CONVERTIBILITY AND PROFIT REPATRIATION
BUSINESS ORGANIZATION AND ENTRY RESTRICTIONS
CORPORATIVE AND BUSINESS
REGISTRATION OF FOREIGN CORPORATIONS FOR DOING
BUSINESS IN GUATEMALA
PUBLIC BIDDING AND ADMINISTRATIVE CONTRACTING
AUCTIONING OF STATE-OWNED GOODS AND ENTERPRISES (DIVESTITURE PROCEDURES)
POTENTIALLY RELEVANT TO PUBLIC CONTRACTING
PROPERTY (IP LAW)
In recent years, Central American countries have embarked on a process
of economic liberalization that is modernizing and improving the
efficiency of their productive and financial sectors. Every Central
American country has implemented neo-liberal economic reforms:
privatizing public enterprises, liberalizing foreign trade, reforming
the tax system, freeing interest and exchange rates, increasing fiscal
austerity, and enacting laws to attract and facilitate foreign
investment. The Caribbean Basin Initiative (CBI), unilateral trade
concessions and foreign assistance from the United States, has
undoubtedly been a driving force behind these significant incentives for
foreign direct investment in Central America especially in draw back
activities for the apparel industry (maquiladoras).
After the conclusion of the North American Free Trade Agreement (NAFTA)
in late 1994, the future of foreign investment in maquiladoras in
Central America looks vis a vis, NAFTA made foreign investment in Mexico
more attractive than in Central America. The phase-out of quotas for
textiles under de MFA under the Uruguay Round of the GATT sounded the
death of foreign investment in the textile and apparel assembly industry
in CBI beneficiary countries. In addition, the CBI is vulnerable to
political pressures within the United States, which threatens to Killed
CBI as an incentive for future foreign investment in maquiladoras in
Do to the above mention factor the governments of Guatemala and the rest
of Central America countries aggressively pursued, negotiated and
concluded a free trade agreement with the United States of America
(pendent Congressional approval). Guatemala has also made commendable
diplomatic efforts to attract the interest of the European Community in
signing a "free trade agreement". These effort have not materialized but
possibilities are rising sin European Official had made remarks that
indicate the willingness of the European Union to start negotiating a
"free trade agreement" with the region. Guatemala has concluded other
very import "free trade agreements" with countries like Mexico,
República Dominicana and Chile.
No expropriations in Guatemala have been carried out since World War II.
The Guatemala Constitution authorizes expropriation for "collective use
or social benefit", but prior compensation is mandatory. The
Expropriation Law fixes the grounds for expropriation, indemnification,
and their procedures. Although the Expropriation Law contains
provisions, which ensure adequate compensation in case of expropriation,
such as requiring compensation to be paid in currency, many other
provisions appear deficient. Most of the problems with the expropriation
procedures center around the property or rights expropriated valuation.
To determine just compensation courts have resolve that market value and
just compensation are synonymous, market value is determined by what a
willing buyer would pay a willing seller, its highest and most
profitable use result in costly and time-consuming delays. These
problems, however, are mitigated by the fact that, as noted earlier, no
expropriations have occurred in Guatemala since World War II.
Expropriation risk in Guatemala, therefore, is low.
The traditional formulation of the compensation standard is the famous
phrase coined in 1938 by U.S. Secretary of State Cordell Hull: "Prompt,
adequate and effective compensation". The Hull formula was reformulated
in the Restatement (Third) of the Foreign Relations Law of the United
States as payment of "just compensation", meaning, "in the absence of
exceptional circumstances,... an amount equivalent to the value of the
property taken ... paid at the time of the taking ... and in a form
economically usable by the foreign national." The Hulla Formula has been
refined by later practice and statements to mean full compensation of
"fair market value" and "value as an ongoing concern."
Guatemala's expropriation laws fall short of the internationally
recognized standard for compensation for expropriation. Guatemala fails
the "adequate" prong of the standard, since the valuation procedures
result in compensation at less than full market value. Since the
Guatemalan government has not expropriated any properties in over fifty
years, the actual promptness or effectiveness of compensation for
expropriation cannot be evaluated. The cumbersome valuation procedures
now on the books, however, could result in delays or even the failure to
resolve expropriation claims.
The two main sources of investment insurance in the United States, the
Overseas Private Investment Corporation (OPIC) and private insurers, are
examined in this subsection.
OPIC, is a United States government-owned corporation, which offers
political risk insurance, loan guarantees, and direct loans to small
businesses doing business in Guatemala. OPIC also offers insurance
against inconvertibility, that is, "the inability of an investor to
convert into dollars the local currency received as profits, earnings or
return of an original investment. OPIC insurance is not available
retroactively; investors must obtain an OPIC "insurance registration
letter" before making their investment or irrevocably committing to
invest. OPIC cannot insure projects, which would have a detrimental
effect on United States balance of payments or employment.
Obtaining insurance from private companies, likes Lloyd's of London or
the Chubb Group, offers several advantages over OPIC investment
insurance. Private insurers frequently cover existing projects, while
OPIC only covers "new projects". Private insurers may also cover a wider
range of contingencies, resolve claims more quickly, and indemnify a
greater amount of loss than OPIC. The disadvantages of using private
insurers are shorter coverage terms and significantly higher premium
AND PROFIT REPATRIATION
Guatemalan Foreign Currency Exchange act:
On May 1, 2001 Congress enacted the "Free Negotiation of Foreign
Currency act" (in Spanish "Ley de Libre Negociación de Divisas"),
which grants the general public the following rights:
Right of holding foreign
Freedom to execute contract in
Freedom of selling or purchasing
foreign currency (except of the value added tax);
Liberty for seeking court
enforceability of contracts executed in foreign currency;
Freedom of opening bank accounts
and/or contracting lowness with national or international financial
institutions (duly authorised to operate in Guatemala by the Bank
Superintendence) expressed in foreign currency; and,
Freedom to transfer foreign
currency out of the country with no prior authorization.
According to this act, and in conformance with the Guatemalan
Constitution, the Guatemalan Central Bank (BANGUAT) retained the
prerogative to influence the foreign currency market by buying or
selling currencies in the open market. Because of this fact, it is safe
to say, that despite it name, "The Free Negotiation of Foreign Currency
Act", what the law really creates is a Dirty Float Exchange Rate.
One relevant aspect of this act is that it authorizes the execution of
administrative contracts (contract regulated by the procurement act,
decree number 57-92) in foreign currency.
This law also enables the general public, as well as corporations and
financial institutions (authorized by the bank superintendence), to
create securities or stocks, listed or not, expressed in foreign
Finally this act imposes on the Guatemalan Central Bank (BANGUAT)
the obligation to publish in the official gazette, "Diario de Centro
America", the applicable exchange rate for compliment of tax obligations
as well as for proper payment of contract obligation stipulated in
foreign currency when parties did not specifically (in writing do to the
high risk of fraud) excluded the legal right to pay in local currency.
This official exchange rate is applicable also to payments made under
administrative contracts as well as to any other payments made to or by
the state of Guatemala or its administrative agencies.
It is also important for the investor to consider the provision
contained in article 8 of the "Foreign Investment Act" that establishes
the following: ACCESS TO FOREIGN EXCHANGE. Foreign investors
shall enjoy free access to the purchase and sale of available foreign
currency, and to the free convertibility of currency, in accordance with
the provisions of the "Free Negotiation of Foreign Currency act" and the
administrative laws applicable to the general public. Foreign investors
may freely engage in the following activities, among others: a)
Transfers abroad of currency related to their investment, or as a result
of the voluntary dissolution and liquidation or sale of the assets; b)
Remittance of any profits or earning generated in Guatemalan; and, c)
Transfer of payment and remittance of dividends, debts, contracted
abroad and interests accrued, royalties, income, and technical
assistance, as well as payments derived from compensation for
Guatemala has made commendable progress in liberalizing its exchange
rates and allowing the free repatriation of profits by foreign exchange
are particularly attractive to foreign investors. Guatemala has
liberalized exchange rates and minimal encumbrances on profit
repatriation definitely conform to the recommendations in the World Bank
ORGANIZATION AND ENTRY RESTRICTIONS
Foreign investment in Guatemala is generally welcome. The country
imposes relatively few restrictions on foreign investment. A foreign
enterprise intending to do business in Guatemala, however, must register
with the Mercantile Registry and the internal Revenue Service named the
SUPERINTENDENCIA DE ADMINISTRACION TRIBUTARIA (S.A.T.). There are no
limits on foreign participation in domestic enterprises. Foreigners may
own 100% of a domestic enterprise. In addition, foreign investors are
guaranteed national treatment by law.
