Doing Business 2020 Guatemala Economy Profile Guatemala Page 1 Doing Business 2020 Guatemala Economy Profile of Guatemala Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Guatemala About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Guatemala Ease of Doing Business in DB RANK DB SCORE Region Latin America & Caribbean Guatemala Income Category Upper middle income Population 17,247,807 96 62.6 City Covered Guatemala City Rankings on Doing Business topics - Guatemala 15 46 82 89 99 104 118 153 157 176 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 86.8 65.3 84.2 64.9 85.0 30.0 70.3 77.2 34.5 27.6 Starting a Business (rank) 99 Getting Credit (rank) 15 Trading across Borders (rank) 82 Score of starting a business (0-100) 86.8 Score of getting credit (0-100) 85.0 Score of trading across borders (0-100) 77.2 Procedures (number) 6 Strength of legal rights index (0-12) 9 Time to export Time (days) 15 Depth of credit information index (0-8) 8 Documentary compliance (hours) 48 Cost (number) 17.3 Credit registry coverage (% of adults) 22.8 Border compliance (hours) 36 Paid-in min. capital (% of income per capita) 0.6 Credit bureau coverage (% of adults) 37.1 Cost to export Documentary compliance (USD) 105 Dealing with Construction Permits (rank) 118 Protecting Minority Investors (rank) 153 Border compliance (USD) 310 Score of dealing with construction permits (0-100) 65.3 Score of protecting minority investors (0-100) 30.0 Time to export Procedures (number) 11 Extent of disclosure index (0-10) 3.0 Documentary compliance (hours) 32 Time (days) 226 Extent of director liability index (0-10) 2.0 Border compliance (hours) 72 Cost (% of warehouse value) 6.1 Ease of shareholder suits index (0-10) 5.0 Cost to export Building quality control index (0-15) 11.0 Extent of shareholder rights index (0-6) 3.0 Documentary compliance (USD) 37 Extent of ownership and control index (0-7) 1.0 Border compliance (USD) 405 Getting Electricity (rank) 46 Extent of corporate transparency index (0-7) 1.0 Score of getting electricity (0-100) 84.2 Enforcing Contracts (rank) 176 Procedures (number) 5 Paying Taxes (rank) 104 Score of enforcing contracts (0-100) 34.5 Time (days) 44 Score of paying taxes (0-100) 70.3 Time (days) 1,402 Cost (% of income per capita) 477.3 Payments (number per year) 8 Cost (% of claim value) 26.5 Reliability of supply and transparency of tariff index (0-8) 7 Time (hours per year) 248 Quality of judicial processes index (0-18) 6.0 Total tax and contribution rate (% of profit) 35.2 Registering Property (rank) 89 Postfiling index (0-100) 33.0 Resolving Insolvency (rank) 157 Score of registering property (0-100) 64.9 Score of resolving insolvency (0-100) 27.6 Procedures (number) 7 Recovery rate (cents on the dollar) 28.1 Time (days) 24 Time (years) 3.0 Cost (% of property value) 3.6 Cost (% of estate) 14.5 Quality of the land administration index (0-30) 13.5 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 4.0 Page 4 Doing Business 2020 Guatemala Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is received -Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Guatemala Starting a Business - Guatemala Standardized Company Legal form Sociedad Anónima (SA) - Corporation Paid-in minimum capital requirement GTQ 200 City Covered Guatemala City Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Procedure – Men (number) 6 8.1 4.9 1 (2 Economies) Time – Men (days) 15 28.8 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 17.3 31.4 3.0 0.0 (2 Economies) Procedure – Women (number) 6 8.1 4.9 1 (2 Economies) Time – Women (days) 15 28.8 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 17.3 31.4 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.6 0.4 7.6 0.0 (120 Economies) Figure – Starting a Business in Guatemala – Score 70.6 85.4 91.3 99.9 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Guatemala and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 87.0: Colombia (Rank: 95) 86.8: Guatemala (Rank: 99) 79.9: Costa Rica (Rank: 144) 79.6: Regional Average (Latin America & Caribbean) 78.6: El Salvador (Rank: 148) 71.4: Honduras (Rank: 170) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Guatemala Figure – Starting a Business in Guatemala – Procedure, Time and Cost Time (days) Cost (% of income per capita) 18 14 16 Cost (% of income per capita) 12 14 10 12 Time (days) 10 8 8 6 6 4 4 2 2 0 0 1 2 3 4 5 *6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Guatemala Details – Starting a Business in Guatemala – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Check uniqueness and reserve the company name 3 days GTQ 50 for each name Agency : Notary Public The notary has to conduct a company name availability search on the website of the Mercantile Registry of Guatemala. The company name can be also checked directly at the Registry. 