The legal system of Guatemala mainly follows the continental or civil law tradition, although certain laws have been inspired by legislation from common-law jurisdictions. Judicial precedent is formally binding only when reiterated across a qualified number of rulings from the higher courts (the Supreme Court and the Constitutional Court). However, non-binding rulings from these courts are often cited and considered authoritative.

The Civil Code has been influenced by historically significant codifications in the Civil Law tradition, such as the French, Spanish, Italian and German civil codes, and is the fundamental basis of private law. Certain aspects of private law (such as issues related to family law, minors, or consumer protection) have also been regulated by other additional legislation with significant public-law elements.

Business law is regulated by:

• the Civil Code, which provides (among other things) the framework for contract law; and
• the Commercial Code, which covers:
1. corporate law;
2. the law on negotiable instruments;
3. the law on commercial agreements; and
4. the law on commercial agency, distribution, brokerage, and business establishments.

There are specific pieces of legislation for banks and other financial firms and activities, such as commercial banking and insurance, as well as for public offering and exchange of securities. Industrial Property (trade marks and patents) is also regulated by specific statutory law.

Certain industrial activities are subject to specific legislation and regulatory authorities – in particular, those related to:

• the extraction of oil and mining;
• energy;
• telecommunications; and
• broadcasting.

Labour relations are mainly regulated by the Labour Code. However, there are other pieces of legislation and regulations that are applicable.

Although Guatemala is a unitary and not federal jurisdiction, municipal governments enjoy a considerable degree of autonomy. For businesses, municipal autonomy is relevant in relation to issues such as construction licences, the operation of business establishments open to the public, certain kinds of infrastructure (such as cell phone towers) or specific types of business locations that may have to comply with additional local zoning rules.

Guatemala’s laws create an open environment for foreign direct investment. As a rule, foreign investors may wholly own investment vehicles and real estate in Guatemala, free from any legal requirements concerning local partners, co-investors, restrictions on the portion of foreign shareholders, and the like. There are some exceptions (eg, open television broadcast through state concession, owning property next to the country’s borders) where some restrictions apply.

There is a specific Foreign Investment Act guaranteeing, among other things:

• equal treatment and enjoyment of constitutional rights to both foreign and local investors;
• the right to take part in any legal economic activity within the country;
• the right to distribute to shareholders or investors in foreign countries any profit generated in Guatemala; and
• the right to repatriate or transfer capital out of Guatemala.

As a WTO member, Guatemala applies the most-favoured-nation and national treatment principles in legislation on various trade-related matters.

Generally, there are no restrictions on doing business with other countries or jurisdictions. There are no exchange control or foreign currency regulations beyond reporting requirements applicable to banks and currency bureaus for statistical purposes. Dividends and capital invested in Guatemala can be freely moved and foreign currency can be used in any kind of agreement and in transactions generally.

The main principle concerning foreign investment, under the Foreign Investment Protection Act, is that of equal treatment for local and foreign investors. This applies to the few investment incentives that are available, such as those for the draw-back industry (involving lowering tariffs on the import of raw materials, machinery, and so on, for the purpose of exporting products manufactured from those materials outside Central America) and forestry projects. There are certain tax holidays and exemptions available under the Free Trade Zones legislation.

The main credit rating agencies in the world have raised Guatemala’s rating following the COVID-19 pandemic, citing the country’s resilient economy, long-standing macroeconomic stability, and cautious fiscal and monetary policies. Inflation expectations have decreased in recent months, with an annual inflation rate of 8.32% in April 2023 ‒ down to 4.18% at the end of the year. Private sector credit has increased, reported at GTQ213,048.90 million for March 2023.

Guatemala’s civil and commercial justice system is undergoing a transition towards electronic proceedings, following lessons learned from the COVID-19 pandemic. Recent amendments to the Code of Civil and Commercial Procedure seek to further enhance the efficiency of the courts through electronic filing. This should have long-term importance for promoting faster response times from a court system that is currently seen by investors as a relevant risk factor for purposes such as recovery and foreclosure.

