Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

February 21, 2020
2020-5260

Guatemala allows airlines engaged in international transport services to deduct costs and expenses generated outside of Guatemala

On 10 February 2020, the Guatemalan Government published in the Official Gazette Decree 2-2020, which was approved by Guatemala’s Congress on 20 January 2020. The decree allows airlines engaged in international transport services to deduct costs and expenses generated outside of the Guatemalan territory that are necessary to provide transport services in Guatemala. The decree generally applies from 11 February 2020, but the income tax provisions will apply beginning 1 January 2021.

Specifically, the decree incorporates Section 21 bis into the Income Tax Law (ITL), which requires foreign taxpayers to apply the ITL’s general deduction rules if they: (i) carry out international air transportation activities to and from Guatemala; and (ii) have operations performed by branches, agencies or other permanent establishments in Guatemala. In addition, they may deduct a proportion of the overall costs and expenses reported by their parent company in accordance with the following formula:

Proportionate expenses = ((Income of the branch or Permanent Establishment / Global income of the parent entity) * (Global expenses – expenses registered locally)) – Expenses registered locally

The formula will be automatically calculated by the tax authorities’ electronic system when preparing the electronic tax return for income tax purposes.

The decree provides that the proportional expenses determined by the formula should not be considered as income as it is a repayment on a pro-rata basis of the expenses incurred by the parent company, to the extent the expenses are necessary, indispensable or pertinent to produce taxable income for the permanent establishment in Guatemala.

Additionally, the decree incorporates Section 21 ter into the Income Tax Law, which requires airlines to support the information for the proportional deductible expense calculation with the parent company’s audited financial statements, which must be: (i) created in accordance with international accounting rules; (ii) duly apostilled; and (iii) translated to Spanish. If a taxpayer (e.g., branch, agency, permanent establishment) is unable to provide the audited financial statements, the decree allows the taxpayer to apply the presumption that the taxable base is 15% of its gross income and is subject to a 25% income tax rate. This provision is effective 1 January 2021.

For additional information with respect to this Alert, please contact the following:

Ernst & Young, S.A., Guatemala
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

ATTACHMENT

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more