2 Deposit the subscribed capital 1 day no charge Agency : Bank or administrator The legal representative opens a bank account and deposits the subscribed capital. The bank will require a bill of any public service with the address of the new company. The deposit slip is presented to the notary. Some banks require a statement letter from the Notary with the general information about the corporation (name, legal representative, comercial name and initial subscribed capital). Companies with a capital lower than GTQ 2,000, have the option to deposit the capital at the bank or with an administrator. 3 A notary public draws the deed of constitution 1 day included in procedure 4 Agency : Notary Public The notary issues a certified copy of the deed and draws the appointment of the legal representative (Sole Administrator or members of the Board), who has to be personally registered before the Tax Authorities 4 Registration and payment of the fees online by a notary, publication of the edict on the 8 days see procedure details Registry's website and opposition period for affected third parties Agency : MiNegocio (Commercial Registry) The notary completes the forms required by the Commercial Registry (Registro Mercantil) online (https://minegocio.gt/). The following forms are required by the Commercial Registry: a- certified copy of the deed of constitution b- appointment of legal representative c- bank receipt if the capital is superior than GTQ 499.999. The notary also pays online the amount required by the Registry. The fees are as follow: GTQ 5,000 average notarial fees + GTQ 250 stamp tax + GTQ 300 notarial stamp tax for the certified copy + GTQ 30 edict + GTQ 200 publication of the edict. Then the registry will proceed to the company's incorporation, tax registration, issuance of commercial license (patente) and edict publication. 5 Register the company’s employees at the Guatemalan Social Security Institute (IGSS) 1 day no charge Agency : Guatemalan Social Security Institute (IGSS) Entrepreneur must go to the Guatemalan Social Security Institute (IGSS) offices to register the company’s employees in the system. Registration is mandatory for companies with 3 or more employees and it is made at the Sección de Inscripciones en la División de Registro de Patronos y Trabajadores. The following documents are required: certificate of company registration, appointment of representative, company deeds, identification document of the representative and the list of employees to be registered. 6 Register the employees’ contracts with the Ministry of Labor 1 day, simultaneous with No charge Agency : Ministry of Labor previous procedure According to the Labor Code, companies with more than 3 employees need to register the contracts of the employees with the Ministry of Labor. Takes place simultaneously with previous procedure. Page 8 Doing Business 2020 Guatemala Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule The warehouse: • Procedure is considered completed once final document is - Will be used for general storage activities, such as storage of books or stationery. received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage • Quality control after construction (0-3) infrastructure, a septic tank in the smallest size available will be installed or built. - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 9 Doing Business 2020 Guatemala Dealing with Construction Permits - Guatemala Standardized Warehouse Estimated value of warehouse GTQ 1,682,916.20 City Covered Guatemala City Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 11 15.5 12.7 None in 2018/19 Time (days) 226 191.2 152.3 None in 2018/19 Cost (% of warehouse value) 6.1 3.6 1.5 None in 2018/19 Building quality control index (0-15) 11.0 9.0 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Guatemala – Score 76.0 42.4 69.7 73.3 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Guatemala and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 70.8: Costa Rica (Rank: 78) 69.1: Colombia (Rank: 89) 65.3: Guatemala (Rank: 118) 63.2: Regional Average (Latin America & Caribbean) 56.2: Honduras (Rank: 158) 52.3: El Salvador (Rank: 168) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 10 Doing Business 2020 Guatemala Figure – Dealing with Construction Permits in Guatemala – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 4.5 200 4 Cost (% of warehouse value) 3.5 150 3 Time (days) 2.5 100 2 1.5 50 1 0.5 0 0 1 2 *3 *4 *5 6 7 8 9 10 11 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2020 Guatemala Figure – Dealing with Construction Permits in Guatemala and comparator economies – Measure of Quality 11.5 11.0 11.0 11.0 11 Index score 10.5 10.0 10 9.5 9.0 9.0 9 8.5 8 Guatemala Colombia Costa El Honduras Latin Rica Salvador America & Caribbean Details – Dealing with Construction Permits in Guatemala – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request and obtain certificate of land ownership 4 days GTQ 50 Agency : Property Registry (Registro General de la Propiedad de Guatemala) The application is done at the Property Registry (Registro General de la Propiedad de Guatemala). Applicants fill out the application form for certification of inscriptions, providing all necessary information pertaining to the property, as well as their contact information. Payment is made in the respective bank, according to the established fees (from 1 to 10 sheets GTQ 50.00). A proof of payment is obtained, which provides the password for the receipt and the expected date of delivery is also indicated on this receipt. 