Libro I Título III. Renta del trabajo en relación de dependencia

The obtaining of any remuneration or income in money, whatever its denomination or nature, derived from personal work performed in a dependency relationship, by individual persons resident in the country, constitutes the taxable event of the Income Tax regulated in this Title.

In particular, income derived from work includes:

1.Salaries, bonuses, commissions, Christmas bonuses, travel allowances not subject to settlement or that do not constitute reimbursement of expenses, and other remuneration that persons, entities or estates, the State, the municipalities and other public or private entities pay to their representatives, officers or employees in Guatemala or abroad.

2.Salaries, bonuses, Christmas bonuses and other remuneration that do not imply reimbursement of expenses, of the members of the crew of air or sea vessels and of land vehicles, provided that such vessels or vehicles have their home base in Guatemala or are enrolled or registered in the country, regardless of the nationality or domicile of the beneficiaries of the income and of the countries between which the traffic is carried out.

3.Remuneration, salaries, commissions, gratuities or compensation paid or credited by entities with or without legal personality, resident in the country, to members of their directories, councils, boards of administration or other directive bodies, regardless of where such collegiate bodies act or meet, when such members are in a dependency relationship.

Income taxed under this Title is attributed to the settlement period in which it is received or made available to the worker.

The following are exempt from the tax:

1.Compensation or pensions received by reason of death or disability caused by accident or illness, whether single or periodic payments, made under the social security regime, by insurance contract or by virtue of judgment. Remuneration received from the employer during the time that paid employment leaves are in force is not exempt.

2.Payment of compensation for time served, received by workers in the public and private sector.

3.Remuneration received by diplomats, consular agents and other official representatives accredited to the Government of Guatemala for the performance of their functions, on condition of reciprocity.

4.Verifiable representation expenses and per diem allowances granted to cover expenses incurred within or outside the country. For the exemption of expenses covered by per diem allowances within the country to apply, they must be evidenced by the corresponding invoices issued in accordance with national legislation.

In the case of expenses incurred outside the country, for the exemption to apply, exit from and entry into Guatemala, the activity in which the person participated and the tickets for the means of transportation used must be shown and documented.

5.The year-end bonus up to one hundred percent (100%) of the ordinary monthly salary or wage.

6.The annual bonus for workers in the private and public sector established by the Law on Annual Bonus for Private and Public Sector Workers up to one hundred percent (100%) of the ordinary monthly salary or wage.

*7. Pensions, retirement pensions or montepío benefits accruing to natural persons or their beneficiaries, including those determined by the Law on State Civil Pensions, pensioners or their beneficiaries of the Guatemalan Social Security Institute, of the Military Provident Institute; of the Professional Associations and any other natural or juridical person that pays or credits directly to persons of legal age or persons permanently incapacitated for work, regardless of the designation attributed thereto.

Taxpayers. Taxpayers of this tax are individual persons, resident in the country, who obtain income in money for the provision of personal services in a relationship of dependency.

The taxable income is determined by deducting from the net income the deductions indicated in this article.

For purposes of this title, gross income means the sum of its taxed and exempt income obtained in the annual settlement period; and, net income means the difference between gross income and the exempt income obtained.

Individual persons in a dependency relationship may deduct from their net income the following:

a.Up to sixty thousand quetzales (Q.60,000.00), of which forty-eight thousand quetzales (Q.48,000.00) correspond to personal expenses without need of any proof; and, twelve thousand quetzales (Q.12,000.00) which may be credited for the Value Added Tax paid on personal expenses, for purchases of property or acquisition of services, during the annual final settlement period. This credit shall be evidenced by filing a schedule containing the detail of the invoices, which shall be subject to verification by the Tax Administration. The schedule must be filed with the Tax Administration within the first ten (10) working days of the month of January of each year, the employer having to reconcile the withholdings made and the final settlement or final return to be filed by the worker.

b.Donations that can be reliably proven, granted in favor of the State, universities, cultural or scientific entities.

Donations to non-profit associations and foundations, for assistance or social service, to churches, to entities and associations of a religious nature and to political parties, all of which must be legally constituted, authorized and registered in accordance with the law, provided they hold the fiscal solvency for the period to which the expense corresponds, issued by the Tax Administration, the maximum deduction allowed to those who donate to the entities indicated in this paragraph may not exceed five percent (5%) of gross income.

c.Dues for contributions to the Guatemalan Institute of Social Security, to the Institute of Military Prevision and to the State and its institutions for dues under social welfare regimes.

d.Life insurance premiums to cover risks in cases of death exclusively of the worker, provided that the insurance contract does not accrue any sum by way of return, reimbursement or surrender.

