The proposed bill would make a number of changes to the current tax incentive regimes and add a couple of new regimes. Taxpayers that are currently benefitting from the incentive regimes or might benefit from the new regimes should continue to monitor the progress of this bill.

On January 11, 2016, the Labor Committee of the Guatemalan Congress proposed Bill No. 5007, modifying the tax benefits granted by Decrees 29-89 (Drawback Law) and 65-89 (Law on Free Trade Zones).

Under the modifications to Decree 29-89, the current regimes would continue and two new tax regimes would be added:

— Producer under temporary admission

— Service provider

The modifications to Decree 65-89 would eliminate industrial and commercial users of Free Trade Zones. Under the modifications, only producers of industrial goods and producers of services would be qualified users of Free Trade Zones.

Additionally, the bill does not contain modifications for qualified users of the Free Trade Zone for Industry and Commerce of Santo Tomás de Castilla.

Companies benefited by Decree 29-89 or 65-89 would continue to enjoy the tax benefits until they expire with the following effects:

— Companies qualified as draw-back entities under the temporary admission regime that had been granted an income tax exemption for less than 10 years would be allowed to retain the exemption for the term granted. (Section 18)

— Companies qualified as draw-back entities under the temporary admission regime that had been granted an income tax exemption for 10 years would retain the exemption and be allowed to complete the remaining time left for the exemption. (Section 6)

— The tax benefits for Free Trade Zones qualified as administrative entities would not change.

— Industrial users in a Free Trade Zone would continue to enjoy the tax benefits granted under current law, except they would not qualify for the income tax exemption and custom duties and import tax exemption on machinery, equipment and tools. They could, however, apply to be qualified as "producers of industrial goods" users for the remaining period of the income tax exemption previously granted. (Section 33)

— Service users in a Free Trade Zone that had been granted a 10-year income tax exemption would be allowed to complete the 10-year term. (Section 31)

— Commercial users in a Free Trade Zone would continue to enjoy the tax benefits granted, except they would not qualify for the custom duties and import tax exemption on machinery, equipment and tools. They may, however, apply to be qualified as a service user for the remaining period of the income tax exemption previously granted. (Section 33)

— Companies interested in qualifying as draw-back entities under the temporary admission regime would not be granted an income tax exemption. (Section 6)

— Companies interested in qualifying as producers under temporary admission or service provider would be granted the current benefits under Decree 29-89. (Section 7)

— Companies interested in qualifying as producers of industrial goods or services in a Free Trade Zone would be granted the current benefits established in Decree 65-89. (Section 22)

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