LEGAL FRAMEWORK

The Constitution

With the return of democracy in 1985, a new Constitution came into effect, which guaranties human rights for all the people living in the country. This new constitution also recognizes the main liberties and safeguards that people and corporations enjoy; such as liberty of petition, free movement around the country, free speech, right not to self-incriminate, due process, access to property and such.

The Guatemalan constitution guarantees the right of private property, and to be duly compensated in a case of confiscation. This compensation has to be cash, and for a price convened for by independent experts (Articles 39 and 40 of the Guatemalan Political Constitution).

The Constitution and other constitutional laws provide the same degree of protection and rights to an individual or a corporation, being national or foreign, without any distinctions.

The Judicial System

The Guatemalan Judicial System is composed of independent courts, with the Supreme Court of Justice at the top of the hierarchy. The judges are elected by congress, nominated by the magistrates of the Supreme Court, and can only be removed with “just cause” before their period is over.

The administrative judges have the power to review the dealings and decisions of the executive branch, with a further right to appeal to the Supreme Court after their decision.

Guatemala has a separate Constitutional Court, which is the supreme entity in constitutional matters. It exercises control over the laws promulgated by Congress.

Land Law

The Guatemalan Constitution guaranties the right to own land. Several exceptions apply, such as near the shore of the oceans, and near the border with other countries.

Since 1990, there has been in effect a new law, which has established regulations for areas the Guatemalan state decided should be preserved. The law casts a total ban on any activity within those areas, or to lesser degree just regulates agricultural and settlement activity within them.

Commercial Law

The Guatemalan Commerce Code gives the option of incorporation for companies in various forms. The most commonly used is the “Sociedad Anónima,” which gives the option to issue nominative shares. A foreign corporation can do business in Guatemala with a simple registration, which requires the designation of a local legal representative.

Taxation

Overview of the taxation system:

· The Corporations and individuals in Guatemala have to pay an income tax, with two options, 31% of net income or 7% gross sales, which can be inter-changed every year.

· The Value Added Tax is 12%, and affects most of the goods and services that are for sale in regular commerce.

· The property tax is a municipal source of revenue, and has a progressive scale. It tops off at a rate of 0.9% of the registered value of the real estate.

There is a Solidarity Tax of 1% gross sales (in case of the 31% regiment), or 1% of total assets, whichever is higher, which can be offset at year’s end with the amounts to be paid in income tax (it is sort of an alternative minimum tax).

Accounting

Proper accounting records must be maintained, and financial statements must be retained for at least four years. It is regulated by Guatemalan laws, and Generally Accepted Accounting Principles (GAAP) apply.