The tax rates applicable to the taxable income calculated in accordance with the preceding article are five and seven percent (5% and 7%), according to the taxable income bracket, and apply in accordance with the following scale:

Taxable income bracket Fixed amount Tax rate of

Q.0.01 to Q.300,000.00 Q.0.00 5% on the taxable income.

Q.300,000.01 onwards Q.15,000.00 7% on the excess over Q.300,000.00.

The tax payable is determined, for the first bracket, by applying the five percent (5%) tax rate to the taxable income. For the second bracket, it is determined by adding to the fixed amount the amount resulting from applying the seven percent (7%) tax rate to the excess of taxable income, in accordance with the preceding scale.

The liquidation period of the tax is annual, commences on the first (1) of January and ends on the thirty-first (31) of December of each year.

Every employer who pays or credits to persons resident in Guatemala remunerations of any nature for services derived from personal work performed in a dependency relationship, whether permanent or temporary, must withhold the worker's Income Tax. The same obligation must be fulfilled by public employees or public officials who are in charge of the payment of salaries and other remunerations for services rendered to State bodies, its decentralized, autonomous entities, the municipalities and their enterprises.

No withholding shall be made on the remunerations paid for the exercise of their functions to diplomats, officials, consular agents and employees of foreign governments who comprise the official representations in the Republic or form part of international organizations to which Guatemala has adhered. The foregoing does not exempt resident employees who work for such missions, agencies and international organizations from the obligation to file their annual sworn return and pay the tax. Such entities shall annually submit to the Tax Administration the list of resident workers, the wages and fees of the latter paid during the immediately preceding calendar year.

At the beginning of each year or at the start of the employment relationship, the employer or payer shall make a projection of the worker's annual net income, from which it shall deduct the amount of forty-eight thousand quetzales for personal expenses and the amount of the estimated annual contributions for payments to the Guatemalan Institute of Social Security, the Military Welfare Institute and to the State as contributions to social welfare regimes. To the value obtained, it shall apply the corresponding tax rate in accordance with Article 73 of this Law, and each month the employer or payer shall withhold from the worker one-twelfth of the projected amount.

Additionally, if the worker has previously worked with another employer in the same settlement period, the employer must add to the annual projection the income the worker earned as shown in the withholding certificate submitted to it.

When the projection indicated in the first paragraph of this article must be prepared after the settlement period has already begun, the projection shall be made for the number of months remaining until the end of the period.

If, for any reason, the estimated annual amount of the worker's net income is modified, the employer or payer, without need for a declaration by the worker, shall make a new calculation to update the amount of the withholding in the successive months.

When the worker has more than one employer, he must inform the employer that pays or credits him the largest annual remuneration of such fact. To determine the amount of the total withholding, according to the tax rate applicable to him, the worker must indicate to him, by sworn statement, the amount of each of the remunerations he receives from the other employers. Simultaneously, he must submit to the other employers a copy of the form filed with the employer that shall act in the capacity of withholding agent.

Withholding agents shall provide to the workers from whom they withhold, within the ten (10) days immediately following payment of the income, certificates indicating the name, Tax Identification Number of the employer and of the worker, the income credited or paid and the amount withheld. Taxpayers to whom the withholding agents do not provide the withholding certificates within the time limits cited shall report this to the Tax Administration, for the verifications and sanctions applicable to the withholding agents.

Upon completion of their annual settlement period, workers shall submit to the employer the certificates of donations made, if applicable, so that the employer may determine the final tax. If the employer determines that it withheld excess amounts from its workers, it shall refund to them the sums withheld in excess and inform the Tax Administration, within the first two (2) months of the calendar year, through the means provided by the latter. The employer or payer shall deduct such refunds from the total withholding amounts corresponding to such monthly periods, until covering the full amount of the refunds.

If the individual employment contract terminates before the end of the settlement period for this tax, the employer must determine the final tax and refund to the worker the sums withheld in excess or withhold the missing amount from the worker.

Employers or payers, by the means that the Tax Administration makes available to them, shall file a sworn statement of the withholdings made and pay the tax withheld, accompanying the same with an annex in which the complete first and last name and Tax Identification Number of each of the taxpayers who bore the withholding, the concept thereof, the income credited or paid and the amount of the withholding are specified. Said sworn statement shall be filed within the first ten (10) days of the month following the month to which the payment of the remuneration corresponds, even if making the withholding was omitted.

The taxpayers referred to in this title are obligated to file the annual sworn declaration of the Income Tax and, simultaneously, to pay the tax, only in the following cases:

1.When the withholding agent or agents did not make the withholdings from them.

2.When the withholding agent or agents made withholdings lower than the corresponding ones.

These workers have the right to deduct from the tax payable the total of the withholdings made in the settlement period. The sworn declaration and payment of the tax must be made within the time limit of the first three (3) months of the year following the period being settled.

The regulation shall indicate the procedures for effecting, collecting and paying withholdings.