Libro I Título IV. Rentas de capital, ganancias y pérdidas de capital

The generation in Guatemala of capital income and of capital gains and losses, in money or in kind, derived from patrimonial elements, property or rights, ownership of which corresponds to the taxpayer, whether resident in the country or not, constitutes the taxable event of the Income Tax regulated in this Title.

The income taxed in accordance with the preceding article is classified as:

1.Income from immovable capital.

a.Income from immovable capital consists of income derived from the lease, sublease, as well as from the creation or assignment of rights or powers of use or enjoyment of immovable property, provided that its habitual business activity is not trading in such property or rights.

2.Income from movable capital.

Income from movable capital consists of:

a.Interest, within the terms of Article 4 of this Book, paid or credited and income in money or in kind derived from credits of any nature, with or without a clause for participation in the debtor's profits. It does not constitute capital income when, within its habitual business activity, the taxpayer grants credits of any nature, in which case it shall be taxed under the regime for income from lucrative activities in which it is registered.

b.Income obtained from the lease, sublease, as well as from the creation or assignment of rights of use or enjoyment, whatever their denomination or nature, of tangible movable property and of intangible property such as key-money rights, royalties, copyrights and similar rights. Income obtained from the habitual business of trading in the property or rights specified in this subparagraph does not constitute income from movable capital and such income shall be taxed under the regime for income from lucrative activities in which it is registered.

c.Life or temporary annuities originating in the investment of capital, capital income originating in conditional donations and income derived from insurance contracts, except when the taxpayer must be taxed as employment income.

d.The distribution of dividends, earnings and profits, regardless of the denomination or accounting treatment given thereto.

3.Capital gains and losses.

a.Capital gains and losses in accordance with the provisions of this Title are those resulting from any transfer, assignment, purchase-sale, exchange or other form of negotiation of property or rights, carried out by individual persons, legal persons, entities or estates whose habitual business activity is not trading in such property or rights.

b.Capital gains also include:

i.The amount of the revaluation of the property forming part of the fixed assets of individual persons, legal persons, entities or estates required to keep accounting in accordance with the Code of Commerce and this Book.

ii. Any increase in estate derived from the alienation of rights or property used in activities producing income taxed under Title II, recorded in the books that must be kept for such purpose, including those carried out by reason of the total or partial liquidation of the activity. When such rights or property are subject to depreciation and are alienated for a value higher than that corresponding to them on the date of the transaction in accordance with the authorized amortization, such difference is included as taxable income in the period in which the transaction is carried out.

iii. *Unconstitutional

c.It is deemed that there is no capital gain or loss in the following cases:

i.The division of property held in common.

ii. The liquidation of the marital estate.

iii. The contribution to a guarantee trust or to a testamentary trust and the return of the contribution.

In no case may the cases referred to in the three preceding subparagraphs give rise to the updating of the values of the property or rights received.

iv. Capital reductions. Except when the capital reduction is intended for the return of contributions, the portion corresponding to accumulated profits not previously distributed shall be income from movable capital.

v.Nor is there a capital gain in revaluations of assets made by mere accounting entries, but upon alienation of such assets, the difference between the sale value and the book value of such property prior to the revaluation is subject to the tax regulated in this Title.

vi. The following are not considered capital losses:

a.Unsubstantiated losses.

b.Losses due to consumption.

c.Losses due to gratuitous transfers by inter vivos acts, without prejudice to the provisions of the article regulating the deductible costs and expenses of this Book.

4.Income from lotteries, raffles, draws, bingo or similar events. Income from capital includes income from prizes from lotteries, raffles, draws, bingo or from similar events. In the case of prizes that are not in cash, the tax applies to the arm's-length value of the right or property constituting the prize.

*That concerning paragraph "iii. Revaluations of immovable property made by the taxpayer.", contained in numeral 3 of Article 84 contained in File Number 293-2013 on 17-04-2013 is provisionally suspended

All individual and juridical persons, entities or patrimonies without juridical personality, resident in the national territory, that obtain income taxed under this Title are taxpayers.

For the purposes of this Title, trusts, participation contracts, co-ownerships, communities of property, irregular companies, de facto companies, commissions of trust, management of business affairs, undivided hereditary patrimonies, branches, agencies or permanent or temporary establishments of foreign enterprises or persons operating in the country and the other productive or economic units that hold patrimony and generate taxable income are considered entities or patrimonies. Those who must comply with the formal and material tax obligations of these entities or patrimonies shall be those indicated in Article 22 of the Tax Code and those who legally represent them.

The following shall act and be liable as withholding agents for the taxed income referred to in this title:

1.Persons who keep complete accounting in accordance with this Law, the Commercial Code or other laws.

2.State bodies and their decentralized, autonomous entities, the municipalities and their enterprises.

3.Universities, schools, associations, foundations, political parties, trade unions, churches, professional associations and other associative entities.

*4. Trusts, contracts in participation, co-ownerships, communities of property, irregular companies, de facto companies, commissions of trust, management of affairs, undivided hereditary estates, branches, agencies of foreign companies or persons operating in the country and the other productive or economic units that hold patrimony and generate taxable income.

