies, as well as local companies, public and private institutions and successful, fast-growing global growth companies in

various industrial sectors. Under the highest quality standards, the Firm helps its clients effectively and measurably meet their bu-siness objectives, while at the same time providing added value by sharing its expe-rience and knowledge through the most advanced technology, intellectual capital, and teamwork.

Deloitte is present in more than 150 coun-tries and from any part of the world we are able to coordinate the activity of different teams to tend to any request of the entities we provide professional services to.

15. Our Firm

Deloitte in the WorldThe leading professional services firm

Barry SalzbergChief Executive Officer

Deloitte Touche Tohmatsu Limited

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Deloitte LATCOLatin American Countries Organization

The Latin American market is evolving rapidly. The traditional business model has changed into one that requires cross-border global solutions. In the face of this dynamic and changing market, Deloit-te constantly adapts its services in order to meet its clients needs, who must in turn develop new solutions to these emerging issues. Based on this reality, Deloitte has established a regional organiza-tion called LATCO (Latin American Countries Orga-nization) in order to provide services of excellence to the clients that operate in the region.

With almost 5,500 professionals distributed among 29 offices in 15 countries, Deloitte LATCO is posi-tioned as one of the leading professional services companies in Latin America. With the objective of setting a trend based on dynamism, a wide array of services has been developed for our local as well as international clients. Committed professionals work together in homogeneous teams in order to ensure the correct balance of skills and expertise and pro-vide services of the highest quality to the client.

It is a regional conceptualization of the business strategy that maintains Deloittes distinctive model: a multidis-ciplinary and industry approach, as well as increased specialization, in order to provide excellent services in audit, tax, consulting and corporate finance.

Carlos HaehnelCEO of Deloitte LATCO

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15 countries29 offices+ 5,500 professionals

DTT member firms that comprise Deloitte LATCO

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Deloitte Guatemala Currently, the organization in Guatemala has 10 partners who are Certified Public Accountants with over 25 years of experience, as well as approximately 395 people, which include Directors, Managers, Supervisors and assistants in various service lines with different levels of experience and professio-nal training that allow us to distribute the work in order to meet the needs and expectations of our clients.

The experience acquired over the years is the product of the constant work and dedication of each and every member of the different areas of the Firm in order to deliver world-class high quality results.

La combinacin entre la cultura de integracin, innovacin y colaboracin es una de nuestras prin-cipales fortalezas.

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360 Thinking We work with a multidisciplinary approach focused around industries.

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16. Our Services

Professionals with academic and personal qualifications that lead us to success, forming the roots of the culture that guides our behavior.

16.1 Audit

We provide audit services aimed at valida-ting financial information for use by senior management, boards of directors, inves-tors, credit institutions and third parties interested in a company.

We evaluate administrative and accou-nting internal controls to determine the degree of confidence that can be had in them. Our auditors go the extra mile, providing advice in the identification and management of risk as well as the key op-portunities for your business.

Our services include, among others:

Audit of Financial Statements of pri-vate and public interest companies

Audit of international organizations and NGOs

Financial due-diligence

Training in International Financial Reporting Standards (IFRS, IFRS for SMEs)

Audit of electronic data processing environment

Audit of data bases

Specific balance reviews

Physical inventories

Performance of previously agreed upon audit or review procedures

Technical evaluations of internal con-trol systems

Development and drafting of accou-nting and administrative procedures manuals

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16.2 Enterprise Risk Servi-ces-ERS (Systems Audit)Deloitte offers a wide array of services designed to help organizations understand the risks of the business, deter-mine the levels of acceptable exposure, implement controls and provide constant follow-up and monitoring.

Additionally, our experts provide advisory services in the optimal management of systems, tools, training and methodologies for risk mana-gement in their technological and business processes.

Our services include:Information Technology Services - Controls Assu-rance/Security & Privacy Services:

Application Integrity

Business Continuity Mana-gement

Business Process Controls

Identity and Access Mana-gement

Integrated External Audit

General Computer Con-trols

IT Governance

Privacy and Data Protec-tion

Security Management

Third Party Assurance

Vulnerability Management Internal Audit:

Contract Risk & Compliance

IT Internal Audit

Outsourcing/Co-sourcing

Quality Assessments

Control Assurance

Risk Assessment

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3.4 Transfer Pricing

In March 2012, the Congress of the Republic of Guatemala enacted the Tax Law Update, which in Book I inclu-des a new Income Tax Law that is in effect as of 2013.

In Title II of such law regarding the tax applicable to Income from Lucrative Activities is Chapter VI Special Valua-tion Rules Between Related Parties, which imposes the obligation that as of January 1, 2013 transactions of Guatemalan companies with non-resi-dent related parties must be valued by observing the Arms Length principle.

In order to face the challenges of this new regulation, our services are as follows:

Transfer Pricing Diagnosis. Ma-king a Transfer Pricing Diagnosis is highly recommended so that companies are timely prepared.

Transfer Pricing Study

In-House training

Advanced Pricing Agreements with the Tax Administration

16.3 Tax

All business operations have a tax implication. In an increasingly globali-zed world, companies have to operate taking into account a great variety of tax systems. Knowing the tax implications of your business decisions in advance and staying on top of the most recent developments in local and international legislation and jurisprudence are key fac-tors that can have an influence on the success of a business strategy.

At Deloitte we have expert teams that support companies in all aspects related to their taxes, placing a special emphasis on the international component.