2 Obtain project approval from the Ministry of Health 30 days no charge Agency : Ministry of Health The Health Code of Guatemala (1997) requires that all constructions in Guatemala City need a clearance from the Ministry of Health to obtain a construction license. This requirement was never implemented in practice until 2016. 3 Hire an environmental specialist and obtain an environmental assessment of minimum 14 days GTQ 14,000 impact Agency : Independent Specialist The environmental assessment of minimum impact is generally prepared by a professional (engineer or architect) authorized to do so. BuildCo hires the professional and the cost will vary depending on the project's characteristics. According to Administrative Ruling ("Resolución Administrativa") 001-2018/DIGARN/OBT, the warehouse of the case study falls under Category c): "Low potential environmental impact" 4 Verify compliance with Standard for Disaster Reduction Two (NDR-2 Norma de Reduccion 14 days no charge de Desastres Numero Dos ) Agency : National Coordinator for Disaster Reduction (CONRED) Since October 2013, the National coordinating agency for disaster reduction (Coordinadora Nacional para la Reducción de Desastres, CONRED) is required to verify that each building is in compliance with Agreement N. 04-2011-Standard for Disaster Reduction Number Two (Acuerdo Número 04-2011 Normas de Reducción de Desastres Número Dos-NDR-2). BuildCo. must submit an application including affidavits of the detailed building plans. 5 Submit a brief or simple industrial report 1 day no charge Agency : One-Stop Shop under the Municipality of Guatemala City This is a simple form obtained at the Municipality and completed by the architect. It must be submitted in the request for a building permit. The report contains an affidavit on storage use and any industrial processes to be carried out in the warehouse. 6 Submit evironmental assessment of minimum impact and receive approval from MARN 75 days GTQ 9,050 (Ministerio de Ambiente y Recursos Naturales) Agency : One-Stop Shop under the Municipality of Guatemala City According to Administrative agreement (Resolución Administrativa) 001-2018/DIGARN from the Ministry of the Environment and Natural Resources (MARN), the warehouse falls under Category c): low potential environmental impact. The environmental assessment along with the application is submitted to the one-stop shop. Required documents include: 1. Initial environmental impact form 2. Project profile 3. Building plans 4. Photocopy of identity card or DPI 5. Deed of affidavit from proposer 6. Legal entity status (if applicable) 7. Certified copy of land ownership certificate 8. Certified copy of the firm's business license 9. Copy of NIT 10. Digital copies of the environmental document 11. Copy of the environmental document Page 12 Doing Business 2020 Guatemala 7 Request and obtain a construction license 44 days GTQ 70,232 Agency : One-Stop Shop under the Municipality of Guatemala City On January 2009, he Municipality of Guatemala City introduced a new Land Management Plan (Plan de Ordenamiento Territorial- “POT”) and other legislation regulating the construction permit issuance. According to this, the new zoning regimes are established according to general use of land which among others introduced mixed use of zoning regimes. Under the new implementing regulations of POT, this mechanism is based on three stages: Simplified Procedure (Precedimiento Directo); Approval of Land Management Council (Junta de Ordenamiento Territorial); Approval of Land Management Council and Neighbors’ Consent. BuildCo's case would fall into the ‘Simplified Procedure' scheme and does not require the subsequent procedure with Land Management Council and neighbors. BuildCo must submit the corresponding form with all the requested specifics, together with all the requirements in the previous procedures, photocopies of the identification cards of its legal agent and the professional responsible for the construction, and a photocopy of the latest Single Real Estate Tax (Impuesto Unico sobre Inmueble) receipt and any other required receipts. An architect or engineer must be responsible for the construction work, signing the submitted form and the plans. All the information to obtain the construction license can be submitted in a digital form. 8 Request water and sewage connection and receive requirements from EMPAGUA 1 day no charge Agency : EMPAGUA Once the construction is