Failure to comply with the obligation to withhold shall be sanctioned in accordance with the provisions of the Tax Code.

The following income is exempt from the tax in accordance with the regulations of this Title:

1.Subsidies granted by the State and its institutions and by international organizations to individuals to satisfy health, housing, education and food needs.

2.Capital gains derived from the occasional alienation of movable property for the taxpayer's personal use, except for capital gains arising from the sale of vehicles, vessels and aircraft subject to registration in the corresponding Registries.

3.Other capital income and capital gains or losses expressly exempted by laws creating decentralized and autonomous entities.

The tax bases of capital income are:

1.The tax base of income from movable capital is constituted by the income generated in cash or in kind represented by the total amount paid, credited or in any manner made available to the taxpayer, minus exempt capital income.

For the case of interest derived from price differentials and discounts, the tax base is constituted by the total amount received upon amortization or disposal of the security or instrument, minus the acquisition price of said security or instrument.

2.The tax base of income from immovable capital is constituted by the income generated in cash or in kind represented by the total amount paid, credited or in any manner made available to the taxpayer, minus thirty percent (30%) of such income as expenses, except evidence to the contrary to be attached to a sworn statement to be filed during the month of January of each year, with documentation proving that the expense was greater than that percentage. For such purpose, the corresponding refund request shall be filed with the Tax Administration.

The tax base for capital gains or losses is the price of the alienation of the property or rights minus the cost of the property recorded in the accounting books.

*In the case of capital gains from revaluation of property for those taxpayers not required to keep full accounting records, the tax base is the revalued value minus the acquisition value.

The cost of the property is established as follows:

1.For taxpayers required to keep accounting records pursuant to the Commercial Code and this Book, the base cost of the property is the recorded value, plus the value of improvements incorporated therein, minus accumulated depreciation recorded up to the date of alienation, both on the original value of the property and on the improvements incorporated therein.

2.For taxpayers who are not required to keep full accounting records, the cost of the property is the acquisition value or the value that has been revalued provided that the tax established in this Title has been paid.

*3. Notwithstanding the provisions of the preceding numerals, for cases of alienation of shares or equity interests, its cost is the acquisition value as documented by the seller of the shares or the value established in the books of the issuing company at the time of alienation by the taxpayer, which value must be certified by the issuing entity.

4.For property and rights acquired by inter vivos donation, the cost is the adjudication value for the donee.

*The alienation value is established as follows: The transfer value is the actual amount for which the alienation was carried out. The actual amount of the alienation value means the amount effectively paid minus the deduction for expenses to carry out the transaction, such as: purchase and sale commissions, notarial expenses, registration expenses and others that are subtracted from the alienation value, such deduction being limited to a maximum equivalent to fifteen percent (15%) of the alienation value. Said limitation shall not apply to persons who keep full accounting records in accordance with the Law, provided that supporting documentation for the expenses incurred is available.

Capital income referred to in this title, where applicable, is subject to final withholding from the moment the payment, crediting or bank credit in money or in kind to the beneficiary of the income is made effective.

Income mentioned in literal b) of numeral 3 of article 4 of this book, which is paid or credited to banks, financial companies and off-site or off-shore entities subject to the supervision and inspection of the Superintendency of Banks, and legally authorized cooperatives, is not subject to withholding.

For capital gains, the tax obligation arises at the moment the variation in the taxpayer's patrimony occurs, in accordance with the article governing the scope of application of the tax regulated in this title.

The capital losses referred to in numeral 3 "Capital Gains and Losses" of the article governing the scope of application of the tax, regulated in this title, may only be offset against future gains of the same nature, for a maximum time limit of two (2) years, counted from the moment in which the loss occurred. The unoffset loss does not entitle the taxpayer to any deduction or credit for this tax. If upon the expiration of said time limit a balance of such capital loss still remains, it may no longer be offset for any reason.

The tax rate applicable to the tax base of income from movable and immovable capital and of capital gains is ten percent (10%).

The tax rate for the distribution of dividends, gains and profits, regardless of the denomination or accounting treatment given thereto, is five percent (5%).

In the case of banks and finance companies that are members of financial groups, as established by the Law on Banks and Financial Groups, the tax accrues and withholding must be effected only when the dividend, gain or profit is distributed to the shareholders of the controlling entity or responsible entity of the financial group.

Any person who pays capital income, by any means or form, where applicable, must withhold the Income Tax referred to in this Title and remit it by sworn return to the Tax Administration within the time limit of the first ten (10) days of the month immediately following that in which the payment or bank crediting in money was made.

When the payment or crediting is made by persons subject to supervision by the Superintendency of Banks, withholdings as definitive payment of the tax shall be applied globally on the totality of the interest paid or credited to savers or investors.

In the event that no withholding is made, the taxpayer must assess and pay the tax to the Tax Administration, within the time limit of the first ten (10) days of the month immediately following that in which the payment, crediting, or bank credit in money was received.

Capital gains must be assessed and paid by the taxpayer within the first ten (10) days of the month immediately following that in which they arose.

To effect the offset of capital losses and apply costs, the taxpayer who has obtained gains must file a return within the time limit of the three (3) months following the end of the calendar year, deducting the prior loss.