Other recent developments in legislation that aim to improve economic and investment conditions in the wake of the pandemic include a new Leasing Act, an Act to Promote Investment of Foreign Capital, a new Insolvency Act that completely overhauls and modernises the pre-existing court proceedings for insolvency and bankruptcy, an Act to Simplify Administrative Procedures and Requirements before offices of the central government administration, and amendments to the country’s Free Trade Zones Act.

Guatemala has faced political turmoil following the 2023 general elections, which produced the unexpected victory of a lesser-known opposition candidate as President of the Republic. All this notwithstanding, a peaceful and orderly transition was achieved under the applicable constitutional rules on 14 January 2024.

Although a considerable variety of models and mechanisms are employed to achieve corporate transactions, the most common structures used include the purchase of shares issued by the local corporation or by a foreign holding company (as may be the case), assets acquisitions, and corporate mergers. As regards cross-border transactions, the corporate structure usually involves local operative companies directly or indirectly owned by corporations organised in other jurisdictions and Guatemalan taxes generally do not apply where the purchase, transfer, and registration of the transaction occur outside the jurisdiction of Guatemala among non-resident entities.

Even though Guatemalan law allows for public offerings of company shares and securities in the local stock market, there are few distinctions between public and privately held companies or businesses as in other jurisdictions. However, the acquisition of control of a publicly held corporation must be reported and made public before the acquisition can proceed.

The Commercial Code establishes two ways of merging business entities:

• merger properly, in which the merging entities cease to exist and a new one is created; and
• merger by acquisition, in which one of the merging entities subsists and absorbs the others, which cease to exist.

In both cases, the new entity or the surviving entity respectively become the successors to all the rights and obligations of the merged or acquired corporate entities.

Mergers must be executed through a public deed before a notary public and filed with the Commercial Registry after public notice in the Commercial Registry’s online bulletin, giving creditors a legal term of two months to oppose the merger or acquisition (unless their credits are paid, secured or deposited). The Commercial Registry’s role is limited to granting publicity and certainty. It does not review or approve the merger in terms of competition regulations.

De facto mergers – through acquisition of assets or voting control – are not restricted and are not expressly regulated as such, except where the target company is publicly traded. The fact that, in practice, the end result of any of these transactions may be equivalent to a merger does not require any additional legal formality.

The main corporate or legal entity forms used in Guatemala are the stock corporation (Sociedad Anónima) (SA) and the limited liability company (Sociedad de Responsabilidad Limitada) (SRL). Foreign companies may also operate through a local branch (sucursal).

One of the main differences between establishing a branch or an agency versus organising a subsidiary is that the parent company of the former is generally liable for the business and obligations of the branch/agency but not for those of a subsidiary. The liability of the shareholders in an SA is limited to the subscribed capital, except where ‒ under general law – the subsidiary has been set up with the intent of defrauding third-party creditors by interposing a legal entity between the parent company and the other party.

The SA is the most common form of business vehicle used in Guatemala. It offers the most flexibility, allowing shares to be freely transferred, which is not the case for a limited liability company. The costs are reasonable, as the minimum capital required is the equivalent of approximately USD26 and the cost of setting up the company is approximately USD1,850 (including legal fees). The shareholders of the SA are not personally liable for the SA’s obligations beyond the amount of capital each shareholder subscribes and pays. The SA’s obligations are guaranteed by the company’s assets and the shareholders’ subscribed and paid-in capital.

The SRL is used less commonly by foreign companies than SAs – although the start-up costs are lower, as limited liability companies do not require a minimum paid capital (see above-mentioned stock corporation). It is, however, more difficult to transfer ownership in an SRL, as this will require the amendment of the company’s articles of association, as well as the registration – with the Commercial Registry – of a certified copy of the deed needed to make the transfer. An SRL is often used where a “tick the box” tax arrangement is preferred by US corporations for the purpose of paying taxes at the level of the parent corporation and not on distributions from the vehicle. Only the SRL (and the assets belonging to it) is liable for its obligations in Guatemala.

