Transfer Pricing Regulations in Guatemala
The current regulations on transfer pricing in Guatemala are contained in the decrees and documents published in March 2012 and May 2013; Valuation Rules included in Chapter VI—Special Valuation Rules for Related Parties—of the Tax Update Law, published by Decree No. 10-2012 of March 5, 2012.
Subsequently, Chapter III—Special Valuation Rules for Related Parties, Regulations of the Tax Update Law, was published via Government Agreement No. 213-2013 of May 8, 2013, and in November 2016, the Technical Guide for Transfer Pricing Studies was published on the website of the Superintendency of Tax Administration (SAT).
Related-Party Rules in Guatemala
For the purposes of transfer pricing regulations, two parties (individuals, legal entities, and other organizations with or without legal personality) are considered related parties—including a party resident in Guatemala and a party resident abroad—when the following circumstances apply:
- When one of them directs or controls the other, or holds, directly or indirectly, at least twenty-five percent (25%) of its capital stock or voting rights, whether in the domestic or foreign entity.
- When five (5) or fewer persons direct or control both related parties, or collectively hold, directly or indirectly, at least twenty-five percent (25%) of the share capital or voting rights of both parties.
- When the entities involved are legal entities—whether resident in Guatemala or foreign—that belong to the same business group. In particular, for these purposes, two (2) companies are considered to be part of the same business group if one of them is a partner or shareholder of the other and is in one of the following relationships with it:
- It holds a majority of the voting rights.
- It has the power to appoint or remove members of the governing body or, through its legal representative, exercises decisive influence over the other entity.
- It can, by virtue of agreements entered into with other shareholders, exercise a majority of the voting rights.
- It has appointed, exclusively through its own votes, the majority of the members of the board of directors.
- The majority of the members of the governing body of the controlled legal entity are officers, managers, or members of the governing body of the controlling company or of another entity controlled by the latter.
When two (2) companies each form part of a business group with respect to a third company in accordance with the provisions of this paragraph, all such companies constitute a business group.
An individual is also considered to hold an interest in the capital stock or voting rights when ownership of the interest or shares, directly or indirectly, belongs to a spouse or a person related by blood up to the fourth degree or by marriage up to the second degree.
Likewise, the following are also considered related parties:
- A person resident in Guatemala and an exclusive distributor or agent of that person resident abroad.
- An exclusive distributor or agent residing in Guatemala for an entity residing abroad, and said entity.
- A person resident in Guatemala and its permanent establishments abroad.
- A permanent establishment located in Guatemala and its parent company resident abroad, another permanent establishment of the same company, or a person related to it.
Formal Obligations: Informative Affidavits
The obligation to prepare a transfer pricing study in Guatemala does not discriminate against taxpayers based on their level of income or operations, nor does it exempt any taxpayer from filing the Related Parties Schedule (Transfer Pricing Affidavit), provided they have conducted transactions with related parties abroad during the fiscal year.
Informative Affidavit: As established by Article 65, paragraph 1, of the Law, taxpayers are required to include, at the time of filing their Income Tax Return, the information and analysis necessary to demonstrate and justify that the prices between related parties are at arm’s length, therefore, starting with the 2015 tax year and thereafter, taxpayers must file an Informative Transfer Pricing Return—“Annex on Transactions with Related Parties”—which must be submitted by March 31 of each year.
Technical Transfer Pricing Study: The technical transfer pricing study must be made available to the Tax Administration to validate compliance with the Arm’s Length Principle. The Tax Administration has published a Technical Guide on Transfer Pricing Studies, which outlines the minimum requirements that the study must meet, in accordance with the provisions of Decree 10-2012.
Deadline for Filing Annual Tax Returns.
The deadline for filing the Schedule on Related-Party Transactions, which is filed together with the Annual Income Tax Return, is no later than March 31 of the year immediately following the reporting period.
With regard to supporting documentation or the transfer pricing study, the taxpayer is required to submit it to the Tax Authority only when the Authority so requests in writing. To comply with this obligation, the Tax Authority grants a deadline of approximately 20 business days at most, counted from the day following receipt of the notification.
Penalties for Noncompliance
In accordance with the provisions of the Tax Code, failure to comply with transfer pricing reporting and documentation obligations results in a penalty for failure to file upon request by the Tax Administration of Q. 5,000 the first time, Q. 10,000 on the second offense; and for more than two violations, the aforementioned fine of Q. 10,000 plus the equivalent of 1% of the taxpayer’s gross revenue for the most recent fiscal year in which revenue was reported will be applied. Furthermore, if the Tax Authority determines that the amounts of transactions with related parties were agreed upon without complying with the Arm’s Length Principle (Article 55 of Decree 10-2012), it may make adjustments to the taxable base for income tax. The penalty for adjustments resulting in income tax liability will be equal to 100% of the amount of tax omitted, plus any applicable interest, in accordance with the Tax Code.
