The Congress of the Republic of Guatemala recently approved as matter or national urgency the Decree Number 19-2016, “Emerging Law for the Preservation of Employment”, which came into force on March 31st, 2016.
This law amends Decree 29-89 (Law of Promotion and Development of Export and Maquila Activities) and Decree 65-89 (Free Trade Zones Law), providing tax benefits specifically for the clothing and textile industry, call centers or contact centers and software developers. Some of the main benefits that the law grants, is a 10-year exemption of Income Tax for the before mentioned activities, as well as exemption for up to 1-year of the payment of taxes and customs duties on import, among others, of raw materials, packaging, containers, machinery and spare parts needed for the production process.
Persons or entities are not eligible for the benefit granted by this law, if amongst others, they are in the following situations: (i) have outstanding tax or customs duties to fulfill; (ii) are enjoying tax incentives or benefits granted by other laws in force; (iii) have outstanding employee or employer labor quotas or fines to pay before the Guatemalan Social Security Institute (IGSS for its acronym in Spanish); (iv) whom by final judgment has been determined to have violated labor rights; and (v) whom by simulation or any other form of deception misleads the Ministry of Economy and Tax Authority, to access the tax benefits provided by this law, including the creation or registration of a new entity to substitute another that already has enjoyed the benefits of this law.
The purpose of this law is to retain investments made in the country and encourage new ones, maintain employment for more than 170,000 people, as well as ensure compliance with labor laws.