Guatemalan law, however, does impose restrictions on foreign investment
in certain sectors of the economy. There are also restrictions, in the
form of cumbersome prior governmental approval requirements. Prior
approval from INGUAT, the tourism ministry, is also required for
investment in tourism sector, including the building of hotels and
marinas, and the set-up of travel agencies. In addition, the
exploitation of forestry resources is reserved exclusively for
The World Bank Guidelines emphasize the importance of national treatment
for foreign investors. Guatemala's laws generally provide for
non-discrimination of foreigners. Their laws also permit 100% ownership
of enterprises by foreigners. The combination of non-discrimination of
foreigners and 100% ownership of enterprises by foreigners satisfies the
guidelines standards on national treatment. The state-monopolies held by
Guatemala on certain sectors of the economy do not contravene the World
Bank Guidelines, since they apply non-discriminately to national and
foreign investors alike. On the other hand, the cumbersome approval
requirements required by Guatemalan law for entry into the
transportation and tourism sectors appear to go against the guidelines
recommendation that "each State ... promptly issue licenses and permits
and grant such concessions a may be necessary for the uninterrupted
operation of admitted investment ..."
The Income Tax Law establishes a maximum 35% tax rate on income obtained
in Guatemala for capital investments, services rendered, or both. This
tax rate applies to all companies and legal entities. Interestingly,
dividends or similar benefits paid by a corporation are exempt from
taxation, (provided the company has paid its income tax). The
Value-Added Tax (VAT) was also recently simplified and remains one of
the lowest in Latin America at 12%. The VAT is imposed on imports or
sales of goods in the domestic market, services (other than personal
services), or rental of property. No VAT is imposed on commodities
exports (coffee, sugar, bananas, meat, cardamom, or cotton).
Guatemalan law provides for CATs, which are issued for up to 15% of the
Value of non-traditional exports. The CAT, which lapses after two years,
can be used to pay certain taxes and has several interesting
characteristics: it is paid in national currency, is negotiable, and is
not subject to any taxes. CATs, however, are only available when the
product is exported to a country, which has not signed a bilateral or
multilateral free-trade treaty with Guatemala.
Special tax incentives, which are really a type of subsidy, remain the
single most common instrument in foreign investment regimes. These
incentives may be a form of "signaling" which shows a country's
willingness and commitment to attract foreign investment. Many
commentators, however, have noted that special tax incentives do not, on
the margin, always attract foreign investment. The World Bank Guidelines
also recommend against special tax incentives for foreign investors.
Most countries in Central and Eastern Europe have actually rescinded
their special tax incentives for foreign investors and treated foreign
and domestic investment on equal terms.
In the Guatemala, it is an essential constitutional principle (Article
239 of The National Constitution) that no one has to pay any taxes
unless Congress legally establishes it, and unless collection is carried
out as prescribed by law. Article 243 of The Constitution of Guatemala
also prohibits double taxation and/or confiscatory or expropriatory
Decree number 26-92 "Income Tax Act" regulates income tax; this law was
enacted by Congress the 1 of December 1992 and has suffered the
following reforms 36-97 and 80-2000. Income tax is only collected at a
national government level. Congress enacted decree number 1-98 by means
of which control over tax and duties collection was transferred to the
"Superintendencia de Administración Tributaria" (SAT), created as a
technical, autonomous administrative agency not politically influenced.
1. BASIC PRINCIPLES GOVERNING INCOME TAXES
The Guatemalan Income Tax Law definition of taxpayer is "any person or
legal entity (corporation or partnership), national or foreign,
receiving taxable income".
a) INCOME SOURCE
According to the Fiscal Code (article 4, decree number 26-92), any
income that is generated from any source within the territory of the
Republic of Guatemala is subject to income tax, regardless of the place
where it is paid or received, of who may be the payer of the same and
independently of the nationality, domicile or residence of the
recipient. Incomes from a source in the Republic of Guatemala (articles:
4 and 5, decree number 26-92) are:
i) Income generated from civil, commercial, industrial or similar
activities and from the practice of professions, occupations, or any
other kind of service rendered, performed or exercised within the
territory of the Republic of Guatemala.
When the services rendered implies the performance of wok both inside
and outside Guatemala, only those services rendered within said National
territory shall be considered of Guatemalan source.
ii) Income generated from goods produced or rights economically used in
the Republic of Guatemala or from capitals or securities economically
invested in the National territory, such as interests on loans, interest
on monetary deposits, interest on securities and documents, dividends
and other distribution of profits among shareholders or partners;
profits from branch offices established in Guatemala by borne offices
located abroad, lease payments from movable goods economically used in
Guatemala, royalties, periodic subsides, income from the assignment of
manufacturer's or merchant's trademarks, patents of invention, life
annuities and any other income or rent obtained from (sources) within
the Republic of Guatemala, either through the use of goods or the
rendering of services.
b) FOREIGN INCOME SOURCE
Exclusively for income tax purposes, income derived from the following
activities is not considered as produced within the territory of
i) Interest, financial commissions or other similar captions earned by
natural or juridical personas, independently of their place of
organization or domicile, coming from loans, money deposits or any other
financial operation, carried out with borrowers domiciled outside the
national territory, as long as the service rendered and the use of the
money are made outside Guatemala, even though, the capital or interest
reimbursement is effected in the country.
ii) Re-invoicing, merchandise that arrives to Guatemalan National Ports,
or Airports in transit to another destination (by transit meaning
merchandise or products that arrive in Guatemala Airports or Ports only
to continue on to another foreign destination, with documents that
indicate that they are consigned to persons or corporations not resident
in the Republic of Guatemala, and with shipping documents that indicate
that such merchandise or products shall be shipped abroad immediately
after arrival). These merchandises shall remain under the official
custody of Customs authorities, which will ensure that such merchandises
are not illegally introduced into the fiscal territory.
vi) Dividends or profits-sharing earnings received from corporations as
long as tax payments are made at a corporate level.
c) GROSS INCOME
Article 8 of the Income Tax Act determines that the phrase "gross
income" refers to the total income, before deductions, that the taxpayer
receives from whatever source and under whatever form (in money or in
kind). Items to be included in gross income are provided by law such as:
salaries, wages, overtime, commissions, bonuses, fees, rental payments,
profits from industrial, commercial and agricultural activities,
royalties, goodwill, trademarks and patents, interest and revenues and
profits from sale of realty and/or personal property (capital gains).
According to article 6 of the Income Tax Act the following are some
types of incomes exempted from taxation:
Income of churches of any
denomination, seminaries and religious or charitable societies, when
such an income is obtained as a direct result of worship or charity.
Income of houses of charity,
foundations and non-profit organization duly recognized, provided
that such income is destined exclusively to social assistance or
Taxable income received by
individuals from any source that does not exceed thirty six thousand
quetzales (Q. 36,000.00) annually (article 37, a.)
3. TAXABLE CORPORATIONS INCOME
Taxable income of corporations is the balance of gross income less
deductible disbursements and expenses (article 38).
4. DEDUCTIBLE EXPENSES
Deductible expenses are disbursements incurred in the production of
taxable income or in the maintenance of its source. The expenses
incurred must be related to Guatemalan income source. Consequently,
expenses incurred to produce foreign source of tax-exempt income are
All disbursements related to expenses must be supported by proper
documentation in order to be deductible, and it is understood that
a) INTERESTS AND ROYALTIES
Interests and royalties are deductible expenses under the general
principle and are taxable income to the recipient (art. 38, m.). When
payments are made to non-resident individuals or corporate entities,
income tax must be withheld.
Concerning this matter, it is appropriate to point out that the annually
permitted depreciation due to wear and tear or exhaustion is that which
is affected over fixed assets employed by the taxpayer in its business,
industry or profession and activities linked with the production of
As a rule of thumb, the correct value of the asset over which
depreciation is to be calculated upon shall be that of its cost, and
also that of the permanent improvements to said asset, if that is the
case. The value of its cost shall also include, besides the value of the
invoice, all expenses associated with the purchase, installation and
assembly of said asset, such as purchase commissions, insurance and
freight expenses, introduction taxes and other expenses related with the
purchase and installation and interests incurred during the period of
To calculate the depreciation of a particular asset, the useful economic
life of a particular asset has to be taken unto consideration, which
shall depend on the activity and conditions under which said asset is
used, the regular turns of activity, the quality of maintenance, the
possibility of obsolescence and the depreciation tables of technical
value. Nonetheless, in no case shall it be permitted to have useful
economic life of less than three (3) years for personal property and
less than thirty (30) years for real estate property.