The SA’s governance structure includes:

• the shareholders’ meetings (generally, there are no prohibitions for foreign individuals and/or corporations to be shareholders of an SA);
• the board of directors or a sole administrator; and
• the general manager (CEO) of the company.

It is possible to impose substantive limitations, conditions, and/or special majorities to take any corporate action or to adopt decisions.

Banking and financial firms are subject to certain corporate governance regulations, compliance, and supervision.

Up to two foreign managers can be appointed without prior authorisation from the Ministry of Labour. More foreign managers can be appointed, but it is necessary to prove to the labour authorities that the skills or expertise of the foreign worker is not available in Guatemala. The number of foreign workers in any company must not exceed 10%.

An SA can operate with a sole administrator or through a board of directors, including a general manager. Other managers may be appointed for specific matters. Board members can meet anywhere in the world, depending on the company’s Articles of Incorporation, and can have members and alternate members. Board members may attend meetings either physically or through any method of distance communication, such as telephone conference or videoconference, if such means are allowed in the Articles of Incorporation. Directors can be represented by other directors at a board meeting, if also provided in the Articles of Incorporation.

The board’s chair is the company’s “legal representative”, so the chair’s actions within the scope of the general corporate object (as defined in the Articles of Incorporation) will bind the company. Legal representation can also be granted to other board members, jointly or severally, or for specific areas of business or administrative matters.

Generally, the board of directors sets policy under the rules and framework given by the law and Articles of Incorporation of the company, and the general manager and/or any other managers handle the day-to-day business of the company to achieve the goals and objectives set by the board. The general manager (CEO) usually also bears the legal representation of the company and, as with the chair, the CEO’s actions will bind the company if within the scope of the general corporate object. Legal representation can be granted to other managers, jointly or severally, and/or for more specific matters or areas of business.

The shareholders can restrict the powers of managers through the Articles of Incorporation or by resolutions at shareholders’ meetings. However, bona fide third parties can rely on the company’s legal representatives as having the requisite power and authority to act and to bind the company in any matter within the ordinary course of business (basically the corporate object). Any specific limitations must be included in the deed of appointment, which must be recorded before a notary public and registered with the Commercial Registry.

Directors and officers are liable for any damages caused intentionally or through negligence and any provision to the contrary is null and void. Although they are generally jointly liable, a director or officer who votes against the prevailing decision is exempted from liability. Directors and officers are specifically liable for overseeing that:

• the company’s accounting system is run in accordance with the law and is true and correct;
• capital contributions are made in a timely and exact manner;
• any dividends distributed are based on real profits; and
• resolutions of the shareholders’ meetings are executed and complied with.

Directors and officers are subject to certain fiduciary duties, in the sense that their individual interests must not prevail over or adversely affect those of the company. They must disclose any personal interest in any matter before the board or their office and, if put to a vote, excuse themselves and leave the meeting room. Unless the Articles of Incorporation provide otherwise or the shareholders consent, they cannot:

• engage the company for their own account or the account of a third party in the same line of business; or
• delegate their responsibilities.

In general, minority investors have the same rights as those of any other partner or shareholder. Some provisions of the Commercial Code, while applicable to any shareholder, are aimed at protecting minorities or function as such protection in practice.

All shares within the same class must give their holders the same rights. Additionally, shares are indivisible and even if not fully paid, their holders have a right to vote (unless the company’s Articles of Incorporation provide otherwise). Special classes of shares and preferred shares can be created with limited voting rights as provided in the Articles of Incorporation.

The following rights attach to each share:

• the right to the distribution of dividends;
• the right to the distribution of the company’s capital upon partial or total liquidation;
• the right of pre-emption in relation to new shares issued by the company;
• the right to vote in shareholders’ meetings;
• the right to appoint auditors when none have been named by the shareholders’ meeting;
• the right to convene a shareholders’ meeting when it has not been carried out in the timeframe set by law or if, having been carried out, a legally required item was left out of the agenda;
• the right to convene a shareholders’ meeting, at any time and for any purpose, by petition of shareholders representing at least 25% of voting shares;
• the right to challenge the decisions of a shareholders’ meeting before a court or through arbitration, if applicable;
• the right to file suit for damages against a director or officer, even when a majority has voted to relinquish such right (in such case, shareholders representing at least 10% of subscribed capital may bring action against the director or officer);
• the right to appoint administrators, shareholders have as many votes as the number of their shares multiplied by the number of administrators to be appointed, and may cast all of their votes in favour of only one of the candidates or distribute them among two or more candidates; and
• the right to separate from the corporation under certain circumstances.

