By Jose de la Peña, Founding Partner – CLD Guatemala
The virus attacked us. COVID-19 affected everyone, some in their system and the vast majority economically, that is why from the worst crises, we must take the best strategies and rethink a growth taking advantage of all the points that we were forgetting in our old normality.
That is why the team of professionals at CLD Legal will talk about issues that we have all missed and are tools to take advantage of our new economic growth.
With the support and supervision of the World Trade Organization, Special Development Zones, Free Trade Zones, or any of the names that have been given to them worldwide, approximately 3,500 of them have been implemented in 135 countries around the world. being the main incentive in developing countries.
The purpose of this customs figure is to promote economic growth, facilitating international trade and investment. It seeks to promote both export and import; production and competition, attract direct foreign investors, reduce trade inequalities, and stimulate the diffusion of technology, among other benefits.
In Guatemala, under Decree 4-29, the figure of the Free Trade Zone was used, which gave highly positive results, unfortunately, the tax and customs authority (SAT) lacked a long-term vision and insisted that these be closed and stop the operation because by exempting taxes and duties, the Tax Authority was losing too much revenue to capture in its role as tax and tariff collector.
As a result, in 2019 under the name of Public Special Economic Development Zones (ZDEEP), this figure was created in Guatemala, through the resolution of the Board of Directors of ZOLIC (Free Industry and Trade Zone “Santo Tomás de Castilla”) number 04/05/2019, which authorizes the Regulation for the authorization, authorization, and operation of the ZDEEP, which was published on February 1, 2019.
The ZDEEP has the main peculiarity compared to the figure used in previous years (Free Trade Zone ), in the sense that the latter could be constituted only in areas adjacent to a port and its operation was mainly oriented to export.
However, since the ZDEEP is created by the law of the Free Industry and Trade Zone “Santo Tomás de Castilla”, this empowers the establishment in any part of the country, an area under this figure, which is mainly aimed at causing an economic impact on the municipality and department where it will be developed, and will also allow the export and import of goods to the country.
The basis of its creation is to cause economic impact in the area where it is developed, by constituting one of the essential elements to start operations (economic impact study in the area), in addition to the jobs that it will generate directly and indirectly; the taxes that the State will collect on expenses, consumptions, and others that people make in the surrounding area since the ZDEEP will generate development to the municipality of the country where it is little governmentally.
Once the ZDEEP is constituted, it can be used for the following purposes and installation of Users:
It is attractive from two perspectives:
- INVESTORS who own or can acquire real estate located in strategic points in Guatemala, can submit to the figure of ZDEEP and become an Assistant of the Customs Public Function of SAT. Under this regime, they lease or Usufruct the property in favor of ZOLIC and it is with these that each user must receive each area located within the zone and thus enjoy the tax and tariff incentives that they enjoy. This impacts economically also on the number of jobs they will generate and the surrounding investment that it entails, since one of the requirements is to have a land of more than 10,000 square meters or if it is a smaller space, they must generate more than 400 jobs in a term in common agreement with the customs authority.
The Investor that constitutes the ZDEEP has an area with basic infrastructure to allocate it to the users identified in the previous section, of the total charge for area lease, 60% to 70% of the total charge is for this, and thus allows to recover the investment, generate operating costs and generate profits.
- USERS are made up of natural or legal persons who wish to carry out their operation within a ZDEEP and benefit from the following exemptions:
- 100% Income Tax (ISR) for a period of 10 years, for services provided to users of the ZDEEP
- Tax on Value Added (VAT), Import Tariff Duties (DAI), and other charges applicable to the importation of merchandise entering the ZDEEP. This allows them to be converted and used as raw material to produce a developed product as a final product or to bring it into the country.
- Value Added Tax (VAT) for taxable events and acts carried out within the ZDEEP until they are exported.
- Tax Stamp Tax on documents containing acts or contracts on goods and businesses in the ZDEEP.
It is also attractive to the Municipalities where the ZDEEP is installed, since they could receive a percentage of the final profits, which makes the operation attractive, due to the influence and help generated by the Municipality of influence.
One of the best benefits for the international market is the fact that the merchandise DOES NOT fall into ABANDONMENT, this has been a link in international logistics that has caused great damage, since many importers lose the merchandise because the 20 days have expired (deposit temporary customs) or 1 year (Tax/customs warehouse), taking into consideration that in third world countries the bureaucracy and slowness with which operators operate, constitute a negative element compared to the aforementioned deadlines.