Will the Righteous Pay the Taxes of the Sinners?

Ximena Tercero, tax expert in Guatemala, shares her perspective on the consequences of the punitive actions announced by the Superintendence of Tax Administration (SAT) on May 21, 2024, regarding taxpayers who issue to Final Consumers (C/F invoices).

In 2023, the Value Added Tax Law Regulations and the FEL system were amended to restrict the issuance of C/F invoices for amounts exceeding Q. 2,500.00 (USD 324.00). Recipients of such invoices must now identify themselves with a Personal Identification Document (DPI) number or passport number, in the absence of a Tax Identification Number (NIT). This measure aims to expand the taxpayer base, promote transparency in purchases and prevent tax fraud. It is noteworthy that in Guatemala, there is a large informal sector, and only 7,080 taxpayers contribute 80% of the revenue.

A year later, according to SAT statements, a practice of splitting invoices has been detected. This allows the purchase of goods for values exceeding Q.2,500.00 through the issuance of consecutive invoices for amounts just below this limit. In response to this practice, SAT has announced criminal prosecution for tax fraud, temporary closure of establishments, and/or money laundering.

Although these measures seem focused on preventing fraud by invoice recipients, who are more likely to evade their tax obligations, they may also pose criminal risks for taxpayers who issue C/F invoices in significant volumes, especially if they are sequential, even when such taxpayers comply with their tax obligations. This is relevant for taxpayers with high sales volumes outside Guatemala City or in areas where cash is commonly used for the payment of personal consumption goods.

Through the announcement of these actions, SAT aims to prevent the purchase of products for resale in the informal market, which usually omits the payment of Value Added Tax and Income Tax. While SAT's goal is to promote tax compliance across all sectors of the economy, it overlooks the potential legal risks for invoice issuers.

Such a measure can negatively impact sales levels in certain areas and increase costs to ensure that the sale is genuinely for final consumption and not for resale, imposing additional and external responsibilities on the issuer. Furthermore, there is the risk of legal penalties for compliant taxpayers becoming entangled in punitive processes.

Having a broad tax base in the country is important; however, it is also crucial to guarantee the rights of taxpayers who have historically contributed to its establishment.

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.