Our main areas of service include:

Tax consulting

Local and international strategic tax planning

Tax diagnosis

Preventive tax audit

Periodic compliance reviews

Tax controversy services (Administrati-ve proceedings)

Review and preparation of tax returns

Recovery of tax credits

Analysis and qualification for tax be-nefit laws.

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16.5 Legal

Our objective is to provide quality legal services focused on the business of national and international corporations.

Our understanding of the business world, along with the experience of our attorneys, allows us to provide expert advice to foreign and local clients.

Our services include:

Corporate Law

Corporate restructuring

Mergers and acquisitions

Legal audits

Design of minutes of sha-reholders meetings, ap-pointments of legal repre-sentatives, registrations, etc.

Preparation and negotia-tion of commercial or civil contracts

Establishment of corporations

Legal representation services

Tax Law

Litigation in tax matters

Legal-tax advisory and con-sulting services

Notarial Law

Authorization of contracts and public deeds

Legalization of signatures and documents

Notarial instruments

Authorization of foreign contracts so that they may have effect in Guatemala

Formalization, registration of mortgage, secured credits

Other Services

Labor law

Intellectual property law

Immigration law

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16.6 Outsourcing

Deloitte offers outsourcing services for financial-accounting processes. In addition to executing the accou-nting procedures, our firm advises its clients on tax and accounting matters, through the use of tech-nology, as well as a team of duly trained professionals that can help your company direct its efforts and resources on the key areas for the growth of your business.

Our main areas of service include:

Accounting and tax process Payroll processing Updating of books and records

(accounting, purchases and sa-les, wages)

Drafting of accounting manuals Organization of accounting and

financial departments

3. Our Services

16.7 Servicios de Capital Huma-no -HCAS-

Nowadays, people represent the key factor in the generation of sustaina-ble competitive differences. Human Capital & Advisory Services is the area of Deloitte focused on optimal advisement in the management of human resources. Our main areas of service include:

Recruitment and Selection Area:

Complete Recruitment and Selec-tion Process

Verification of work references Verification of credit references Socioeconomic Studies Psychometric Tests

Sale of Curricula Vitae Outplacement

Planning and Administrative Area Diagnosis of organizational

climate Human Resources Audit Specific Salary Surveys Wage Scales Position Manuals HR Policies and Procedures Ma-

nuals Special Human Resources Projects Performance Evaluation Career Plans Training and development programs

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16.8 Consulting Our knowledge of business and the practical approach of our Consul-ting specialists allow us to offer you solutions within a complex context, with the objective of making your company more efficient, competiti-ve and profitable.

The Consulting division provides support through the following services:

Strategy and Operations:Design and Redesign of Processes Design of new processes Optimization of existing processes Drafting of contingency plans

Consulting services in industrial safety

Drafting of Organizational, Policies and Procedures Manuals according to international standards

Design of the Organizational Structure Analysis, design, redesign and im-

plementation of the organizational structure based on the strategy, mis-sion and vision of the organization

Technology Integration: Technological Strategy and Inno-

vation Social Business Information Management Systems Integration

16.9 International Trade The importance of good interna-tional relations in political, com-mercial and cultural development at a global level is crucial today for achieving the integral develo-pment of the country.

The International Trade division can provide support through the following services:

1. Advisory services and support to local and foreign investors from various sec-tors on matters such as: Export Regulations Obtaining of permits for ope-

rating in special customs re-gimes

Appeals of adjustments made by customs entities

Supply Chain

2. Advisory services and support to the import/ex-port sector on:Regulations, procedures and for-malities for successfully impor-ting and exporting their products. 3. Internationalization Use and leveraging of FTAs Optimization of the tariff

burden Commercial Exchange (Cou-

ntry of interest)

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16.10 Corporate Governance

Family protocol and a Family Board of Directors are part of the infrastructure of corporate gover-nance which is why it is necessary to ensure its proper establishment and operation. Deloitte Guatemala has a specialized service line that contributes to the implementation of best practices and processes in family businesses.

Among the services provided are:

1. Institutionalization Family Protocol

Board Member Profiles Rules of operation of the

Board and Committee

2. Corporate Governance Model

Corporate Governance Structure 3. Succession Plan

Definition of strategic portfolios Competency plans and develo-

pment of competencies Implementation Plan

4. Training

16.11 Climate Change and Sus-tainability Services

1. Sustainability Management Sustainability assessment model Sustainable value creation map Business vulnerability and risk

map Contingency plans

2. Carbon Management Greenhouse Gas Inventory Carbon footprint (product or

service Strategies for reducing Green-

house Gases Mitigation strategies Carbon markets

3. Green IT Green IT Maturity Model Model for control of specific

areas such as telecommunica-tions, efficiency of computer centers, use of direct power, use of paper, technological waste, end-user applications, processes and computing.

4. Sustainability Reports Global Reporting Initiative (GRI) Identification of key indicators Development of Information

Capturing Processes Drafting of Sustainability Re-

ports Verification of Sustainability

Reports

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About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by gua-rantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients span-ning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloittes approximately 182,000 professionals are committed to becoming the standard of excellence.

2013 Deloitte Guatemala, S.A. Member of Deloitte Touche Tohmatsu Limited

Contact UsEdificio Euro Plaza World Business Center5a. Av. 5-55, Zona 14, Torre 4, Nivel 8PBX: 2384 6500Fax: 2384 6555-7

For more information visit ourwebsite: www.deloitte.com/gt