Guatemala: Overview

RENTAL YIELDS

Yields are high in Guatemala

Prices for apartments in Guatemala City are around US$900 to US$1,200 per sq. m.; while monthly rents are around US$8 to US$10.50 per sq. m. The rental yield for a 200 sq. m apartment could reach 17%, while other sized apartments have yields of 10 to 12.6%.

Rental yields for houses in Antigua City are around 4% to 8%. For houses near Lake Atitlan and the coastal area near the Pacific, yields are around 7.5% to 10.5%. Per square meter (sq. m) prices in these areas are higher than in Guatemala City at US$1,300 to US$1,550.

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TAXES AND COSTS

Taxes are very high in Guatemala

Rental Income: Withholding taxes are applicable to nonresidents. A nonresident deriving income from property rentals is taxed at 31% of net income. In addition VAT (Impuesto al Valor Agregado) is levied at 12%, and applies (among others) to the sale or rental of real estate.

Capital Gains: Capital gains earned by nonresidents selling Guatemalan property are subject to a flat 31% withholding tax.

Inheritance: Inheritance and gift taxes are levied at progressive rates from 1% to 25%.

Residents: Guatemalan residents are subject to income tax on Guatemalan-sourced income only.

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BUYING GUIDE

Total transaction costs are high in Guatemala

The Total round trip transaction cost, i.e., the cost of buying and selling a property, is around 16%, with the biggest cost being the 12% Value Added Tax on property sales.

The total cost of registering property is around 2.1% of the property value. The five procedures required can be completed in about 55 days.

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LANDLORD AND TENANT

Tenancy laws are neutral between landlord and tenant in Guatemala

Rent: Rents can be freely agreed between landlord and tenant. Rent indexation clauses are permissible, and normal.

Tenant Security: The Civil Code establishes that, when the terms or concepts of a contract are clear, and there is no doubt about the intention of the contracting parties, the text of the contract must be interpreted literally.

The law can be slow. There are a lot of opportunities for defendants to introduce delays.

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ECONOMIC GROWTH

Recovery after a 36 year civil war

During the second half of the 20th century, Guatemala (pop. 13 million, GDP/cap US$2,100) experienced a variety of military and civilian governments as well as a 36-year guerrilla war between the government and leftist-indigenous groups.

In 1996, the government signed a peace agreement formally ending the conflict, which had led to the death of more than 100,000 people and had created some 1 million refugees.

The 1996 peace accords removed a major obstacle to foreign investment, but widespread political violence and corruption scandals continue to dampen investor confidence.

The distribution of income remains highly unequal, with perhaps 75% of the population below the poverty line. Ongoing challenges include increasing government revenues, negotiating further assistance from international donors, upgrading both government and private financial operations, curtailing drug trafficking, and narrowing the trade deficit.

Despite its turmoil, travelers flock to Guatemala because it offers Central America in concentrated form: its volcanoes are the highest and most active, its Mayan ruins the most impressive and its earthquakes the most devastating.

The country’s varied topography and excellent climate have made it a favorite tourism destination. Travelers visit its magnificent Mayan ruins, colonial architecture and Lake Atitlan, considered to be one of the most beautiful lakes in the world.