Investment Incentives

CHARACTERISTICS:
The objective of this law is to promote, encourage, and develop the activities undertaken by natural persons or legal entities domiciled in the country and operating within the customs systems in the national customs territory, in accordance with this law.

It is limited to two sectors (which benefit from all the incentives):
a) Clothing and textiles 1*, Article 8 bis*:
The production activity under the Temporary Admission Regime entails producing, transforming, assembling, putting together, and processing industrial goods related to the clothing and textile industry, with the purpose of providing them with other characteristics or assigning them to other uses that are different from those of their original materials or components.
b) Services: The natural persons or legal entities providing services linked to information and communication technologies offering call- or contact- center, software-development, and digital-content development services, as long as their services are provided to people who do not reside in the national territory.

Authorized by: The Trade and Investment Services Directorate under the Ministry of Economy (MINECO), 8 Avenida 10-43, zona 1, Telephone +502 2412-0200, https://www.mineco.gob.gt/

INCENTIVES APPLYING TO THE CLOTHING AND TEXTILE SECTORS + SERVICES

• – Temporary suspension (for up to a one-year period) of the payment of customs duties and import taxes, including the Valued Added Tax (VAT) on raw materials, semi-manufactured products, intermediate products, containers, packing, and labels.
• – Temporary suspension (for up to a one-year period) of the payment of customs duties and import taxes, including the Valued Added Tax (VAT) on samplers, engineering samples, instruction manuals, patterns and models needed for the production process or for research or demonstration purposes.
• – Total exemption from customs duties and import taxes including Value Added Tax -VAT- on the import of machinery, equipment, parts, or components necessary for the production process.
• – Total exemption from income tax -IRS in Spanish- for a period of 10 years.
• – Total exemption from taxes, customs duties, and other charges applicable to the import and consumption of fuel oil, butane gas, propane gas, or bunker fuel that are strictly necessary for energy generation.
• – No Value Added Tax is levied on the procurement of locally produced inputs to be incorporated into final products and services that are used exclusively in its activity.

INCENTIVES FOR OTHER SECTORS:

• – Temporary suspension (for up to a one-year period) of the payment of customs duties and import taxes, including the Valued Added Tax (VAT) on raw materials, semi-manufactured products, intermediate products, containers, packing, and labels.
• – No Value Added Tax is levied on the procurement of locally produced inputs to be incorporated into final products and services that are used exclusively in its activities.
• – Other benefits: Users qualifying under Decree 29-89 are not restricted to a specific location; that is, they can locate in any place in the country.
• – Time for authorization: 30 days from the time the documentation is submitted to MINECO.

REQUIREMENTS TO BE A USER OF DECREE 29-89

1. 1. An application on letterhead paper, signed and sealed by the owners of the company or its legal representative, addressed to the Director of Trade and Investment Services at the Ministry of Economy.
2. 2. A technical-economic report of the project to be undertaken, signed and sealed by the legal representative or the owner of the company. Instructions.
3. 3. A photocopy of the duly-registered certified copy of the company’s public deed of incorporation.
4. 4. A photocopy of the appointment of the legal representative.
5. 5. A photocopy of the Applicant’s Identification Document –DPI in Spanish–.
6. 6. Photocopy of the certificate of registration in the Unified Tax Registry –RTU 2* in Spanish– of the holder.
7. 7. Photocopies of the company’s and/or corporation’s trade licenses.
8. 8. A sworn statement of the Legal Representative before a Notary.
9. 9. Proof of the last payment of labor and employer’s fees to the Guatemalan Social Security Institute –IGSS–.
10. 10. Proof of no outstanding fines payable to IGSS 3*.
11. 11. Certificate of fiscal solvency issued by the Superintendence of Tax Administration to the natural person or legal entity, the legal representative, partners, and stockholders.
12. 12. A sworn statement by the Legal Representative before a Notary certifying that the company has not been sanctioned through a revocation of the benefits granted to it by Decree 29-89, Decree 65-89, or Decree 22-73 4*.
13. 13. A certification of the Partner and Stockholder Registry.
14. 14. A photocopy of the lease on the property where the company will be installed.
15. 15. Publication of the name of the natural person or legal entity requesting the benefits under Decree 29-89 in at least one widely-read national newspaper.

