The recent update of the report on the Estimation of tax expenditure in Guatemala indicates that it amounted to Q22,586 million in fiscal year 2025, equivalent to 2.4% of GDP.
The main fiscal benefits corresponded to the value added tax (VAT), with Q15 thousand 164 million, equivalent to 1.6% of the GDP, and the income tax (ISR), with Q6 thousand 186 million, equivalent to 0.7% of the GDP. Together, both amounted to Q21,350 million, that is, 94.5% of the total tax expenditure.
The total income that the State stops receiving as a result of the application of preferential treatments established in the legislation is known as tax expenditure.
These may consist of exonerations, exemptions, franchises or special deductions contained in the Constitution, in ordinary laws—including tax laws—as well as in other economic policy instruments.
VAT concentrates the exemptions
In the breakdown, Q15,775 million corresponded to indirect taxes and Q6,811 million to direct taxesaccording to the report prepared by the Collection Office of the Superintendency of Tax Administration (SAT), presented during the first half of the year.
In all countries, tax or promotion incentives are applied with the purpose of attracting investments and generating employment.
IGSS receives greater exemption
For constitutional beneficiaries, the amount amounted to Q5,114 million, equivalent to 22.7% of the total. The Guatemalan Social Security Institute (IGSS) reported Q2,476 million; educational centers, Q1,550 million; universities, Q1 thousand 68 million; and the Guatemalan Olympic Committee (COG) and the Autonomous Sports Confederation of Guatemala (CDAG), Q18.2 million.
Ordinary laws absorb 77.4%
The beneficiaries covered by ordinary laws registered an amount of Q17,472 million, equivalent to 77.4% of the total tax expenditure in 2025.
The beneficiary taxpayers made use of the exemptions established by law. Among the top five, individuals and families stand out, with Q7,360 million; financial intermediation, with Q2,272 million; commercial activities, with Q1,633 million; social assistance institutions, with Q1,336 million; and employees in a dependency relationship, with Q1,221 million.
Together, these five groups totaled Q13,822 million, equivalent to 79% of the amount corresponding to beneficiaries under ordinary laws.
Tax expenditure remains the same
The superintendent of the SAT, Werner Ovalle Ramírez, declared that tax spending in 2025 remained around 2.4% of GDP, in macroeconomic terms, without showing an increase in its general level.
He clarified that it is possible that some treatments, benefits or tax incentives have registered upward or downward variations, depending on the behavior of the economic activities to which they are associated. However, from an aggregate perspective, The study does not reflect a significant increase in tax spending with respect to the size of the economy.
Likewise, it confirmed that in 2025 there were no relevant changes in tax legislation that would expand the current tax benefits or incentives, which helps explain the stability observed in the general level of tax spending.
SAT asks to evaluate tax incentives
The head of the SAT considers it important that, in the future, fiscal dialogue allows progress towards a analysis of the cost-benefit relationship of the different differentiated treatments, in order to determine its relevance, effectiveness, continuity or eventual deletion.
He explained that, for the moment, progress continues in the control, measurement and traceability mechanisms of tax spending.
“Currently, an increasingly important part of the study is built from information contained in customs and tax declarations, progressively reducing dependence on alternative estimates. This improvement represents a substantial advance to identify, quantify and control with greater precision the application of tax benefits and incentives,” he added.
IMF proposes rationalizing exonerations
During the visit that the International Monetary Fund (IMF) made to Guatemala last June, as part of the annual evaluation, it highlighted that reducing social and infrastructure gaps requires an increase in tax revenues.
The international organization recognizes that, despite the advances of the SAT in areas such as tax compliance, digitalization, management of tax refunds and customs modernization, tax revenues have remained around 12% of GDP for decades.
According to the IMF, for the current and planned efforts of the SAT to translate into greater collection, it is necessary avoid measures such as the elimination of taxes or the introduction of special tax regimes that further erode the tax base.
In addition, the organization warns about the need to limit tax arbitration, both internal and cross-border. Ultimately, it recommends undertaking a comprehensive tax reform that rationalizes tax spending, expands the tax base and increases tax rates, which are currently at extremely low levels, especially in the case of the ISR.
Icefi proposes reviewing exonerations
Ricardo Barrientos, executive director of the Central American Institute of Fiscal Studies (Icefi), explained that tax spending should not be seen as an illegal practice, but as taxes that the The State stops collecting because there are laws that establish it.
He added that the SAT registers the exonerations and exemptions that apply by law.
As an example, he pointed out that individual people in a dependency relationship have a single deduction for the value added tax (VAT) return, which cannot be considered an illegitimate tax loss, since it corresponds to the vital minimum.
He added that there are other types of tax spending that are legal, but whose legitimacy is questioned. That is to say, at the time they had an economic and social justification to attract investments and generate employment, although currently its relevance is the subject of debate.