According to article 18 of the Income Tax Act the methods for
calculating depreciation of assets are: a) direct or straight line
calculation, which applies a fixed percentage over the original cost; b)
decreasing value, which applies a fixed percentage to the decreasing
balance of the value in terms of cost; c) that which employs the digit
sum of the years of useful life and, dividing its original value cost
from said sum, and multiplying, each year, the quotient by the digit of
that particular year be it in a decreasing or increasing manner.
No mater the method of depreciation article 91 of the law establishes
maximum depreciation percentages that may not be exceeded. Examples of
said maximum depreciation percentages are:
a) Computer equipment: 33.33%; b) Furniture and Office equipment: 20%;
c) Machinery and manufacturing equipment: 20%; d) Buildings and other
constructions: 5%; e) Vehicles: 20%.
In financial leasing contracts, it is up to the lesser to depreciate the
asset over the term of the contract, using the depreciation criteria
provided by the law. The base for the calculation of the depreciation
will be the acquisition value including sales taxes.
c) OTHER DEDUCTIBLE EXPENSES
Other deductible items are:
Donations to non-profit
educational and charitable institutions of Guatemala, provided that
these institutions have been previously approved for such purposes
by the corresponding authority.
Donations to the central
government, its institutions, the Municipalities and the community
Taxes paid to the local
Corporations distributing dividends or profits to their shareholders are
exempt of taxes as long as the applicable taxes are paid at a corporate
Profits derived from the dispositions of securities, even if registered
with the National Securities Exchange Commission (whose securities are
negotiated in a stock exchange), will be subjected to capital gain taxes
6. CAPITAL GAINS
Profit obtained from the sale of any personal property is considered
taxable income (see articles 28 - 30, Income Tax Act).
7. BRANCH OFFICES OF FOREIGHN CORPORATIONS
For tax purposes, branches of foreign corporations established in the
Republic of Guatemala must keep their accounting records for the
Guatemalan operations separated from head office or other branch
records. Foreign corporation branches will be taxed as Guatemalan
corporations and are not subjected to withholding tax (provided that
this branch is registered with the Mercantile Registry and the IRS,
"Superintendencia de Administración Tributaria").
Guatemala acceded to the GATT (latter WTO) in 1991. Guatemala, as noted
earlier, is also a member of the CACM. Guatemala, El Salvador and
Honduras have formed a "Northern Triangle" free-trade area to augment
the accomplishments of the CACM, but it has suffered from implementation
problems and its provisions have not been finalized. Current import
tariffs in Guatemala, as those in the other CACM-member countries, range
from a low 5% to a high of 20%, although there are some exceptions to
the 20% ceiling, such as tires (30%) and textiles (25%).
As noted earlier Guatemala has signed "free-trade" agreements with
countries such as Mexico, Dominican Republic and Chile. Its is easily
predictable that Guatemala will continue promoting free trade agreements
with other countries and that duties will continue to disappear within
the next 15 year. Said trade agreements include the following topics: a)
National Treatment and access of goods to the market; b) Rules of
Origin; c) Customs Procedures; d) Sanitary and Phytosanitary Measures;
e) Illegal Commercial Practices; f) Protective Measures; g) Investments;
h) Trade of Services; i) Temporary entry of businesspeople; j)
Procurement by the Public Sector; k) Technical Obstacles to Trade; l)
Intellectual property; m) Competition Policy; n) Solutions to disputes;
o) Exceptions; p) Administration of the Agreement; q) Transparency; r)
Guatemala enjoys an abundant supply of unskilled and inexpensive labor,
making the country attractive to labor intensive enterprises. Skilled
manual workers and management and information processing professional,
however, can be hard to find. Restrictions on the number of foreign
employees who may work for a given enterprise exacerbate the problem of
low availability of skilled workers and management professionals.
Labor regulation in Guatemala is primarily the responsibility of the
Labor Code. Under the Guatemalan Labor Code, the government plays a
significant role in labor-management relations. The Labor Code, which
dates from 1947, has been described as a "New Deal" labor code, since
the government assumes paternalistic responsibility over the welfare of
employees. The Labor Code contains provisions prescribing workplace
conditions, work-periods, and collective bargaining.
Although the Labor Code provides for the organization of employee
associations and labor unions, labor unions in Guatemala remain
relatively weak. Labor unions are found mostly in the public sector,
although labor organization in the private sector has increased
recently. Membership in employee associations, such as the Solidarity
groups, is increasing in Guatemala.
Work-periods and holidays
According to the Labor Code, the ordinary workday (6 a.m. to 6 p.m.)
lasts eight (8) hour per day, not to exceed forty-eight (48) hours per
week. The ordinary working hours (6 p.m. to 6 a. m.) lasts six (6) hours
per night, not to exceed thirty-six (36) hours. For mixed work-periods
the ordinary workday, consists of seven (7) hours per day not to exceed
forty-two (42) hours. The normal workweek lasts forty-five (45) hours,
but employers pay for forty-eight (48) hours.
Guatemalan employees receive twelve (12) paid holidays per year (January
1st., Easter Thursday and Friday, May 1st., June 30th, September 15th,
October 20th, November 1st, December 24th and 25th, and December 31st)
plus local holidays. Annual vacations are fifteen (15) days after one
year of continuous employment workers employed in commerce; ten (10)
days after a minimum of 150 days of continuous employment for workers
employed in industry; and six (6) days after a minimum of 150 days to
continuous employment in all other cases.
Wages are negotiated between the employer and the employee (or the
union), but the Ministry of Employment fixes minimum wages. Overtime is
calculated at time-and-a-half (1 + ½) for employees in commercial or
manufacturing industries; time-and-a-quarter (1 + ¼) for all other
employees. Employers must pay wages for the seventh (7) day after six
(6) consecutive workdays or 48 hours of work in six (6) days. The basis
for determining the rate of pay for the seventh day and paid holidays in
the daily average of total pay for the week. Interestingly, the Labor
Code permits workers to negotiate increases to the already generous list
of benefits it provides for, but workers cannot bargain collectively not
negotiate reductions in benefits in return for higher wages.
Employers must pay a Christmas bonus, the aguinaldo, consisting of one
month's salary for a full year worked and proportionally for shorter
periods; one half of the aguinaldo must be paid before December 15th,
while the other half is not due to the employee until January 30th.
Social security rates vary depending on whether the enterprises are
located in Guatemala City or in areas outside of the capital, an obvious
incentive for investment in rural areas of the country. The rate for
employers in Guatemala City is 17.5% that is booth by the employer in a
rate of 12.67 and by the worker in a rate of 4.83, while the rate in
other areas is lower.
Foreign investors should be wary of indirect compensation for Guatemalan
employees under the Labor Code. If an employer establishes traditions of
paying a bonus in addition to a statutory required bonus, like the
Christmas aguinaldo, such a bonus could become an "acquired right". The
employee could sue to collect an acquired right bonus if, for example,
the enterprise's earning were down and the employer did not pay the
Terminating a business enterprise in Guatemala may also require the
employer to pay severance benefits equal to one month's pay for each
year the employee worked for the enterprise. In addition, if the
employer provided "economic benefits", such as transportation, meals,
etc., which employees normally pay themselves, the employer must add 30%
to the employee's normal pay to compensate her for the loss of those
Termination of employment
The Labor Code establishes a two-month probation period for new
employees. If the employee is dismissed after of two-month probation
period, the employer must pay her severance pay equal to one month's
wages for every year worked.
Restrictions on foreign employees
A significant obstacle for foreign direct investment can be found in the
Labor Code's restrictions on the employment of foreigners. The Labor
Code requires that a least 90% of the total employees be Guatemalan, and
these must collectively earn at least 85% of the total salaries paid by
the employer. Two high-level administrative positions, such as managers
or directors, are exempt from the percentages discussed above. Another
significant restriction relates to work permits in those cases where it
cannot supply qualified Guatemalan workers. Work permits are granted for
a tem of one year. In addition, a company employing foreign technicians
must also employ and train an equal number of Guatemalan workers for the
job relating to the work permit, making renewal of the work permit more
The World Bank Guidelines recognize the importance of the foreign
investor's freedom to hire foreign personnel. Although the guidelines
recognize restrictions on hiring foreign employees, by limiting these
restrictions to restrictions on hiring foreign employees, by limiting
these restrictions to requiring the foreign investor to establish his or
her inability to recruit required personnel locally before recruiting
foreign employees. The restrictions implemented by the Guatemalan labor
code do not conform with the World Bank Guidelines. These restrictions
exceed the scope of the restrictions envisioned in the World Bank
Guidelines and pose a severe constraint on foreign direct investment.
Guatemala's exemption of two high level administrative position from the
quotas on the hiring of foreign employees mitigate this problem and is
more in tune with the guidelines stress on the investor's freedom to
hire top managers regardless of their nationality.