1*. Industrial goods related to the clothing and textile industries are those included in Section XI pertaining to textile materials and their manufacturing, which comprise chapters 50 to 63 of the Harmonized System, as well as those inputs classified in any other sub-section of the Harmonized System, which should be described by tariff items in the qualifying resolution issued and notified by the Ministry of Economy, as well as the services and goods that are necessary exclusively to produce, transform, assemble, put together and process industrial goods relating to the clothing and textile industry, which should also be described in the above-mentioned resolution.
2*. The RTU is the only tax registration and serves as a kind of proof of your registration in the SAT. This helps companies to know your taxpayer status.
3*. Guatemalan Social Security Institute: it is an autonomous, governmental institution dedicated to providing health and social security services to the population that has affiliation to the institute, then called the insured or entitled.
4*. Law Promoting and Developing Export and Maquila (Outsourcing) Activities, Decree 29-89; Law on Free Zones, Decree 65-89, and Organic Law of the Free Industry and Trade Zone Santo Tomas de Castilla, Decree 22-73; all of them issued by the Congress of the Republic of Guatemala.

LEGAL CONCEPT OF FREE ZONE (DECREE 65-89)

A limited physical area of land that has been planned and designed, subject to a special customs regime, in which natural persons or legal entities can undertake either to the production or commercialization of goods for export or re-export, as well as providing services linked to international trade. The Free Zone will be guarded and controlled by the customs authority. They can be public or private and the areas assigned to industrial users will be physically separated from those assigned to service users and they can be established in any region of the country, according to the legal stipulations currently in force.

TYPE OR USERS

1. 1. Industrial: producing and assembling goods for export out of the national customs territory, re-exporting goods or engaging in research and technological development.
2. 2. Services: linked to international trade
3. 3. Commercial: commercializing goods to be exported out of the national customs territory, as well as re-exporting them without engaging in any activities that change characteristics of products or alter their origin.

Authorized by the Ministry of Economy through the Trade and Investment Services Directorate under the Ministry of Economy –DISERCOMI–, 8 Avenida 10-43, zona 1, Telephone +502 2412-0200,  More information at: https://www.mineco.gob.gt/

PROCESS TO ESTABLISH A FREE ZONE

• 1. Submitting a request to DISERCOMI, which will issue a legal opinion within a maximum period of 30 days.
• 2. Based on the above-mentioned opinion, MINECO will decide whether the application is admissible or not, within a maximum 15-day period.
• 3. Once the administrative entity is authorized, it may process user applications. See user requirements.

INCENTIVES

• – Exemption of taxes, customs duties, and charges applicable to importing goods that are used in producing goods and providing services.
• – 100% IRS 1* exemption during a 10-year period
• – VAT 2* exemption for transferring goods within and between free zones.
• – Exemption from Fiscal-Stamp Tax and Special Protocol Paper Tax on real-state purchases, exchanges, or transfers.
• – VAT exemption on the purchase of locally-produced inputs to be incorporated into final products and services.

Other benefits*:

• – Warehouses of various sizes
• – Water
• – Wastewater treatment
• – Waste Disposal
• – Electricity
• – Internet
• – 24-hour security and surveillance
• – Streets suitable for international business activity

PROHIBITIONS
ARTICLE 41. **They may not be produced or marketed from the free zone, nor may the following activities be developed within them:

• – Exploitation, commercialization, deposit or temporary storage with suspension of duties and taxes, of crude oil and petroleum-derived fuels, as well as natural gas. The deposit of the aforementioned products is exempted from this provision, that they have for themselves, in their own storage places, those who use these products in production processes at their load. Such This circumstance must be accredited with the corresponding license issued by the respective agency of the Ministry of Energy and Mines.
• – Alcoholic beverages, alcoholic liquids and vinegars except wines and ciders.
• – Natural or artificial mineral water and aerated water with or without added sugar or other sweetener or flavored, ice and snow, beer and malt.
• – Fishing and breeding of marine or freshwater species.
• – Forestry, exploitation and commercialization of logs, round, plank and plank wood.
• – Cane sugar, refined or unrefined and molasses, their derivatives and substitutes.
• – Coffee in cherry, parchment and gold.
• – Cardamom in cherry, parchment and gold.
• – Uncarded cotton.
• – Fresh banana.
• – Sesame without peeling.
• – Rubber or rubber in its natural state.
• – Reproduction, breeding, fattening and slaughter (livestock) of bovine, pig, goat, avian and any other species.
• – Mining in its extraction phase.
• – Goods that cause pollution.
• – Processing and handling of explosives and radioactive materials.
• – Breeding, cultivation and processing of flora and fauna species protected or prohibited by special agreements or laws.
• – Packaging, container or labeling of products to which Guatemala is subject to a quota.
• – Sowing of agricultural products of any kind.
• – Cigarettes and tobacco products.
• – Cement and clinker.
• – Construction materials for gray work.
• – Import of vehicles for sale or lease purposes to the national customs territory.
• – Mineral, metallic and non-metallic products, coming from the extractive activity; scrap or scrap of steel, iron and others ferrous and non-ferrous materials.
• – African palm and walnut.
• – Supply of food, prepared or not, intended for employees or companies benefiting from this Law and any other regime liberatory or suspensive.
• – Financial services or financial intermediation.
• – Generation and transport of electrical energy that is not intended for its own use or that of the users.
• – Fixed, mobile, digital or satellite telephone services.
• – Television service, cable television, satellite or digital and radio broadcasting.
• – Jewelry and gemstones as finished products.

USER REQUIREMENTS

1. 1. Application by the user a (MINECO).
   DISERCOMI issues a legal opinion within a maximum 30-day period.
2. 2. Based on the above-mentioned opinion, MINECO resolves whether or not the user’s application is admissible within a maximum 15-day period.

The application should be accompanied by:

• – A copy of the Resolution authorizing the user’s installation and operation
• – A copy of the certified copy if it is a legal entity.
• – A copy of the appointment of the legal representative
• – A copy of the Personal Identification Document (DPI in Spanish) of the legal representative.
• – Certificate of registration in the Unified Tax Registry.
• – A copy of the Company and Corporation Trade Licenses.
• – A copy of the receipt for the last fees paid to IGSS 3*.
• – Proof of no outstanding fines payable to IGSS.
• – Proof of fiscal solvency issued by SAT 4*.
• – Certification of the Stockholders Registry
• – A sworn statement before a Notary Public stating that the person / entity has not been sanctioned by a revocation of the benefits conferred by the Free Zone Law, that it is not operating as a beneficiary of the Santo Tomás de Castilla Free Zone and that it is not benefitting from the fiscal incentives of other laws in force.

1. 1* Income Tax
2. 2* Valued Added Tax
3. *These benefits may vary according to what each free zone offers.
4. 3* Guatemalan Social Security Institute
5. 4* Superintendence of Tax Administration

LEGAL CONCEPT OF SPECIAL PUBLIC ECONOMIC DEVELOPMENT ZONES (DECREE 30-2008)

A geographically-defined area within the national territory that is an extra-customs area where industrial goods and services are developed or commercial activities are undertaken under special tariffs, a temporary customs and foreign trade regime, authorized by ZOLIC (Free Trade Zone).

• – It can be established anywhere in the national territory.
• – The minimum authorization period is 12 years, as of the date of the resolution. Extensions may be requested.
• – It can be installed in ZOLIC facilities or third-party property that is leased or granted in usufruct to ZOLIC.
• – An area of at least 10,000 square meters. If the area is smaller, 400 direct and permanent jobs must be guaranteed. There can be exceptions that consider the investment to be made and employment generation.
• – A minimum of two users must be installed (an administrator and a productive user). If there is a single user, the economic impact and employment generation must be justified.

TYPE OF OPERATIONS

•  – Importing from the National Customs Territory (TAN in Spanish) or from abroad
• – Transfers to any other tax warehouse
• – Transfers from and to other regimes, ports, borders, and airports in the country.
• – Providing services or products to other users or ZDEEP.
• – Exporting to the National Customs Territory (TAN) or abroad.

USERS OF A ZDEEP

• – Industry, trade, and services
• – Activities: Production, manufacturing, transformation, assembly, commercialization, distribution, warehousing,
  conservation, fragmentation, packing, repacking, crating, manipulation, classification, any other operation on its own goods or imported and exported goods.

