Company Registration in Guatemala

Guatemala is not only a popular destination for travelers in Central America. This is also a business hub that offers favorable conditions for doing business, including worldwide. The most developed sector of the economy is agricultural with a great part of export for coffee, bananas, and sugar. However, the local government made steps to diversify the economy, including through the involvement of foreign capital in the country. Construction and service sectors are prioritized in this context. So, company incorporation in Guatemala City or in any other location in this state may bring these benefits to your business.

Why Choose Guatemala as Your Target Jurisdiction?

A business solution to buy a company in Guatemala or register a new one promises to be highly profitable in view of the next advantages:

• strategic location in Central America with access to huge markets, including for the export of food products;
• moderate transactional costs to start a new business and simplified registration procedures;
• skilled manpower involving which requires reasonable employment costs;
• free trade zones are available;
• developed and modern infrastructure;
• convenience of international banking transactions in currency, without limitations.

Legal and Organizational Forms in Guatemala

Start a company in Guatemala or formalize your official presence in an alternative way after making a choice in favor of one of these options:

• Corporation company (Sociedad Anónima) – the most popular registration solution among foreign investors as it enables quick and convenient ownership transfer. The minimal capital should be equivalent to specific goals set by the promoters. All kinds of obligations, including monetary and legal, of the company’s shareholders are restricted to the funds contributed solely. At least two shareholders are needed for this company, of any nationality.
• Limited liability company – this is an alternative but less popular choice for most investors because of less flexibility during the share transfers. Although, investors will bear limited financial and legal obligations as well. Such will not exceed the funds contributed to a business under any circumstances. Two promoters may establish this entity. One director will be required. There are no statutory requirements concerning the involvement of a secretary, formalizing an official legal address, and minimal capital needed for this entity.
• Branch – this is also an option for doing business in Guatemala but without investing funds and establishing a separate entity. In the case of a branch, a separate legal personality is not granted and a mother company remains 100% in charge of all monetary and legal obligations of its branch. However, a branch may be a good instrument to arrange interaction with local customers and contractors more conveniently and at lower costs.

Steps to Register a Company in Guatemala

An investor who has decided to establish a company in Guatemala should pass these stages regardless of the business form chosen:

1. Forming the scope of commercial operations that you are going to carry out through a local Guatemalan entity.
2. Finding and verifying a business name for a Guatemalan legal entity.
3. Gathering and arranging appropriately the details about the future legal entity’s promoters, beneficiaries, a parent company (if any), and managers.
4. Depositing the amount of share capital (the step is always required for foreign investors, at least 25% of the share that each promoter holds should be fully paid up).
5. Drafting corporate documents for a future company, including its articles of association and resolutions of founders.
6. Submitting the set of registration documents for consideration. Entering the details about a new Guatemalan company in the Commercial Registry.
7. Formalization of a new business form to pay taxes and compulsory social security payments.
8. Opening a corporate bank account(s).
9. Applying for and formalizing required licenses and permits to start a certain regulated business.

Legal and Regulatory Framework

The local legislation was formed under the impact of French civil law. Guatemala is very favorable to foreign investors. The policy of the local government is focused on prohibiting the discrimination of foreign investors in any form. They enjoy equal rights and treatment as the locals. Foreigners don’t need to have a local partner with a specific share to start a business in Guatemala.

Administrative procedures are much simplified. This point is relevant to business incorporation, electronic fillings, permit applications, and various certifications. Moreover, foreign investments are encouraged through different incentives, for example, tax exemptions for the next 10 years after the registration in certain industries, lowered tariffs, etc. There are also options for public-private partnership – a good example is the construction of infrastructure facilities.

Taxation in Guatemala

Any preliminary assessment about company formation in Guatemala or buying the existing one should comprise the approximate calculation of the taxes due. These rates are applied to the basic taxes in Guatemala:

• Profit tax (for businesses) – (1) general system – 25% on net income (2) simplified (optional) – 7% on gross income
• Income tax (for natural persons) – 7%
• Value-added tax – 12%
• Withholding tax (for non-residents) – (1) dividends – 5% (2) interests – 10% (3) royalties – 15%
• Capital gains tax – (1) for businesses – 10% (2) for natural persons – 10%.

How Prifinance Attorneys Can Assist You

If you are interested in establishing a company in Guatemala or buying ready-made, provide the details about your expectations and the background of a case to our experts. Get fully professional and customized legal advice on the matter.