FTZ in Guatemala have not been a successful as in other countries since
maquiladoras enjoy virtually the same incentives as enterprises located
in FTZ without the site restrictions. Nonetheless, Guatemala counts with
one government-owned FTZ, (ZOLIC), and ten private ones. An enterprise
located in and FTZ benefits from relative physical security, building
facilities, installed infrastructure, expedited customs clearance, and
tax and other fiscal incentives. All labor laws apply fully in
The Guatemalan government provides few inducements for investing in FTZs.
There is an import duty exemption for raw materials, equipment, and
tools used in the FTZ. Goods produced in FTZ are exempt from the 2%
withholding tax on exports. In addition, essential items such as food
are exempt from sales taxes within an FTZ.
Foreign investors should take steps to comply with Guatemala's
ever-more-stringently enforced environmental regulations to avoid civil
and criminal sanctions. Compliance with the host country's environmental
regulations also improves the image of the foreign investor in a region
leery of perceived "exploitation" of a country's natural resources by
foreigners. In addition, anecdotal evidence suggests that businesses
will increasingly factor environmental quality issues into their foreign
investment decisions, increasing the value of knowing the host country's
environmental regulations and their administration.
Careful planning around existing and imminent environmental laws also
reduces the cost of investment projects. In addition, environmental
protection plans may prevent accidents, speed the project through a
complex system of laws and institutions, which is always confusing,
sometimes duplicate, and never easy to navigate. The regulation of water
pollution was tightened in 1986 with the enactment of the Law for the
Protection and Improvement of the Environment (Law for the Protection of
the Environment). The Law for the Protection of the Environment contains
an entire chapter devoted to the protection of water resources, which
includes measures to evaluate the quality, prevent the pollution, and
control the use of continental and maritime waters. CONAMA (Comisión
Nacional del Medio Ambiente), however, has been unable to enforce many
of the provisions of the Law for the Protection of the Environment
because their regulations have not been promulgated.
The Health Code also contains provisions regarding water resources
contamination from household or industrial wastes, or sewage. The Health
Code prohibits the discharge of all wastes which endanger human health
into the nation's waters, yet authorizes the Ministry of Health to
permit the discharge of waster treated in conformity with the applicable
regulations. The discharge of solid or liquid household or industrial
wastes requires authorization of the respective municipal governments,
however, final authorization of the respective municipal governments,
however, final authorization from the Ministry of Health is also
required. Approval by the Ministry of Health is also required for any
construction, repair, or modification of a public or private facility
used for the discharge or treatment of waster or sewage.
The Law for the Protection of the Environment also regulates forest
resources. The law contains general provisions for the conservation of
forest resources, but the exploitation of forestry resources is governed
by the Forestry and Wildlife (DIGEBOS). The Forestry Law establishes a
system of concessions for the exploitation of forest resources,
including resins, saps, non-cultivated vegetable products, etc., in the
national o municipal forests, which have not been declared, protected
areas. Concessions for the exploitation of forest resources, which last
for ten years, are only given to Guatemalan nationals or enterprises
that are al least 70% Guatemalan-owned. The legal representatives of the
concession-holders must also be Guatemalan nationals. In addition,
concession-holders must also post a bond, equal to the value of the
forest resources they intend to exploit, to guarantee the reforestation
of the used land.
Guatemala is generally receptive to foreign direct investment, the
country provide for national treatment of foreign enterprises and have
few restrictions on profit repatriation. Expropriation risk in both
countries is also rather low. There are, however, significant legal
restrictions on foreign direct investment. One can generally conclude
that, from a legal point of view, certain types of investments are
better suited to these countries than others. Taken as a whole, the laws
affecting foreign direct investment Guatemala makes both countries best
suited for labor intensive, "low-tech" enterprises, such as light
manufacturing and agriculture for export. Guatemala provides
opportunities for investment in large enterprises, such as power plants,
telecommunications, utilities or insurance companies. Investment is
smaller enterprises faces no significant legal obstacle.
CORPORATIVE AND BUSINESS
This general overview of the profit corporations will focus only on the
so-called mercantile corporations (Commercial Code). There are of course
other forms for operating a business such as the sole proprietorship and
partnership (Commercial Code and Civil Code respectively). The reader
must consider that there are some special areas of business in which
special forms of corporations are permitted such as; Investment
corporations or Banking.
The following is a list of the alternative options for creating a
corporation in Guatemala:
1) Sociedad Colectiva (Articles 59-67 of the Commercial Code):
The definition of corporation is valid for this form of corporation,
except for the fact that there is no limited liability and partners are
jointly and extensively liable for damages or debts incurred by the
corporation. The most obvious distinction between a sociedad colectiva
and a partnership is that in a partnership each partner retains the
right to manage and bind the partnership while in a sociedad coletiva
these rights are granted to elected officials who may or may not be
partners. No issue of shares is permitted and the only means to show
participation is through a copy of the bylaws.
2) Sociedad en comandita Simple o por Acciones (Articles 68-77 and
195-202 of the Commercial Code): These are two different types of
corporation that due to their proximity can be explained together. This
corporations are formed by two or more persons, having as members one or
more general partner and one or more limited partner. General partners
are granted the right to manage and bind the corporation since they are
subject to unlimited liability. The general partners' unlimited
liability in this case is not joint and extensive, and their assets can
only be touched after foreclosure on corporation assets (capital).
Shares may or may not be issued depending on prohibitions in the bylaws,
hence the difference between one and the other.
3) Sociedad Anónima (Articles 86-183 of the Commercial Code):
This is the most commonly used form of corporation due to the benefits
of limited liability and the fact that its capital is divided into
shares of stock (face value shares) that facilitate transfer and
appreciation (market value).
4) Sociedad de Responsabilidad Limitada (Articles 78-85 of the
Commercial Code): These types of corporations are a device designed
to limit responsibility to the participation of capital from each
partner. All of the partners are treated equally and officials are
elected to manage the business. Partner participation is limited to 30
members and no shares of stock are issued due to the fact that capital
is divided into each person's participation (Commercial Code). This type
of corporation is especially attractive for American (US.) corporations
interested in investing or co-investing (with local capital or Know how)
in Guatemala doe to taxing provisions in bought countries (Guatemala has
not signed any double or multiple taxation treaties).
GENERAL INFORMATION ON GUATEMALAN CORPORATIONS:
According to the Guatemala's Commercial Code, two or more individual
persons or corporations (juridical entities), even though not citizens,
residents or domiciled in the Republic of Guatemala, may organize a
local corporation (company) for any lawful purpose or purposes.
Under the law, corporations must file Articles of Incorporation (Escritura
Social), under the form or public document, with the Mercantile Public
Registry. The standard procedure to form a corporation in Guatemala is
to resort to Guatemalan attorneys/notary public who, acting on behalf of
the client, files the articles of Incorporation, and then assign their
rights to the client. Therefore the client needs not to come to
1. Why Guatemala?
Disclose of beneficial owners is
not a requirement to access registration by the Public Registry.
Speedy incorporation procedures /
simple ongoing administration.
The incorporation of a new
company takes approximately five working days. After formal
incorporation, a company shall be ready to engage in business
(except in areas of business were a license, concession, special
registration or permit is required (Exp. Telecommunication registry
Reasonable costs and fees for
constitution and continuance proceedings.
The minimum capital is very low,
it is approximately US$610.00 at an exchange rate of (Q.8.10 x US$
Normative or bearer share at
All entities, natural or created
by law, with legal capacity qualify as shareholders, Directors and
Officers, regardless of nationally and legal residence.
Neither the Directors nor the
Officers need to be shareholders.
Shareholders and/or Directors may
hold their meetings in any country and may attend such meetings by
2. Information Required to Form a Corporation
The articles of incorporation shall contain, at least, the following
The names and domiciles of the
subscribers, at least two, (usually the attorneys form the firm in
charge of the incorporation).
The name and the domicile of the
corporation, which shall include the words "sociedad anónima",
corporation, or incorporated, or their abbreviations; the name shall
not be the same of any other previously registered corporation (to
avoid possible confusions) several possible names should be
submitted in order of preference to prevent delays resulting form
The general purposes or objects
of the corporation, or a statement declaring it may engage in all
lawful activities, or both.
The amount of authorized capital
stock, indicating the number of shares into which such capital is to
Whether the shares shall be
issued to bearer or as registered shares.
The name and domicile of the
resident agent, who must be Guatemalan Citizen, acting as the
legally responsible person before the Tributary Administrative
Agency (Superintendencia de Administración Tributaria equivalent
agency to the IRS.).