Authorized by The ZOLIC Board of Directors. Guatemala office: Blvd. Los Próceres, 24-69 zona 10 Edif. Empresarial Zona Pradera, Torre 4, Nivel 10, Oficina 1002. Telephone +502 2279-0950. Headquarters in Izabal: Km. 293.5 Ruta al Atlántico Norte, Santo Tomás de Castilla. Puerto Barrios, Izabal. Guatemala. Telephone No.: +502 7961-5400. Consult the law and its set of regulations: https://zolicguate.com/zdeep/

PROCESS TO ESTABLISH A ZDEEP

Submitting the file:

• – Strategic Project including the economic, social, and productive impact that will be generated by the ZDEEP and its contribution to the development of the region and to employment generation.
• – Professionals’ technical opinion and the Environmental Plan to be implemented.
• – Application form: This applies if the property is owned by third parties (see details in the Regulations for Authorization, Qualification and Operation)

Once the file is complete:

• – Physical inspection by ZOLIC, within a maximum period of 30 working days
• – Technical opinion issued within a maximum period of 20 working days.
• – Board of Directors resolution within a period of 30 working days. After this, the ZDEEP is authorized and SAT is notified so that it assigns personnel to start operations.

INCENTIVES

•  – ISR 1* exemption for a period of 10 years, also applicable to dividends and profits.
• – Temporary suspension of VAT 2*, import duties and other import charges on goods entering the ZDEEP.
• – VAT exemption on taxed events and acts undertaken within the ZDEEP when they are exported.
• – Fiscal-Stamp Exemption on the documents pertaining to acts or contracts on goods and business in the Zone.
• – Goods do not cause abandonment.
• – The State or Municipal Governments may grant non-fiscal incentives to certain users.

Other benefits: 3*

• – The possibility of selling products processed within the free zone in the internal market.
• – On-site Customs Office.
• – Software for logistics and customs processes.
• – Infrastructure adapted to international operations.
• – Immediate access to Puerto Santo Tomás de Castilla and Puerto Barrios.
• – AEO 4* Certification.
  – Logistical complementarity in operations.
• – Opportunity to establish sectoral clusters.
• – Decentralization of productive economic activities and local development.
• – Extensive National Telephone Network and Internet bandwidth options.
• – National and Regional Electric Network Connection.
• – Abundant labor, possibility of instruction and training.
• – Consultancy and accompaniment for the installation process.

USER REQUIREMENTS

Requirements for a legal entity or natural person 5*

1. 1. Application containing the legal requirements and information on the economic impact, employment generation and the activities that are expected to be undertaken. Term of the lease (minimum 1 year) and a statement establishing that they wish to enjoy tax benefits.
2. 2. Fill out the form included in the website or provided by ZOLIC (download: https://zolicguate.com/wp-content/uploads/2019/09/FORMULARIO-PARA-ZDEEP-MERCADEO.pdf).
3. 3. A certified copy of the Trade License.
4. 4. A certified copy of the owner’s Personal Identification Document –DPI in Spanish– or passport.
5. 5. Latest audited Financial Statements.
6. 6. Copy of the Tax Identification Number –NIT in Spanish– of the company and an updated certificate of registration in the Unified Tax Registry –RTU in Spanish–.
7. 7. A sworn statement in a notarial certificate, in which they indicate that they are not included in the prohibitions or limitations to make use of the rights contained in the ZOLIC Law.

Legal entities must also submit the following:

1. 8. A certified copy of the company’s Public Deed of Incorporation
2. 9. The Notarial Certificate of the Appointment of the Legal Representative.
3. 10. A certified copy of the corporation and trade licenses.
4. 11. A certification by the Board of Directors authorizing the contracting to be performed and authorizing the Legal Representative to sign a lease with ZOLIC.

Other requirements:

1. 1. Technical, Economic, Financial and Environmental Feasibility Study
2. 2. A list of products or raw materials to be stored.
3. 3. Safety data sheets of the products to be stored.
4. 4. Others https://zolicguate.com/requisitos-para-ser-usuarios/

1. 1* Income Tax Pacífico.
   
2. 2* Value Added Tax.
   
3. 3* Each ZDEEP may grant additional benefits, for example, commercial areas, training centers, special facilities for energy efficiency or logistics operation facilities.
   
4. 4* Authorized Economic Operator.
5. 5* ZDEEP administrators can also be its users. These requirements apply to new companies or investments. Projects with 29-89 or 65-89 benefits must secure a previous resolution from SAT.