• Guatemala and the challenge to adapting their tax system to the transparency and international co-operation in tax matters

    By Jennifer Ebrecht


    On 9 June 2017, the President of the Republic of Guatemala, Jimmy Morales, deposited Guatemala’s instrument of ratification for the Convention on Mutual Administrative Assistance in Tax Matters, being a remarkable achievement to Guatemala and a specific commitment to greater transparency and international co-operation in tax matters.

    This challenging process started on 2016 with the publication of N° 37/2016 Decree, that modified the previous N° 22/2002 which regulated the Banks and Financial Groups Laws, and previous N° 6-91 Decree regarding the Tax Code.

    Since then, we can state that Guatemala has lifted the Bank Secrecy which is reaffirmed with the ratification of the Convention on Mutual Administrative Assistance in Tax Matters.

    The main disposition on Decree N° 37/2016, is in relation to information to be shared with the Tax Authority, enabling the possibility to ask for information about operations and transactions regarding tax matters to any Bank or financial institution. This information request however, cannot be extensive, to the contrary, it must be specific putting the accent on the transaction or operation to analyze and on top of that, it must be done by judicial petition.

    With this petition, the legislator wishes to safeguard the data protection from third parties that could profit from it. As such, the process is such so as it can only be actioned through a judicial petition.

    Another important modification generated by this Decree is in regard to the requirements to offshore companies, which now are more rigorous than before this new legislation.

    When it comes to the Tax Code, modifications were made on article 30. “C”, granting the Tax Authority with the ability to require taxpayers’ information to banks, and other financial institutions. It is important to highlight here, that this rule is key, as it delegates all powers to ask for any requirement, only with the judicial petition as a restriction, and aiming to use this information on Tax matters.

    As a consequence, up until the ratification of the Convention, tax information could only be shared into the Guatemalan Tax Jurisdiction, yet now it can be shared with any country that signed the Tax Convention.

    In this way, we can be positive and ratify that Bank Secrecy in Guatemala is fatally wounded.

    Furthermore, the Convention is the most powerful instrument for international tax co-operation. It provides for all forms of administrative assistance in tax matters, for example: exchange of information between countries on request or spontaneous exchange and even automatic exchange.

    On the other hand, the Convention provides tools like tax examinations abroad, simultaneous tax examinations and assistance in tax collection while guarantying safeguards for the protection of taxpayers' rights.

    The Convention currently has 114 participating jurisdictions1. The OECD considers that this instrument is helping the world to boost its transparency and to fight offshore tax evasion and avoidance. At the same time, this Convention is implementing the new Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries. It can also be used to swiftly implement the transparency measures of Base Erosion and Profit Shifting (BEPS) project specifically in case of the automatic exchange of Country-by-Country reports under Action 13 as well as to share rulings under Action 5 of the BEPS Project.

    1. 114 jurisdictions participating. Status at 25° October 2017.
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  • The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.

Jennifer Ebrecht

Jennifer Ebrecht is an International Tax Lawyer based in Costa Rica, she was born and raised in Argentina. Her practice concentrates on direct taxes, including tax planning, M&A, BEPS, transfer pricing and cross-border investments in Latin-America. In June 2013 she won a public competition as a Tax researcher in the Tax Investigation Department of Argentinian Association of Fiscal Studies (AAEF). She obtained a Master Degree in International Taxation on Torcuato Di Tella University in Buenos Aires.

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