REGISTRATION OF FOREIGN CORPORATIONS FOR DOING BUSINESS IN GUATEMALA:
Foreign corporations that wish to do business in Guatemala must seek
prior registration with the General Mercantile Registry (administrative
agency in charge of authorizing corporations) and the intern of revenue
service (SAT). According to the law there are two alternatives for the
registration of foreign corporations, with the Mercantile Registry that
are: a) Permanent Registration; and, b) Temporary Registration for a
period of no more than 2 years. Before providing an overview of the
procedures for registration, it is important first to bear in mind that
no matter which alternative is chosen, the foreign corporation must open
a branch office by listing a registered agent, who must be a Guatemalan
attorney, and a registered office in the country. For these purposes,
the enjoiner must file the following documents: a) A copy of the
articles of incorporation, the bylaws and the charter of incorporation,
all of which must comply with the following requirements; a.1)
Certification by a Notary Public or an equivalent official in the
country were the articles of incorporation, the bylaws and the charter
of incorporation were issued; a.2) Certification by the State Department
or equivalent authority in the issuing country; a.3) Certification by
the Consulate of Guatemala in the issuing country; a.4) Certification by
the Ministry of Foreign Affairs in Guatemala; a.5) If the document is in
a foreign language, translation by a certified translator; a.6)
Establishment of document protocol by a Notary Public (in Guatemala all
attorneys are Notary Publics as well). It is important to keep in mind
that steps a.4 through a.6 are usually handled by the corporation's
registered agent; b) A power of attorney (in the hands of a Guatemalan
lawyer) that complies with the same requirements established by the
articles of incorporation, bylaws and charter of incorporation and; c)
General Mercantile Registry fee payment invoice (this fee is calculated
according to the capital assigned to branch office).
Temporary Registration Procedures:
1) Registration Application: The first step in registering a foreign
corporation is to file an application with the General Mercantile
Registry (GMR), attaching the documents already described. The legal
department of the GMR then examines the application and if it complies
with all requirements a file identification number will be assigned.
2) Preliminary Registration and Publication in the Official Gazette:
Once the file number is assigned the next step calls for the file to be
sent to an official in charge of preliminary registration. When
preliminary registration is completed, the GMR will issue a general
information notice that is later handed over to the enjoiner. The law
mandates that this general information be published for notice in the
Official Gazette and a mayor newspaper.
3) Registration Bond: During the publication period a surety bond the
enjoiner must present warranty of $50,000.00 (Decree 62-95) to the GMR.
This bond serves the purpose of securing possible liabilities left by
the foreign corporation once the two-year term expires.
4) Approval of the Attorney General's Office: Once the file contains the
information for publication and the surety bond, it is sent to the
Attorney General's Office for his approval. The approval serves as
notice that the State of Guatemala has no opposition to the
5) Final Registration (Charter of Registration): After the Attorney
General's approval, the GMR proceeds to final registration by issuing a
temporary charter of registration and printing the file number,
registration date, GMR seal of approval and the signature of the GMR
Commissioner on the copies of the bylaws presented with the application.
Permanent Registration Procedures:
1) Registration Application: The first step for registering a foreign
corporation is to file an application with the GMR, attaching the
documents already described in the paragraphs dealing with general
information. The legal department of the GMR then examines the
application and if it complies with all requirements a file
identification number will be assigned.
2) Preliminary Registration and Publication in the Official Gazette:
Once the file number is assigned the next step calls for the file to be
sent to an official in charge of preliminary registration. When
preliminary registration is completed, the GMR will issue a general
information notice that is later handed over to the enjoiner. The law
mandates that this general information be published for notice in the
Official Gazette and a mayor newspaper.
3) Registration Bond: During the publication period a surety bond
warranty of $50,000.00 (Decree 62-95) must be posted by the enjoiner
with the GMR. This bond serves the purpose of securing possible
liabilities left by the foreign corporation after termination of
4) Final Registration (Charter of Registration): Once the file contains
all information for publication and the surety bond, the GMR proceeds to
final registration by issuing a charter of registration and printing the
file number, registration date, GMR seal of approval and the signature
of the GMR Commissioner on the copies of the bylaws presented with the
application. No approval notice is required from the Attorney General's
Opposition to Registration:
Interested parties can oppose the registration of a corporation.
Oppositions are commonly filed in order to protect corporate names
(corporate names differ from trade names; see trade names under
Intellectual Property). Other factors, such as non-compliance will bylaw
requirements, may serve as basis for filing an opposition. Enumerating
the grounds for opposition to a registration is virtually impossible
here due to the fact that the law does not list them. According to the
statutes, there are two basic opposition procedures, which are, a)
Administrative proceeding (a resolution is reached by the General
Mercantile Registry Commissioner); and, b) Judicial proceeding. Finally,
it is important to note that administrative proceeding resolutions can
be and commonly are challenged in a court of law.
An enterprise entered into by two or more people for a limited purpose.
A joint venture contains most of the elements of a partnership, such as
division of profits and joint responsibility of losses. However, unlike
a partnership, a joint venture anticipates a specific area of activity
and/or period of operations, so that once the purpose is fulfilled,
bills paid and profits divided and the joint venture is terminated. The
joint venture document must stipulate a managing partner or promoter,
who will have the right to bind the parties. In Guatemala, registration
of joint venture contracts (contratos de negocios en participación) is
not required by statute.
BIDDING AND ADMINISTRATIVE CONTRACTING
State Contract Law:
State contracting is regulated by decree number 57-92 ("Ley de
Contrataciones del Estado"), enacted in 1992. This law establishes five
different applicable contracting procedures, which are: 1) public
biding, 2) private biding, 3) open contract, 4) direct acquisition, and
5) public auctioning of state-owned goods and enterprises (divestiture
procedures). The law also contains statutes that clearly determine which
procedure is applicable and the prior steps to be taken. State
contracting is a very vast and specialized matter that must be studied
case by case. For this reason, we will only include general information
to give the reader a preliminary understanding of the requirements and
procedures required by state contracting legislation.
Pre-qualification (Articles 71, 72, 73 and 74):
Corporations as well as individuals must go through a pre-qualification
procedure before becoming eligible bidders or contractors. There are
three different administrative agencies that handle pre-qualification
procedures, which are 1) the Registry Office for Construction
Contractors (Registro de Precalificados de Obra), 2) the Registry Office
for Consulting Contractors, and 3) the Registry Office for Wholesale
Goods (Registro de Proveedores). The main objective of these
administrative offices is to serve as filters for eligible bidders.
Public Bidding vs. Private Bidding:
The difference between public and private bidding lies mainly in the
offering parties allowed to participate in the process. In a public bid,
anyone can participate as long as the individual or corporation meets
the special requirements set forth by the terms of references. In a
private bid, invitations are issued to pre-qualified participants and no
one else is allowed to participate in the process. In a public bid, the
law mandates that a general invitation to participate in a bid be
published in the Official Gazette and a major newspaper; while this is
not a requirement in the process of private bidding.
Public Auctioning of State-Owned
Goods and Enterprises (Divestiture Procedures)
The legal procedure for the sale of State-owned goods or enterprises is
described in Articles 89 and 90 of the State Contracting Law, which, in
essence, mandates the use of competitive procedures such as auctions.
The procedures required in Article 90 include:
a) A detailed description of the property to be sold.
b) The terms of the auction or similar method of sale (approved in the
resolution of the Board of Directors or similar regulatory body),
including the means of publicizing the sale and the bonds or guarantees
c) The contracting of internationally-recognized parties (optional),
presumably investment banks and other advisors, to promote the
issues Potentially Relevant to Public Contracting
The following is a list of issues potentially relevant to public
contracting. The purpose for providing this list is to give the reader a
preliminary idea of issues that may be considered relevant.
Public/Private Bidding Committee
Terms of References (technical, financial and specific)
Invitation to bid
Bid presentation and opening
Bond (surety, maintenance, contract, performance, construction and bid)
Insurance (liability, compensation, political risk, loan guaranties and
INDUSTRIAL PROPERTY (IP LAW):
Legal Protection of Trademarks, Services Marks, Trade Names and
Articles 35 and 36 of the "Industrial Property Law", decree number
57-2000, establish legal protection of trademarks, service marks, trade
names, trade dress and slogans. This law grants the owner of a
registered trademark, service mark, slogan, well-known mark, inventions,
utility model, industrial model or trade secrets all rights that derive
from exclusive use, or better said, the right to exclude other from the
use of a substantially indistinguishable from a trademark or slogan.
