Corporate - DeductionsLast reviewed - 01 June 2023
Taxpayers under the system on earnings from lucrative activities may deduct costs and expenses from gross income, including the following.
Depreciation is calculated annually using the straight-line method. The tax authority may authorise a different method on request of the taxpayer. The annual maximum rates allowed as deductible expenses are the following:
|Building and improvements||5|
|Machinery and equipment||20|
|Furniture and fixtures||20|
|Tree and vegetable species||15|
|Any other depreciable asset||10|
Intangible assets (e.g. goodwill, trademarks, manufacturing processes, patents, software, know-how) may be deductible under the straight-line method of amortisation over a period that depends on the conditions of the acquisition or creation of the intangible asset concerned, and cannot be less than five years. Goodwill actually paid can be amortised over a period of a minimum of ten years.
Start-up expenses are deductible.
The deduction of interest expense may not exceed the result of multiplying the interest rate by three times the average net total assets reported by the taxpayer in the corresponding annual tax return.
Uncollectible accounts arising in normal business operations can be deducted individually or, alternatively, via an allowance for doubtful accounts, which shall not exceed 3% of the debit balances of accounts and notes receivable.
Duly proven donations made to the government, the municipalities, and their agencies, as well as to duly authorised not-for-profit welfare, social service, and scientific associations and foundations, universities, political parties, and guild entities, are deductible. The maximum deductible amount for income tax purposes of each period shall not exceed 5% of the donor’s net income, up to a maximum of GTQ 500,000 per year.
Employee pension/retirement funds
The deduction of provisions to establish or increase employee pension and retirement funds or reserves is allowed, provided the government approves the related plans.
Severance compensation payments
Severance compensation payments are allowed as deductible expenses as well as limited allocations (not to exceed 8.33% of total annual salaries and wages) to a reserve for severance compensation. Provisions pertaining to actual liability for severance compensation per year are also allowed, provided the related plans, based on collective bargaining agreements, are approved by the employer and employees.
Fines and penalties
Charges, penalties, and interest charged by any government institutions are not deductible.
All taxes are deductible, except income tax and VAT when these are not considered as a cost.
Net operating losses
Operating losses may not be carried forward for deduction from otherwise taxable profits. Guatemalan laws also do not permit carryback of losses.
Payments to foreign affiliates
Deduction for royalties will be allowed, up to 5% of gross income. The deductible expenses for technical services rendered from abroad shall not exceed 5% of gross income.
Expenses incurred abroad by non-residents in connection with income earned from Guatemalan sources cannot be deducted for income tax purposes by merely having the supporting receipts, as the regulations to the law do not permit such a deduction for these purposes, unless these expenses are related with the Guatemalan company operations and these expenses are needed for generating taxable income.