As explained in 1.2 Regulatory Framework for FDI, foreign investors and companies (as well as their local investment vehicles) are subject to the same treatment as Guatemalan companies and investors. Thus, SA and SRL companies ‒ the corporate purpose of which is not subject to a specific regulatory regime – must file their balance sheet and profit and loss statements annually with the Commercial Registry and publish them in the Official Gazette. However, this is rarely done in practice owing to lack of space in the Official Gazette.

Additional financial and/or operating requirements apply to companies subject to special regulatory regimes, such as:

• financial institutions;
• insurance companies;
• publicly traded companies or those that have issued securities in the securities markets;
• telecommunications operators; and
• distributors of electric energy.

Guatemala has the Securities Exchange and Trade Market Act 1996, which establishes a legal framework for the development of a local stock market, regulating public offerings, securities, contracts, agents, traders, markets and exchanges, risk assessments, among other aspects.

At present, there is a local stock exchange called the Bolsa de Valores Nacional with self-regulatory powers under the Act. There is also a public registry for the securities market and, while not a regulator in a wider sense as in other jurisdictions, this has the power to oversee that the exchange exercises its self-regulatory powers in accordance with law. The exchange and the securities market are still in the developing stages but have been steadily gaining importance. Banks trade more than a third of their reserves requirements through the exchange and, including transactions in US dollars and in local currency, the monthly average volume of transactions reached approximately USD10 billion in 2022.

The Guatemalan Bank, the Banking Superintendence, and the Ministry of the Economy have been working on a Bill to update the capital markets legislation.

The Securities Exchange and Trade Market Act of 1996 seeks to provide an organised and specialised market in which to carry out securities transactions through professional intermediaries. It sets the legal basis for a stock market (both through a supervised exchange and off-exchange trading), public and private offerings, investors, and traders, etc. It also creates a public registry in charge of recording securities offerings and transactions, as well as related information.

Stock exchanges are subject to specific requirements prior to executing their Deed of Incorporation, which must be authorised by the Commercial Registry along with additional internal Articles of Incorporation. Professional intermediaries (trading and investment agents) do not require special authorisation before being created as business entities; however, their Deed of Incorporation (either from the outset or through amendment) must prohibit other intermediaries from being shareholders or indirect participants in their equity capital, and they must register at the Securities Exchange Registry in order to operate as traders.

A new draft Securities and Securities Exchange Act has been prepared and may be turned into law during 2024.

The Securities Exchange and Trade Market Act 1996 provides requirements for foreign entities wishing to act as agents within the Guatemalan markets. Foreign investors structured as investment funds would need to comply with these and any other conditions applicable to all foreign investors, regardless of their structure.

The Commercial Code enumerates certain activities that a foreign company may carry out in Guatemala, without requiring local presence or authorisation. These include, among others:

• opening and maintaining bank accounts in Guatemala;
• granting loans or opening credits in favour of merchants located in Guatemala; and
• holding securities in Guatemala.

Guatemala’s Constitution establishes general clauses forbidding monopolies and privileges and orders the State to protect a free market economy. However, there is no specific legislation on competition, nor rules concerning merger control.

The Commercial Code contains basic provisions on freedom of contract and a prohibition on discriminating in commercial transactions. It also contains rules on mergers and acquisitions of commercial entities, but these are purely for procedural and administrative purposes and do not amount to a control regime from a competition law perspective.

A merger or acquisition of a bank or financial institution must be approved by the banking regulator.

Several bills on competition law, including merger control, are pending before Congress.

This is not applicable in Guatemala, as there is no merger control regime in this jurisdiction.

This is not applicable in Guatemala, as there is no merger control regime in this jurisdiction.