Patent, Trademark and Copyright Office (PTCO):
The Patent, Trademark and Copyright Office (the PTCO), which is an
administrative agency, is in charge of registering trademarks, service
marks, trade names, certification marks, utility model, patents,
copyrights and slogans. Act number 148 created this administrative
agency as part of the Ministry of Development in 1886. After its
creation the PTCO has undergone many changes in terms of its
responsibilities as well as in its structure. The first major change
occurred when Congress enacted the "Central American Agreement for the
Protection of Industrial Property Act", by which this agency became part
of the Ministry of Economic Planning. The second change occurred in1983,
when the Government of Guatemala and the World Intellectual Property
Organization (WIPO) undertook the effort to reorganize the
administration of the PTCO. The third important change, occurred
recently in 1998 when Congress enacted the "Copyright Act", which
modifies the PTCO structure by adding to its responsibility the
registration of copyrights in cases were the petitioner wishes do so
(protection of Copyright does not depend on registration, but when
possible, it is highly recommended). The final change occurred with the
enactment by Congress, of the new IP law, Act number 57-2000.
A Commissioner appointed by the President, through the Ministry of
Economic Planning, heads the PTCO. The Commissioner must be a lawyer
with no prior criminal record. It is also important to keep in mind that
the information collected by, or given to, the PTCO, due to its
administrative function, is of public domain and as such remains
accessible to everyone. There is of course and exemption to this general
rule, which is intended to protect computer programs (software) and
PTCO has the following departments: general management, accounting,
secretarial, legal, data management, trademark and service mark
division, patent and utility models division and copyright division,
oppositions and general records.
The PTCO is in charge of the following registration records: 1)
Presentation (Filling) or application records (this help determine
preemptive rights); 2) Registry of Trademarks; 3) Registry of Slogans;
4) Record of Utility Models (Graphics); 5) Patents Records; 6)
Certification Marks Record, and 7) Copyright Records. It is important to
state, at this point, that the Central American Agreement for the
Protection of Industrial Property contemplates the use of two books of
records or (data bases) not in use in Guatemala: the Resolutions Records
and the Procedural Records. Finally, the IP and Copyright Laws mandates
for these records books (data bases) to be in the public domain, but
under no circumstances the records are to leave the premises of the PTCO.
To obtain copies of the PTCO records (or part of) the interested party
must file a written request and certification of said documents will be
Practical Aspects of the Industrial Property Statutes:
1) Industrial Property Registration Procedure for Foreign Petitioners
(Trademarks and Service Marks):
a) Legal Representative (power of attorney): According to the
Guatemalan IP law, the first step for registering a Trademark or a
Service Mark is to appoint a legal representative in Guatemala, which
must be an attorney at law. This is done by granting a power of attorney
(see model enclosed) that must comply with the following requirements;
a.1) Certification by a Notary Public or equivalent official in the
country were the power of attorney is issued; a.2) Certification by the
State Department or equivalent authority in the issuing country; a.3)
Certification by the Consulate of Guatemala in the issuing country or
the nearest consulate in charge of the region; a.4) Certification by the
Ministry of Foreign Affairs in Guatemala; a.5) Translation by a
certified translator (if applicable); a.6) Establishment of the power of
attorney by the legal representative in his capacity as a Notary Public,
this is called in Spanish "protocolización de documento proveniente del
extranjero"; a.7) Registration of the power of attorney with the Supreme
Court; and, a.7) Registration of the power of attorney with the
Mercantile Registry Office (this is only applicable if the power of
attorney is granted by a Corporation). It is important to Know that
steps a.4 to a.8 are handled by the appointed legal representative in
b) Registration Form: Once the legal representative is appointed,
the next step is to fill out a form provided by the PTCO and attach the
required documents in order to comply with Articles 5, 6, 7, 22, 23 of
the decree 57-2000. One important provision of the IP law to point out
is Article 22, which mandates that separate application forms are to be
presented to the PTCO for each international category (classification)
were the trademark applicant wishes to register the trademark (Guatemala
as a WIPO member uses the international Nice Classification).
c) Filing of the Application Form: The application form is then
posted with the Secretary of the PTCO, which takes notice of the
presentation by an official sign and date a copy of the form and handing
it over to the legal representative or his proxy. This signing and
dating of the form has important significance because it grants
preemptive rights if registration is later approved by the PTCO.
d) Trademark eligibility Analysis: Next, the PTCO conducts a
preliminary examination of the trademark or service mark to determine if
the application form filed and the mark itself complies with the
requirements of Articles 5, 20, 21, 22, 23. After this, preliminary
examination, and if all requirements are properly met, the PTCO conducts
what is called an eligibility exam.
e) Publication in the Official Gazette (OG): Once the eligible
exam has been past and the PTCO has given approval for registration,
three separate publications, with no more than 15-day intervals, must be
printed in the OG.
f) Opposition: The right to oppose registration by the owner of a
registered trademark, service mark, notorious trademark has a statutory
limitation of two (2) months (from the date the latest publication
appeared in the Official Gazette). The opposition should be presented to
the PTCO in writing and singed by an attorney. The opposition must
comply with the requirements of Article 27. Once the opposition is
filed, the PTCO will notify the legal representative of the applicant
granting a hearing (procured all in writing) will be conducted over a
two (2) months period. After this period has expired the PTCO will
render a resolution, either accepting the opposition or denying it. It
is important to take notice that after the resolution has been rendered
by the PTCO, the opposing party or the applicant has the right to appeal
the decision and take the matter to a court of justice (judicial review
of an administrative decision). Also you must know that; it would be
erroneous to say that after opposition period has expired, or even if
opposition presented and denied by the PTCO, the trademark has become
uncontestable (incontestable). This is so because under predetermine
circumstances a trademark applications and registrations can still be
attacked and rendered null or void (articles 67, 139 and 201-203).
g) Granting of Trademark Certificate (Registration Certificate):
Once the statutory limitation for the opposition procedure has expired,
or when the opposition has been rejected, the PTCO will proceed to
register the trademark or service mark. A record of protected trademarks
or service marks will be kept for prior searches, registrability exams
and opposition filings. As explained above, the PTCO extends two
different certificates which are; g.1) the ownership registration
certificate (deed) and, g.2) the preemptive rights certificate.
2) Registration of Licensing Contracts: The owners,
representatives or licensees (if properly authorized to do so) of
trademark can license Trademark, Service Marks, Slogans and Patents.
This subject is too complicated to be dealt with in this brief
introduction but it is important to let the reader know the procedure
for registering licensing contracts with the PTCO:
a) Registration Form: For registration of licensing contracts,
the IP act requires a form (provided by the PTCO) to be filled with PTCO
along with some documents provided by the trademark owner. The documents
required to be attached to the form include, a.1) Power of attorney (if
applicable, see registration procedures); a.2) PTCO fee payment invoice;
and, a.3) Trademark or service mark certificate (deed) of ownership.
b) Registration Form Analysis: The form should then be presented
to the Secretary of the PTCO, which takes official notice of the
presentation by dating, signing and delivering a copy to the petitioner.
The officer then elevates the application form to the appropriate
department, which conducts an analysis of the form to determine if all
requirements (Articles 45 and 46) are met.
c) Licensing Certificate: Once the analysis is complete the PTCO
extends a licensing certificate.
3) Assignment Contract Registration:
a) Assignment of IP Registration Application: By law trademarks,
service marks, patents, utility models and slogans are considered
personal property (movable property) and as such the ownership can be
transferred totally or partially through a contract. Articles 42 and 43
of the IP Act determine the procedure for registration of sale
(assignment) contracts. Registration is obtained by filling an
application form with PTCO that asserts: a.1) Name or denomination
(corporate name) of the "assignor" or transferring party; a.2)
Indication of the trademarks, service marks, trade names, patents,
copyrights and slogans transferred by the contract; a.3) Designation of
a notification address; a.4) Signature of the "assignor" or its (hers or
his) legal representative; a.5) A copy of the power of attorney (should
this be the case); a.6) PTCO fee payment invoice; a.7) A copy of the
document of transfer (contract); and, a.7) Seven (7) copies of the
trademark, service mark, trade name or slogan to be transferred (if
b) Registration Analysis: The application is next presented to
the Secretariat of the PTCO, which takes official notice of the
presentation by dating, signing and delivering a copy to the applicant.
The officer courses the application to the appropriate department, which
conducts an analysis to determine if all the requirements of Articles
28, 29, 124 y 135 are met.
c) Publication in the Official Gazette: Once the exam has been
conducted and the PTCO has given approval, the assignor or assignee must
publish a single publication with the OG, which serves as public notice
of the transfer.
d) Transfer Certificate: Once publication has been placed, the
PTCO, issues a Certificate of Ownership to the acquiring party.