finalized, BuildCo must fill out the application at the one-stop shop and receive the requirements from the Water and Sewerage Authority (Empresa Municipal de Agua, EMPAGUA). EMPAGUA will notify BuildCo of the fee to be paid as a deposit to cover the completion of the procedure and a service feasibility study that must be carried out by EMPAGUA. EMPAGUA will start the feasibility study within about 15 days. In 2007 the Municipality of Guatemala unified the application forms and relevant requirements for EMPAGUA, Department of Urban Construction Control (Departamento de Control de Construcción Urbana) and Infrastructure Directorate (Dirección de Infraestructura). Another change is that the approvals from all these entities are given simultaneously. However, this has not had any practical impact on the ground. 9 Notify the Construction Licensing Department upon construction completion and return 1 day no charge the license Agency : Construction Licensing Department (Departamento de Licencias de Construcción) The license must be returned to the Construction Licensing Department who performs the final inspection. If the construction work conforms to approved specifications, the occupancy permit is issued. When the license is returned, the Municipality notifies the Cadastre Office about the construction and its cost. Within 7 -- 14 days, the Municipality visits the site to verify that the building complies with the approved specifications. 10 Receive final connection to water and sewage 60 days GTQ 8,800 Agency : Municipality/EMPAGUA This procedure entails the reception of the water connection. 11 Receive final inspection and obtain occupancy permit 11 days no charge Agency : One-Stop Shop under the Municipality of Guatemala City According to Plan de Ordenamiento Territorial (COM 30-2008), upon completion of the construction work, BuildCo. requests a final inspection from the Construction Licensing Department at the one-stop shop. This inspection shall be performed by the supervisor in charge, who shall record the result on an inspection card.If no objections are raised during the inspection (meaning that every part of the construction is authorized as complying with the plans submitted to the Construction Licensing Department), the professional in charge of the inspection immediately provide the applicant with the certificate of conformity. Takes place simultaneously with previous procedure. Page 13 Doing Business 2020 Guatemala Details – Dealing with Construction Permits in Guatemala – Measure of Quality Answer Score Building quality control index (0-15) 11.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, in-house engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use Architect or engineer; 1.0 (Latent Defect Liability or Decennial Liability)? (0-1) Professional in charge of the supervision; Construction company; Owner or investor. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 2.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans University degree in 1.0 or drawings are in compliance with existing building regulations? (0-2) architecture or engineering; Being a registered architect or engineer. What are the qualification requirements for the professional who supervises the construction on the ground? (0- University degree in 1.0 2) engineering, construction or construction management; Being a registered architect or engineer. Page 14 Doing Business 2020 Guatemala Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts • Tools to monitor power outages (0–1) (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. • Regulatory monitoring of utilities’ performance (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 15 Doing Business 2020 Guatemala Getting Electricity - Guatemala Standardized Connection Name of utility Empresa Electrica de Guatemala, S.A Price of electricity (US cents per kWh) 20.1 City Covered Guatemala City Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 5 5.5 4.4 3 (28 Economies) Time (days) 44 66.8 74.8 18 (3 Economies) Cost (% of income per capita) 477.3 407.2 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 7 4.4 7.4 8 (26 Economies) Figure – Getting Electricity in Guatemala – Score 66.7 88.7 94.1 87.5 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Guatemala and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 88.9: Costa Rica (Rank: 25) 84.2: Guatemala (Rank: 46) 76.3: Colombia (Rank: 82) 74.5: El Salvador (Rank: 87) 71.7: Regional Average (Latin America & Caribbean) 59.9: Honduras (Rank: 138) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Guatemala – Procedure, Time and Cost Time (days) Cost (% of income per capita) 450 40 400 Cost (% of income per capita) 35 350 30 300 Time (days) 25 250 20 200 15 150 10 100 5 50 0 0 1 *2 3 4 *5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 16 Doing Business 2020 Guatemala reflected here, see the summary below. Figure – Getting Electricity in Guatemala and comparator