This is not applicable in Guatemala, as there is no merger control regime in this jurisdiction.

There is no review regime applicable to FDI for national security purposes. Some restrictions based on national security concerns do apply in specific matters ‒ for example, only Guatemalan nationals of origin (born in Guatemalan territory or of a Guatemalan parent abroad), or companies whose members are such, may own property or possess real estate within 15 kilometres of the country’s borders.

This is not applicable in this jurisdiction, as Guatemala does not have a foreign investment/national security review regime.

This is not applicable in this jurisdiction, as Guatemala does not have a foreign investment/national security review regime.

This is not applicable in this jurisdiction, as Guatemala does not have a foreign investment/national security review regime.

Guatemala has a Foreign Investment Act (Decree 9-98 of Congress) establishing the general rule by which a foreign national must enjoy equal conditions as Guatemalan nationals in all economic activities, forbidding any discrimination, except as provided in the Constitution or economic sectors subject to specific regulation. Its Executive Regulation is contained in Government Agreement 893-98, which creates an office within the Ministry of the Economy tasked with overseeing its implementation.

Companies must pay income tax in Guatemala on Guatemalan-sourced income, regardless of nationality or residence. However, the tax regime applicable to residents differs from that applicable to non-residents. While tax resident companies are taxed according to the nature of their income (whether derived from their main business activity or from capital investments, and so on), tax non-resident vehicles are subject to withholding taxes – the rates of which vary according to several categories of income (interest, dividends, remuneration for services, royalties on IP, and so on). Tax resident businesses are not liable to pay tax on worldwide income.

Residence depends, broadly, on:

• physical presence in Guatemala for more than 183 days in a year;
• carrying on business activities in Guatemala on a habitual basis;
• having the company’s main business interests or administrative headquarters in Guatemala; and
• becoming organised under the laws of Guatemala and establishing the company’s tax residence in Guatemala.

Non-residents are subject to tax in Guatemala only on Guatemalan-sourced income. This includes income derived from the provision of services, capital investment, labour, royalties on intangible assets, and capital gains.

The main taxes applicable to a business vehicle in Guatemala are as follows.

• Corporate income tax – corporate business vehicles are generally subject to a 25% tax rate on net income. There is an alternative regime available to all taxpayers where gross income is taxed at 7%. For those taxpayers with an effective tax rate of 7% or more, this may be the best choice as administrative costs are very low (meaning that there is no need to determine applicable deductibles or their amount). The default and main method of payment of income taxes consists of a quarterly interim payment (calculated on the previous fiscal year’s results or, alternatively, on a forecast for the current fiscal year) to be liquidated at the end of the fiscal year when compared to the definitive results. The alternative method, calculated on gross income, consists of either a withholding applicable to every amount paid to the taxpayer or a direct monthly payment by the taxpayer of the 5% or 7% on gross income.
• VAT – there is one rate of 12%, which is applicable to all sales of services and goods, except for real estate and motor vehicles, where the seller’s trade is other than those transactions. VAT is paid on a monthly basis.
• Import duties ‒ Guatemala’s economy is open, and therefore the average import duty rate is 7%. Guatemala, however, has secured free trade agreements with its major commercial partners. Therefore, close to 90% of all imports are subject to rates lower than 7%.
• Social security contributions are a total of 17% ‒ of which the employer contributes 12.67% and the employee 4.83%. The employer has the legal obligation to withhold and pay, on behalf of the employee and itself, the relevant contribution. Withholdings and payments are made on a monthly basis.
• Excise taxes for certain areas of business – namely, soft drinks (GTQ0.8 to GTQ0.18 per litre), alcoholic beverages (6% to 8.5%), gasoline (GTQ4.70 per US gallon), diesel oil (GTQ1.30 per US gallon), cigarettes (100% of the 75% of the suggested retail price for each packet of ten packs of 20 cigarettes), among others.
• Property tax on the recorded value of real property – at 0.9%, 0.6%, and 0.3%, depending on the value.