Renewal of registration of a Trademark:
4) Renewal of Registration: Initial registration of trademarks,
service marks and slogans granting the right to exclude other from use
is valid for a ten-year (10) period that may be renewed indefinitely for
additional ten (10) years periods, if the owner files the required
application with the PTCO in a timely manner.
a) Renewal Application: The owner of a trademark, service mark or
slogan seeking renewal of his registration must file an application with
the PTCO before the initial ten-year period expires. This application
must be filled along with the following documents: a.1) Power of
Attorney (should this be the case) and, a.2) the PTCO fee payment
b) Registration of Renewal Application Analysis: The application
is then filed with the Secretariat of the PTCO, which takes official
notice of the presentation by dating, signing and delivering a copy to
the applicant. The officer in charge then elevates the application to
the appropriate department, which conducts an analysis to determine if
all the requirements of Article 32 are met.
c) Renewal Certificate: Once all the requirements are met, the
PTCO issues a renewal certificate.
5) Trademark Searches:
In Guatemala as a civil law country (unlike common law countries were
use is not a valid way to acquire ownership rights) trademark ownership
is only legally recognized with the proper registration certificate.
This means that direct hit search with the PTCO is the only type of
search needed to determine if a trademark, service mark, trade name or
slogan is similar enough to cause confusion with other trademarks
already registered. To conduct a trademark search, the interested party
must present a search application signed by an attorney. This
application is examined by the Data Record Keeping Department of the
PTCO, which gives the applicant a list of similar trademarks registered
within the appropriate listing or international category.
6) What do I need for filing a trademark application?
a) 10 copies of the trademark (word/design)
b) Power of attorney (same as for a trademark application)
c) International class or product/services in which renewal is
7) Power of Attorney:
Applicant's signature should be notarized not only as to the
authenticity of the signature but also -if the principal is a company-
as to the capacity of the individual person signing it. Guatemalan is
not a member the Hague Convention of 1961, regarding "Apostille".
Suggested model of the Power of Attorney:
The undersigned ____________________________________________________
______________ residing at ______________________________ hereby,
declares that it/he grants indistinctly to Marisol Campollo Méndez,
Allan Herbert Marroquin Castillo and/or Jose Maria Marroquin Samayoa a
full and sufficient power of attorney in the Guatemala Republic for the
obtainment of patents, utility models, trademarks, ornamental models and
designs, filing copyrights and any other matter related to Intellectual
Property Rights; either through application or assignment from third
parties, and also to intervene in court or administrative actions of any
kind related therewith, including cancellation and misuses, even
criminal ones, to which end they shall be empowered to take jointly or
severally all necessary steps before the proper administrative or
judicial authorities for the object stated, to name and appoint
translators, engineers or any other expert as required, to file
applications, prepare descriptions, make statements, and particularly
statements of use, enter oppositions, pay taxes, prove workings, bespeak
certified copies, receive documents, grant accept and record
assignments, withdraw applications, collect or recover any sums of
money, file and answer complaints, submit and answer interrogatories,
submit and produce of any kind, enter and answer nullities and appeals,
to desist and settle, and do all and whatsoever shall be necessary
before any judicial or administrative authorities, with power also to
appoint a substitute in whole or in part hereunder, and again to revoke
such substituted power.
Done and subscribed in_________________________this__________________________
_____________day of ______________________________________
8) ADVERTISING EXPRESSION OR SIGNAL
According to article 4 of the Industrial Property Act (decree number
57-2000) advertising expressions or signals refers to all adds, slogans,
phrases, combination of words, designs, engravings or any other similar
means, provided to be original or distinguishable, used to attract
consumers attention over an specific product, service or commercial
As with trademarks, exclusionary right is not acquired by means of use
of the advertising expression, slogan or signal. In Guatemala, as in all
other civil law countries, such right is granted by means of proper
registration with the PTCO. This right legitimates the registration
holder or his assignee the right to exclude others form using or
profiting from an advertising expression, signal or slogan (art 35) or
even opposing the registering of similar slogan or advertising
expression or signal (or asking for voidance to be declared by courts).
According to article 31 of the IP Act this exclusionary right shall keep
good standing for an initial ten (10) year period (from application
filing date) which may be renewed indefinitely for other ten (10) years
periods (one at a time).
It is important to say that exclusionary right may be extended to not
registered slogans, advertising expressions or signals in such cases
were said phrases are considered notorious (internationally or locally
recognizable) or famous.
One of the most important aspects of slogan or advertising expression
protection is that it is provided in concerned with the whole
expression, signal or slogan and not with parts or isolated elements
(Art. 70 of the IP Law).
Use of a mark within the slogan or advertising expression requires the
express consent of the trademark owner (legitimate right holder).
Article 68 of the IP Act determines that Advertising expression are
subject to the same rules as trademark concerning; a) registration; b)
use (article 66 determines that not using of a slogan, advertising
expression or signal within a five year period, from registration, may
result in cancellation of said registration); c) cancellation; and, d)
A) LEGAL FRAMEWORK
In Guatemala, Title III of the IP Law governs Invention Patents utility
models as well as industrial designs. The Republic of Guatemala has
subscribed and ratified the Paris Convention.
B) DEFINITION OF INVENTION
An invention is an idea applicable in practice to the solution of a
given technical problem. Our law classifies inventions according the
following: a) Invention of a product: which Include substance,
composition, material, articles, devices, machinery, etc; and, b)
Invention of a process: which include, among others, any method, system
or sequence of phases leading to the manufacturing or the obtainment of
a product or result, as well as the use or the application of a process
or of a product for the obtainment of a given result.
Article 91 of the IP Law determines that the following are not
considered inventions (not eligible for patent protection):
Theoretical or scientific
Discoveries concerning Nature.
Plans, schemes, principles or
methods of Business or Economics, of purely mental activities and
The software programs per se
referred to the designated use for a computer (issues covered by
Aesthetics creations and artistic
or literary works (issued covered by copyrights).
Methods for surgical, therapeutic
and diagnosis treatment of the human body and methods related to
animals. This rule shall not apply to products, especially to
substances or compounds, nor to the invention of devices or
instruments intended to put into practice the said methods. For
example, an "oral method" to take a drug is not covered by patent
Juxtaposition of known
inventions, or mix of known products, the variation in their form,
dimensions or material, except when actually combined or merged in a
way that qualities are modifies to obtain an industrial result not
obvious for an expert in the field.
Inventions contrary to the
national laws, the health, the public order, morals or the national
For an invention to be granted a patent the following must be met the
An invention is not eligible for a patent if it is not consider novel.
Novelty refers to different to prior art (comparison between the
invention requesting patent protection to previous products, devises,
method and document). An important note regarding invention
patentability is that even if a product is considered novel it is
possible to fail the novelty exam if the invention has been described
within a published document or put to public use, one year before
filling a patent application.
At the time of ascertainment of the patentability, any other patent
application in progress in Guatemala shall be taken into account,
whether filed before or with a previous priority, with respect to the
applications currently examined.
b. That the invention resulted from an
inventive activity (nonobvios).
This is when the invention is not obvious or not evidently derived from
the state of the art by a person normally acquainted with the
corresponding field (the novelty consideration regards the ability of
the invention to produce unexpected or surprising new results).
The IP Law provides that even if a patent is issued (granted), the
patent may be challenged in court on the ground that the patent examiner
made a mistake on the question of nonobviousness.
c. That the invention has industrial
This is the situation when the invention may be produced or used in any
type of industry or activity, whether crafts, agriculture, mining,
fishing and services, in other words, that the invention satisfies a
D) RIGHTS RESULTING FROM PATENTS
Patent of a product: The holder shall have the right to prevent
or impede others from manufacturing the product, offering the patent
product for sale, selling or using the product, or from importation or
storing the product for any of such purposes.
Patent of a process: The holder shall have the right to prevent
or impede others from, use the protected process, manufacturing the
product, offering for sale, selling or importation or storing the
product obtained by means of the patented process.
The patent right holder shall have the right to assign or to transfer
these rights to third parties, as well as to grant exploitation licenses
to one or several persons.
The patent exclusionary right (monopoly) is effective for 20 years (from
the filing of the patent application). This term is not extendable.
