Total transaction costs are high in Guatemala
October 11, 2018
How high are realtors´ and lawyers´ fees in Guatemala? What about other property purchase costs?
|Real Estate Agent´s Fee||seller|
|Costs paid by buyer||4.15%||(for new properties)|
|4.15%||(for new properties)|
|Costs paid by seller||0%|
|ROUNDTRIP TRANSACTION COSTS||4.15%|
| See Footnotes
Source: Global Property Guide
How difficult is the property purchase process in Guatemala?
Under Guatemalan law, foreigners can acquire, maintain and dispose of real property with very few restrictions. What foreigners cannot do is own land directly next to rivers, oceans or international borders. Foreign firms developing projects in designated tourism zones are eligible for income tax exemption on revenue from their investment in the country. However, administrative procedures remain a burden to the investor. All firms must register with the Ministry of Economy, formally incorporate there, publish their intent and agree to Guatemalan jurisdiction.
Foreign firms must complete further registration tasks than domestic firms, and thus are subject to too much greater delays in completing the registration process. Foreign investors must realize that corruption is a fact of life in Guatemala and be prepared to encounter it at all levels. Political violence has abated, but crime is high.
The seller obtains a Certificate at the Property Registry in which the buyer can verify that the property doesn´t have any mortgages and to verify that the property is owned by the seller. The buyer needs to know the registry numbers where the property is registered. The seller must obtain from the Municipality of the city where the property is established, the cadastral value of the property. Sometimes, the city where the property is established, does not have a Municipality registry of the property value, so this information has to be solicited in DICABI (Dirección de Catastro y Avalúo de Bienes Inmuebles). The Laywer/Notary prepares the sale agreement and notarizes it by preparing the Public Deed. Lawyer/Notary charges 1% of transaction value. Value Added Tax with the rate of 12% is paid. As soon as the Public Deed is ready, it is delivered to the Real Estate Office for its recording. Lastly, it is important to notify the Municipality and or DICABI of the transaction. This step is important to update the cadastral value of the property for the purpose of tax collection.
The whole process of registering a property can take up to 23 days to complete.
Additional Buying and Selling Tips
Mortgages from financial institutions are typically impossible to get. If you are able to get one the interest rates will be very high. You may be able to arrange one through the seller. In general plan on paying for all property in cash.
There are basically two types of property offered, registered and unregistered. In the larger cities you will find mostly registered in the smaller areas unregistered. All property can be registered and it is best if you buy property that is registered, though it is not always absolutely necessary.
Typically you will pay a tax on property at the time of sale. In most municipalities you will also pay a yearly property tax, though by most standards it can be considered low.
Footnotes to Transaction Costs Table
The round trip transaction costs include all costs of buying and then re-selling a property - lawyers´ fees, notaries´ fees, registration fees, taxes, agents´ fees, etc.
Registration fees are around 0.15% of the property value.
Legal fees are around 1% of the property value.
Value Added Tax (VAT)
Value Added Tax (VAT) of 12% is levied on the sale of new properties.
Stamp duty at a flat rate of 3% is levied on the subsequent sale or transfer of properties, instead of VAT.