Dividends distributed to shareholders, whether resident or non-resident, are taxed at 5% and withheld by the paying company. Dividends received from Guatemalan companies would normally have been subject to withholding tax. Dividends received from foreign companies that do not operate or have a permanent establishment in Guatemala are considered to be foreign source income and therefore not subject to taxation in Guatemala.

In general, the payment of interest is subject to 10% tax, whether paid to residents or to non-residents, with some exemptions, such as:

• government bonds; and
• insured mortgage-backed securities, for the development of low income housing projects.

For foreign financing, interest on loans made by fully licensed banks or financial institutions to Guatemalan companies is also exempt (though it is recommended that a ruling is sought from the Tax Administration). However, if the resident regularly derives income from financial transactions, the income will be subject to corporate income tax.

IP royalties paid to non-residents are subject to a 15% withholding tax.

In share acquisitions and disposals concerning cross-border transactions, where the sale, merge and/or acquisition takes place between non-resident individuals and/or corporate entities, tax can be mitigated by executing the transaction outside Guatemala. Capital spin-offs can be carried out under Guatemalan law. However, the Tax Administration emphasises substance over form when reviewing these types of transaction. Therefore, if there is no economic substance in performing the transaction (except for the sole purpose of reducing tax liabilities), the transaction could be considered to constitute a form of tax fraud.

In asset acquisitions and disposals, depending on substance, appropriate due diligence, and transparency considerations, tax can be mitigated by considering the following:

• contributing the assets to an entity and then being paid in shares, which will make the seller a shareholder of the entity; or
• selling ownership shares of an entity instead of a direct sale of its assets, which will give the buyer ownership or control of the assets belonging to the entity.

Both options will mitigate the tax burden (as the applicable taxes correspond to the asset contribution or the sale of shares and not to the direct sale of assets). Also, the transfer of shares generally does not have a direct effect on the value of real estate, which would otherwise be subject to a value assessment for property tax purposes.

For mergers, the Commercial Code establishes a single procedure. Therefore, there are no transaction structures commonly used to mitigate the tax burden. However, if the merger occurs as part of a corporate reorganisation, the VAT liabilities and credits resulting from it will be absorbed by the new entity.

To mitigate the tax burden, reorganisations can be structured by way of a merger instead of transferring assets between group companies.

Guatemala does not generally exempt capital gains. Capital gains are taxed as a special category of income under the Income Tax Act. The generation of Guatemalan-sourced income and gains derived from assets is regarded as a triggering event. All individuals, entities or assets without corporate existence (eg, trusts and undivided hereditary estates) that are resident in Guatemala are subject to the tax, as are non-resident foreign companies that are beneficiaries of Guatemalan-sourced income or gains.

This category of capital gains includes, among other things:

• dividends;
• interest;
• royalties;
• rents from property; and
• winnings from lotteries or contests.

Income from dividend distributions and interest payments are charged income tax at a rate of 5%, whereas income from capital gains is charged income tax at a rate of 10%.

Income from asset disposals may constitute a capital gain for the seller, subject to income tax at 10%. Share acquisitions and disposals are potentially subject to income tax on capital gains under the Income Tax Act. However, if the gain is generated outside of Guatemala, it will not be subject to income tax in Guatemala, as it is not Guatemalan-sourced income. Share acquisitions or disposals are exempt from stamp tax, except when shares are acquired by the final recipient of a right of ownership in real estate housing projects.

Transfer pricing rules are applicable to transactions between related parties, concerning both products and services. The system follows the OECD rules on transfer pricing, including valuation methodology, reporting requirements and criteria on company groups, with reference to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2010.

The Labour Code is the main source of labour law. Other rules can be found in the Constitution, specific statutes amending the Labour Code or creating new obligations, and international treaties ratified by Guatemala. The main aspects governed by labour law include wages, right to severance pay for unjust dismissal, ordinary working hours and overtime, certain mandatory bonuses, paid leave, maternity leave and protection of nursing workers, right to unionise and collective bargaining, health and safety, social security.