F) PRACTICAL ASPECTS
The prosecuting of a patent application entails the following:
Filling of the application:
Filing of the application accompanied by the original documents and
two copies thereof. Note that all documents shall be incorporated to
the file with a certified translation to Spanish. Application shall
be presented with the signature of a Guatemalan lawyer. Applicant
may be natural or a juridical person (Juridical personas shall
present a certificate attesting to its existence and legal
representation). If the applicant is not the inventor, the
application shall be accompanied with a certified copy of the
assigning document or other document attesting to the right of the
applicant to obtain the patent. An application shall only cover one
invention or a group of inventions as long as they are related to
each other as to constitute a sole inventive concept. If priority
right are to be claimed the application must include them. The
application shall include: a) Identification and domicile of the
applicant; b) a description of the invention including: b.1) Name of
the invention, preferable with no more than ten words. The title
shall denote the type of the invention (of a product, of use, etc);
b.2) Field of Technology of the invention; b.3) Previous technology
known to the applicant, as well as references to the previous
documents and publications concerning the said technology; b.4)
Clear and full description of the invention. It is preferable to use
the International Measures System. The summary shall not exceed of,
approximately, 200 words. Description may vary in accordance with
the type of invention. (Product or chemical compound: Its
identity, preparation and use or application; Chemical Process:
Phases or steps, type of reaction and necessary re-agents and
conditions; Machines, devices or systems: Structure or
organization and functioning; and, Mixtures: Ingredients);
b.5) Description of drawings, if any, or of chemical formula; b.6)
Description of the way to perform or put into practice, using
examples and references of the drawings; and, b.6) The way in which
the invention may be produced or used in some activity, except if it
results evident from the description or of the nature of the
invention; and, c) Receipt attesting to the payment of the tax rate
and the filing rights set forth by the law.
After reception of the
application, the PTCO performs a formal examination in order
to check if filling application requirements are met. Requirements
of novelty and inventive activity shall not be studied at this
stage. If a correction is in order, an extendable term of 2 months
is granted. If the applicant fails to correct the deficiencies, the
application is declared abandoned.
Once completed the application
examination the PTCO will order the publishing of the condense
application information prepared by the PTCO by the official
From the publication date third
parties may examine the application posted with the PTCO and present
their remarks, with respect to the application, within three
months following the publication. The writ shall be notified to the
applicant, who will have three months to make comments and/or modify
Novelty and usefulness exam.
Three month after the publication the PTCO or its appointees will
carrion with the novelty and usefulness exam. The PTCO will deny,
totally or partially, the application if the object thereof is
deemed not patentable, or if the application continues to be
defective. The PTCO will also deny the patent, in the corresponding
part, for lack of distinctness of the description or the claims that
prevents, totally or in part, the preparation of the report on the
state of the art.
The rights deriving from an
application or a patent may be assigned or transferred
totally or partially. Such transfer shall be recorded in the PTCO to
produce the due effects with respect to third parties.
Execution of Exploitation
licenses and mergers, change of name or domicile of the
holder of a patent shall all be recorded, in order to produce the
due effects with respect to third parties.
Any interested party may challenge before competent courts a patent
registration by alleging violation or error of legal or jurisprudence
interpretation committed by PTCO in granting the patent application on
one or more of the statutes regulating: a) Novelty; b) Level of
inventiveness; c) Whether or not the invention is susceptible of
industrial application; d) Products or processes not considered
inventions e) Pubic protection; and/or, f) Description of the invention.
Of course the patent can also be challenged in cases where a patent was
granted to a person not legally entitled to own it. In this situation
the law determines that the nullity challenge is reserved to the
rightful holder of the affected of the invention (product or) process or
his/hers (its) proxy. This action has a statute of limitations of five
10. UTILITY MODEL:
Utility model refers to all forms, configurations or dispositions of
elements of some artefact, tool, instrument, mechanism or other object,
or of any of its parts, that result in a better or different function,
use or manufacturing of the object intended for the application thereof,
or that add some utility, advantage or technical effect, that did not
Alike inventions, the utility model shall be novel and applicable to
industry. Furthermore, it shall be substantially different with respect
to previous utility models or inventions, and shall not violate the law,
the public order and morals.
Processes, Chemical substances or compounds, whether metallurgic or of
any other class and inventions related to living materials are not
subject of utility model protection.
The utility model grants the right holder an exclusionary right of
preventing third parties from conducting the following activities in
relation with the patented object: Manufacturing of a product
incorporating the utility model protected, offering for sale, selling,
using the product, or importing or storing said products for the purpose
of the activities previously mentioned.
Utility model rights shall remain in good standing for ten (non
For registration requirements, see patent application information.
11. INDUSTRIAL MODEL AND DRAWING
The industrial model is a tri-dimensional form serving as type or
pattern for the manufacturing of an industrial product, endowing it with
a special appearance, as long as it does not imply technical effects.
On the other hand, industrial drawing refers to all combination of
forms, lines or colours that, once incorporated in an industrial
product, endow it with a peculiar aspect. It is essentially
The industrial model or drawing shall be a novelty otherwise any
interested person may ask the court to declare its nullity. Novelty is
ascertained by the promotion received by the industrial model or
Application for registry shall include:
Identification and domiciles of
the applicant and the creator of the model or drawing. If the
applicant is a juridical person, a certification of its existence
and legal representation issued by competent authority of the
country of incorporation shall be presented.
Indication of the type or kind of
product it shall be applied to, and the class or classes of the said
products according to international classification adopted.
A graphical representation of the
industrial model or drawing.
An introductory note pointing out
the industrial object in question and the application of preference.
A description of the industrial
model or drawing that shall refer briefly to the graphical
reproduction of the industrial model or drawing.
The essential characteristics of
the industrial model or drawing that provide the originality and
novelty, the distinct appearance and characteristics of its own.
A scale model or prototype when
required by DIGERPI.
Receipt attesting to the
mandatory tax rate and rights payment.
After fulfilment of formalities, the application is published in the
official gazette. Within a two months period from the publication of the
application in the official gazette, third parties claiming opposition
rights to the application may exercise it by introducing an opposition
request in writing to the PTCO. If no opposition is introduced, or if
the administrative resolution accepts registration of the application
after considering the opposition, the registry will be granted.
In addition to protection granted by the IP Law, industrial model and
drawings may be protected under copyrights law.
12. INDUSTRIAL AND TRADE SECRET
It refers to any information, entailing trade or industrial application,
kept confidential by a natural or juridical person for obtaining or
maintaining competitive or economic advantages, while engaged in
economic activities, and having adopted the means or systems sufficient
to protect its confidential character and access restrictions.
To be considered a secret, the information shall not be of public
knowledge resulting evident for a specialist on the field, or publicized
by legal disposition or judicial order.
IP Law protects industrial and commercial secrets without need for
registration. Protection shall consist of the right of the holder of the
secret to demand the suspension of the publicizing of the secret and the
compensation for damages.
However, this protection is subject to the adoption, by the holder, of
measures sufficient as to the preserve confidentiality of the secret.
For example, to use the word "Secret", keep the secret in a safe place,
warning about the secret of confidentiality to the persons to which the
secret is transmitted or having access to it, drafting and executing
confidentiality agreements with employees, suppliers, service providers
or any other person which might need to know the information intended to
be kept, warning of the prohibition concerning publicizing, etc.
13. GENERAL INFORMATION ON THE PROTECTION OF INDUSTRIAL PROPERTY:
Legitimate holders of IP right enjoy full protection of their rights.
The Government of Guatemala acting through its courts or/and the
District Attorney (criminal cases) materializes this protection. This
protection extends to: i) Constitutional or Administrative challenges in
the event of IP expropriation or individual attack on acquired rights;
ii) Civil actions mostly intended to obtaining injunctions or/and
payment of damages; and, iii) Criminal actions based on one of the
following offences: a) trading, selling or storing products covered by
registered trademarks, or to imitate or falsify such trademarks. b) To
use in the trade protected commercial names, emblems or advertising
expression. c) To trade or sell products covered by new registered
trademarks, after being altered, substituted or totally or partially
eliminated. d) To use trademarks, which may cause confusion with other
registered trademarks, after a resolution has been issued ordering
discontinuance of the use of the trademark. e) To manufacture labels,
containers or packing materials which reproduce or imitate a registered
trademark. f) To reuse or refill used containers of a registered
expression. g) To use or exploit a trade secret which belongs to
another. h) To reveal to third parties professional secrets of which it
has become aware due to work, position or business. i) To manufacture or
market products covered under a patent belonging to another. j) To use
false geographic indicators; and k) to use false or deceiving names.
These penal actions are independent from civil actions that may be taken
in each case for annulment and disloyal competition.
PARTNERS IN THE STRUCTURE OF THE
Constitutional, Construction and Procurement Law
Lic. José María Marroquín (L.LM)
International Law, Financial and Notary Agreements
Lic. Arturo Fajardo Maldonado (PHD)
Intellectual Property, Corporations and Business Law and
Lic. Allan H. Marroquín Castillo (L.LM)
Claims, Collections and Counterclaims
Licda. Marisol Campollo Méndez