In Guatemala, financial authorities work on a bill to regulate the financial market, which, among other measures, would create a ruling commission and an electronic stock market, among other points.
Rolando San Román, general manager of the National Stock Exchange, confirms to the free press that one of the issues that is working prior to the opinion is to avoid double taxation in the new regulations. This is specifically important for investors to receive their profits without duplicate fiscal loads.
In the Guatemalan context, this mainly affects the investment funds and companies, where taxes apply both at the level of the fund and to investors who receive returns. Currently, legislation does not contemplate specific mechanisms to avoid this issue.
This is an excerpt from the executive’s conversation with Free press and Guatevisión.
Does the Securities and Goods Market Law allow this to be an accessible financing system for companies?
In general terms, yes. More than 150 companies have approached the stock market to obtain these financing. They have been captured for private issuers above Q50 billion for these 150 companies. The Ministry of Public Finance has caught through the tenders of the stock market more than 5,000 tenders that have taken here, possibly a little more than Q100 billion. In such a way that we can say that in general terms the current law does contemplate that the issuing of all kinds can access the stock market and finance. But there are definitely mechanisms or figures that are not contemplated by our regulation or that are not properly regulated, especially from the tax point of view, where certain modifications to the law would be required to contemplate both those mechanisms or instruments.
What are the figures that do not contemplate the current law?
These figures could, apart from the issues of collective investment that can be improved and more, the titulization issues that are emissions that are guaranteed by certain assets that typically, for example, can be taken to what is a bag is certain assets, such as mortgage cards that will support an issue in such a way that the fruits of those mortgage cards serve to pay what the new yields are titles that will be issued. This is, in general terms, what are the degrees, this is not properly covered by current legislation. Then, there are specific figures related to the stock market, with the bags, with what are known as the market infrastructure that are the entities that help in the negotiation processes, specifically they are the depository plants that help to be negotiated in the bags can be guarded and recorded. For this, a regulatory framework that develops these figures that is known as the central counterparts where the compensation of these operations is carried out. The other important issue is the regulator. In the most developed markets there is a specialization of regulators for the stock market, it monitors that these markets comply with international standards and that there may be supervision, monitoring, surveillance, inspection of the market participants, understand the stock exchanges, depository plants, central counterpart centrals, values and stock market agents and what are the managers of these entities of collective investment institutions.
What happens to double taxation?
For some, this double taxation can be presented, we are talking about what is known as collective investment, which are basically investment societies that what they seek is to group the savings of many people, invest those savings, if the collective result is distributed proportionally within the investors of these funds or these investment companies. For this particular issue, especially tax legislation is required that avoids double taxation in these processes. In the current law there is already the investment fund contract that could be developed more and near Q4 billion quetzales are currently distributed to what are investments in investment fund contracts. In such a way that they already exist, but there are issues that have not yet been developed within these investment funds, for example, real estate development issues that are contemplated in more developed regulations what is known in Anglo -Saxon markets such as real estate investment funds (Reit, for the acronym in English, Real Estate Investment Trust). These types of contracts, of funds or investment companies are not contemplated or are not properly developed in our in our regulatory framework.
In the bill they propose to create a securities commission, how would it work?
Securities commissions are quite common in stock markets as they develop in several countries of the world. There is a specialized entity in the stock market and these can take different names, but in the United States it is the Securities Exchange Commissionwhich is a stock market commission. In Spain it is the National Securities Market Commission and we can find many examples of countries that have a specialized regulatory entity for the stock market. It has adequate communication with the other regulatory entities of the financial system, for example, the Superintendence of Banks or with other participants of that financial system, but specializes in the stock market and in supervising those who participate in it: to the bags, to the centrals, to the central counterpart entities, to the emitters, to the agents, and whose purpose is to ensure an adequate dissemination of the financial information and the protection of the financial information and the protection In general terms through the existence of this information and the proper dissemination of this information complying with international standards.
What would the sale transactions be like?
The sale transactions are still carried out through operations that are carried out through the stock market, through one of the stock market agents continue to be carried out by these purchase and sale orders that the agents put for their respective investors.
What options would improve the leverage and financing of companies with this initiative?
The initiative would provide several sources of potential benefits for companies. In the sense that there is first a regulatory framework that allows the development of these institutional investors, the investment fund contracts and understand the investment companies, which will be large buyers of the issues that could potentially leave. This development of large institutional investors is very important for the development of markets, but also a draft can contemplate the existence of new types of instruments. Understand, for example, most broadcasts had been carried out through promissory notes. Recently, corporate bonds began to venture into the market and now there are bank bonds, but convertible corporate bonds have also come to the market, for example, there are also preferential actions. But it can, as in other markets, have additional instruments or values such as those that exist, for example, in Mexico that we find stock certificates, participation certificates. Some of these new instruments could also reach through a new one of a new regulation.
What are the key points that cover with the Superintendence of Tax Administration (SAT) to advance with the bill?
They are still reviewing some special points of the tax issues and have requested some changes and modifications to some of those articles in which they will work soon to see if with these changes there is already a fulfillment of what they would like to have this preliminary draft. The issues of double taxation is the main theme, that this is properly covered and that the many details for the various types of instruments that will be broadcast under the various types of participants that exist in this market are properly covered. At the end of the taxation, this has to return to the technical table (Ministry of Economy, the National Stock Exchange, the Bank of Guatemala and the SAT) that has been seeing this because the tax chapter has definitely had some impact on some of the other chapters of the draft and this has to be reviewed by the technical table that has participated throughout this process.