Parties may only override provisions of the Constitution, Labour Code, treaties, or collective agreements, if such contractual provisions improve the rights and conditions in favour of the employee. Rights and conditions can also be improved through workplace custom or practice. It is not legally possible to renounce any benefit already established by law, convention or custom in Guatemala.

The application of labour laws does not necessarily depend on the will of the parties as expressed in an agreement, but on the facts of the situation as characterised by labour law. By way of example, a labour judge is likely to rule that an individual service contract is subject to labour laws where there is any agreement, memorandum, accounting documents or any other evidence establishing facts such as employment hierarchy and direction, working time, disciplinary measures, etc, even if the agreement’s text stated that it was of a civil or commercial nature.

Employment contracts must be executed in writing. The burden of proof of the written agreement lies on the employer and, if no written contract can be produced as evidence before a labour judge, the employment conditions argued by the employee will be taken as a fact.

The same rules apply to national, resident, and foreign employees working in Guatemala. Frequently, when foreign companies wish to reproduce employment policies that apply in their original jurisdiction, employee benefits are considered in addition to – rather than in replacement of – those established by applicable Guatemalan law.

The Constitution guarantees a minimum wage, which is set annually by the government on the advice of commissions formed by employees, employers, and public sector delegates. Different minimum wages apply for different activities, usually divided into three categories:

• general or non-agricultural;
• agricultural; and
• export and maquila.

Within these categories, the minimum wage applies to all employees, regardless of their age, industry, or experience. For 2023, the government further differentiated minimum wages by region: one for the Department of Guatemala (which includes the country’s capital) and one for the rest of the country’s departments (21 in total).

Wages must be paid in legal currency and it is prohibited to pay them – wholly or partially ‒ in coupons, vouchers or any other item intended to substitute legal tender. However, farming workers may receive up to 30% of their salary in food or other items for personal or family consumption, provided their value is at cost or below cost (for purposes of calculating the percentage of salary they replace). Part-time employees have the same rights as all workers, in proportion to the amount of time that they work. They are entitled to salary on an hourly basis, which cannot be lower than the minimum wage per hour.

The frequency of salary payments must be agreed by the parties but may in no case be more than fortnightly for manual workers, and monthly for intellectual and domestic workers. Its amount may be calculated in one of three ways:

• by unit of time (monthly, fortnightly, weekly, daily, or hourly);
• by unit of work (per piece, task, etc); and
• by participation in profits, commissions on sales or collections, without the employee assuming the employer’s risk of losses ‒ in this case, a fortnightly or monthly sum must be assigned and paid, subject to a final liquidation that must be carried out (at least) yearly.

Specific statutes mandate one mid-year and one Christmas bonus. The Christmas bonus, or Aguinaldo, was legislated based on pre-existing widespread practice. The mid-year bonus is commonly known as “Bonus 14”, as it was introduced as a 14th monthly salary when the Christmas bonus already existed as a 13th. Both are equivalent to one month’s salary, or a proportionate lesser amount if the employee has not worked for a whole year when payment for that period is due.

Legislation also creates a mandatory productivity bonus, which must be agreed between companies and employees in accordance with their own productivity and efficiency systems and must be paid to employees along with the monthly salary. By law, the productivity bonus must be a minimum of GTQ250 (approximately USD34) per month. In addition to this mandatory minimum productivity bonus, it is common to reward employees through other contractual or discretionary bonuses. There are no restrictions or guidelines on what bonuses can be awarded.

All salaries, bonuses, and other applicable benefits must be paid to the employee up to the date of their dismissal, whether the dismissal is for a just cause or not. However, if the dismissal occurs without a just cause, the law additionally requires payment of a severance amount for damages, equivalent to one month’s salary for each year of continuous service (or in proportion to the period of continuous service where this is less than one year).

For purposes of Aguinaldo, Bonus 14, and severance, a “monthly salary” is not limited to basic or nominal wage. Rather, it is an average calculated on the last six months of total compensation including all payments received, such as bonuses, overtime, and other applicable benefits.

