International air transport income tax in Guatemala

Lester Meda (Guatemala)

The aviation services are regulated by the Air Transportation International Association, which promoted the subscription of the international agreement called “Montreal Agreement” in 1999.

One of the most important aspects of this agreement has the purpose to create a general framework regarding the obligations relating of the international transportation activity, so they won´t generate any obstacle and which it won’t make difficult to operate in a specific territory. 

These obstacles include the way to calculate the incomes in order to avoid double or multiple taxation. 

This international instrument also allows specific bilateral or multilateral treaties to deal its matters. For this reason, Guatemala and United States signed an aerial transport agreement. By law, the agreement exonerates from certain taxes to these airlines, putting in disadvantage airlines from other countries. Additionally, the local law gives certain advantages to local airlines that don’t have commercial flights, only the ones that share with the other airline. 

Thanks to this agreement, regulations were established regarding the preferential treatment in the management of rates, fees and charges, However, these benefits only applied to the signers (Guatemala and United States), because of the nature of the agreement. 

That is why international airplanes were in disadvantage, given that the most extended model of such commercial airline, due to the fact that airlines’ “central offices” are located in a determined country, while all their “agencies” operate in on or in many other territories.

This generated that the airlines from other countries had a competitive disadvantage and that the local aerial transportation weren’t competitive. 

That is why, on February 10th, 2020 the Decree 2-2020 of the Congress of the Republic was published on the Central American newspaper.

To that effect, in compliance to the international commitments described, the change includes:

The article 21 Bis is added: “Costs and deductible expenses for taxpayers of international aerial transportation activities”. In this article, a proportion of the costs and global expenses reported from the headquarters is being added.

The article 21 Ter is added: to comply with the article 21 Bis, the results obtained from the headquarters as a base to calcute the formula from the previous article must be documented.

The article 38 is modified: trimestral payments to taxpayers subjected to the income of a tax payment over the utilities perceived by lucrative activities, affects international aerial transportation taxpayers, who by calculating such tax deduction, must apply a 15% as a presumed income. 

These changes put Guatemala on the same place as Mexico, Honduras and Costa Rica, which already have approved clarification regulations on such matter. Particularly, this makes the country more appealing to airlines that have more clarity over the tax burdens associated to their activity.