Acquisitions and other investment transactions typically involve, as part of due diligence, a review to establish whether the structure and practice of compensation comply with applicable law. This includes the above-mentioned aspects but, importantly, also to establish if tax withholdings and payments of social security contributions are being calculated correctly. A review will also analyse if there are any risks arising from potential misclassification between employees and service providers, as well as financial provisions for future payment of accumulated labour liabilities.

As a rule, the Labour Code states than the substitution of an employer may not adversely affect employees, and that employment contracts may not be transferred without the employee’s consent. However, this will depend ‒ in each case ‒ on the legal form taken by the acquisition, change-of-control, or other investment transaction. In general, there are some transactions (eg, acquisitions) in which the corporate entity of the employer remains the same and others in which the employer formally changes.

The first type of operations will have no effect on the labour relationships or on employees’ rights. This would be the case, for example, in a share purchase: the employer is still the same legal person (entity), having only changed its shareholders, and the labour relationships suffer no modification.

In cases where the employer does change (such as a merger originating a new entity), the substituted employer is jointly liable with the substituting employer for all contractual and statutory obligations originating both before the substitution (transfer) and during the six months immediately following the transfer. After six months, only the new employer becomes liable for these obligations.

Guatemalan law considers employment contracts as part of the commercial enterprise as a movable good. Therefore, labour contracts are considered included, by default, in any contract over the enterprise (such as its purchase), unless otherwise stated by the parties. Both commercial entities and individual merchants may be proprietors of commercial enterprises.

There are no collective bargaining requirements to be met to complete an acquisition or other investment transaction, as a matter of general statutory provisions. They may, however, exist in particular collective agreements in force at a given workplace ‒ although it is not usual.

As explained in 1.2 Regulatory Framework for FDI, foreign investment is promoted in Guatemala by granting foreign investors the same treatment and rights as Guatemalans. Therefore, there is no special screening or review process that takes IP into account.

Intellectual and industrial property rights are specifically included within the legal definition of investment under the Foreign Investment Act. The Act’s Regulation, furthermore, states that foreign investment should be promoted by the Ministry of the Economy to foster transfers of technology (among other ends).

Guatemala’s Copyright and Neighbouring Rights Act states that foreign nationals have the same rights as Guatemalans for purposes of its subject matter. Guatemala’s Industrial Property Act expressly incorporates the principle of national treatment for the protection of industrial property (trade marks, patents, trade secrets and unfair competition). Both Acts are relatively recent (enacted in 1998 and 2000, respectively) and were amended in 2006 to comply with DR-CAFTA. Furthermore, Guatemala is party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (the “TRIPS Agreement”) and all the main IP treaties administered by the World Intellectual Property Organization (WIPO), including Berne, Rome, Paris, the WIPO Copyright Treaty (WCT), the WIPO Performances and Phonograms Treaty (WPPT), the Trademark Law Treaty (TLT) and the Patent Cooperation Treaty (PCT). Therefore, legal protections are designed to be strong and up-to-date, both in substance and in procedural aspects. By way of example, the Acts grant special powers to judges and to customs authorities for the protection of IP rights.

There is no secondary political authorisation required to obtain or enforce rights, other than the normal registration procedures generally applicable both to Guatemalans and foreign nationals. The Industrial Property Act does allow for compulsory licensing, which it regulates in certain detail.

The national equivalent to the Freedom of Information Act (Ley de Acceso a la Información Pública) regulates access to public registries and records, transparency of public offices, and also contains provisions related to habeas data, or the right of persons to know which personal information of theirs exists in public files, records or registries, the purpose for which such information is used, and to protect, correct, rectify or update such information.

It also sets provisions against commercial use of personal data without prior consent and prohibits the commercial use of sensitive private data. The legal definition of sensitive private data includes physical or moral characteristics of persons, facts or circumstances of private life and activity, such as personal habits, racial or ethnic origin, ideology and political opinion, religious belief or conviction, physical or mental health, sexual orientation or sex life, moral or family situations, and other intimate aspects of a similar nature.

The Act is applicable in Guatemala, without an extraterritorial scope. Enforcement has been focused on public authorities, for purposes of access to information ‒ although some cases have been brought against private companies engaged in widespread commercialisation of private data.