economies – Measure of Quality 9 8 8 7 7 Index score 6 6 6 5 4.4 4 3 2 2 1 0 Guatemala Colombia Costa El Honduras Latin Rica Salvador America & Caribbean Page 17 Doing Business 2020 Guatemala Details – Getting Electricity in Guatemala – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application request to EEGSA and await estimate 11 calendar days GTQ 0 Agency : Empresa Eléctrica de Guatemala S.A. (EEGSA) The client requests the connection to the grid via online or in person. The application must include: A. A simple copy of the notarized legal representation document. B. The local identity card (ID) of the legal representative. C. Notarized proof of ownership of the property or lease contract. D. List of technical data of the load required. E. Electrical design of the connection F. Plot plan The utility will perform a feasibility study to verify the conditions of the new connection point and will confirm that the network has the capacity requested by the client. It will also verify that the electrical design and the plot plan comply with the technical conditions stipulated by EEGSA. 2 Await external inspection by EEGSA 1 calendar day GTQ 0 Agency : Empresa Eléctrica de Guatemala S.A. (EEGSA) EEGSA performs an external inspection. The utility that the electrician in charge of the internal installations is present to clarify technical details. The visit consists of reviewing EEGSA's network and its interactions with the new user. There is no review of the user's internal wiring installation. During the inspection, the utility will verify that the voltage, capacity, and distance comply with the safety regulations. After EEGSA performs the external visit and checks the suitability of the connection's technical conditions, it will deliver a letter to the customer specifying the amount to be paid as a guarantee deposit and will confirm that the technical conditions are adequate to connect the warehouse to the grid. 3 Pay deposit and sign supply contract 2 calendar days GTQ 23,500 Agency : Empresa Electrica de Guatemala S.A. (EEGSA) EEGSA will only provide its services once the client has signed the contract and paid the guarantee deposit. For loads above 100 kW, the deposit is not paid in cash but is covered by a bond issued by a guarantee agency in Guatemala. The guarantee deposit will be refunded when the customer no longer requires the service of the power supply (according to the General Electricity Law). As soon as the customer pays the deposit, he is able to sign the supply contract. 4 Hire private company to construct transformer post and install transformer 21 calendar days USD 17,970 Agency : Private company For EEGSA to make the connection, it is needed that the civil works are completed. EEGSA is only responsible for the measuring equipment and therefore does not supervise the construction and laying of the cables, so the customer should contract the services of an independent engineer for this part of the works. The electrical engineer hired by the client installs the transformer, the pipe onto the post, the meter box, and the underground wiring to the main board. 5 Receive external works, meter installation and final connection 30 calendar days GTQ 0 Agency : Empresa Eléctrica de Guatemala S.A. (EEGSA) When the civil works are completed, the internal wiring are ready and the contract is signed, EEGSA installs the meter, transformers and connects the internal wiring to the transformers. The physical installation is performed by the Distributor (EEGSA) although subcontractors do the job. The electricity distribution company has a sufficient stock of materials. The customer does not buy any materials for the external connection. The meter installation is simultaneous with the connection and the electricity begins to flow from the moment the connection is made. It is necessary to mount the transformer station, which involves installing a post and installing the metering equipment, all of this is paid by EEGSA. Takes place simultaneously with previous procedure. Page 18 Doing Business 2020 Guatemala Details – Getting Electricity in Guatemala – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 7 Total duration and frequency of outages per customer a year (0-3) 2 System average interruption duration index (SAIDI) 4.0 System average interruption frequency index (SAIFI) 2.7 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? Yes Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.cnee.gob.gt/Ca lculadora/pliegos.php Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 19 Doing Business 2020 Guatemala Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. • Reliability of infrastructure index (0-8) - Has no occupants, and no other party holds a legal interest in it. • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 20 Doing Business 2020 Guatemala Registering Property - Guatemala Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 7 7.4 4.7 1 (5 Economies) Time (days) 24 63.7 23.6 1 (2 Economies) Cost (% of property value) 3.6 5.9 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 13.5 12.0 23.2 None in 2018/19 Figure – Registering Property in Guatemala – Score 50.0 89.0 75.7 45.0 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Guatemala and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 74.4: Costa Rica (Rank: 49) 71.2: Colombia (Rank: 62) 66.3: El Salvador (Rank: 79) 64.9: Guatemala (Rank: 89) 62.3: Honduras (Rank: 101) 54.9: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 21 Doing Business 2020 Guatemala Figure – Registering Property in Guatemala – Procedure, Time and Cost Time (days) Cost (% of property value) 4 3.5 20 Cost (% of property value) 3 Time (days) 15 2.5 2 10 1.5 1 5 0.5 0 0 1 *2 *3 4 5 6 *7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 22 Doing Business 2020 Guatemala Figure – Registering Property in Guatemala and comparator economies – Measure of Quality 20 17.5 18 16.5 16 14.0 Index score 13.5 14 12.5 12.0 12 10 8 6 4 2 0 Guatemala Colombia Costa El Honduras Latin Rica Salvador America & Caribbean Details – Registering Property in Guatemala – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a property certificate ("Certificacion del historial de la finca") and the cadastral 4 days GTQ 214; (Non- value certificate ("Valor de matricula") encumbrance certificate Agency : Property Registry (Registro General de la Propiedad de Guatemala) (www.rgp.org.gt) QTG 50 (for first 10 pages, The seller obtains a certificate at the Property Registry in which the buyer can verify that the each additional page property is free from mortgages and encumbrances, and to verify that the property is owned by +QTG 5) + Legal Fees the seller. In order to obtain the certificate, the buyer needs to know the registry numbers where QTG 164. the property is registered. Usually this information is provided by the seller and it is usually the Average number of pages: lawyer who verifies the books at the registry and obtains this information. This updated certificate of the property will be used later by the Notary to prepare the public deed. 10) This information can be searched online on www.rgp.org.gt , however only the physical, paper certificate, has legal value. 2 Obtain the cadastral value of the property from DICABI (Dirección de Catastro y Avalúo de 1 day no charge Bienes Inmuebles) Agency : National Cadastre (Dirección de Catastro y Avalúo de Bienes Inmuebles, DICABI) In parallel to requesting a non-encumbrance certificate at the Property Registry, the Notary must obtain a certificate from the National Cadastre (Dirección de Catastro y Avalúo de Bienes Inmuebles, DICABI) indicating the cadastral value of the property. DICABI is a national institution containing information based on a “personal registry type” on all the regional registries in the country. Pursuant to amendments in Tax Law (Article 171 Decree 10- 2012), authorized valuation of property and declaration of value of the real estate are mandatory. The request can be either submitted online, or at a specific counter of the Superintendencia de Impuestos located in the Property Registry in Guatemala City. The most common practice by Notaries is to request all the certificates necessary to proceed with the property transfer physically at the different counters located in the Property Registry building. It is common for Notaries to pick up the DICABI certificate once the non-encumbrance certificate has been issued by the Property Registry. 3 Obtain the cadastral value from the Municipality of Guatemala 1 day no charge Agency : Municipality of Guatemala A certificate of the cadastral value can be obtained online; however it is more common to submit a paper form at the Municipality of Guatemala and obtain the certificate on the same day. This certificate is necessary as the Stamp Duty will be determined based on the highest value between the sale price, the cadastral value from DICABI and the cadastral value from the Municipality. For taxation purposes, the sale price cannot be smaller than the cadastral value of the property. Page 23 Doing Business 2020 Guatemala 4 Lawyer/notary prepares the sale agreement and notarizes it, along with the public deed 2 days GTQ 58,337.49; (3% of Agency : Lawyer / notary the property value for The lawyer/notary (in Guatemala, the lawyer is also a notary public) prepares the sale and Stamp Duty (2nd or purchase agreement and notarizes it by redacting the agreement on a public deed. The deed is subsequent transfer) and read by the Notary and then ratified and signed by the parties, thus accepting the transaction. between QTG 6500 - QTG 8200 for notary fees plus There is a scale in the Notary Act that regulates the fees and one will likely pay between $800 and QTG 500 (tax stamps, $1000 for such a transaction. The notary will oversee buying the State stamps for the Stamp Duty tax of 3% charged to second and subsequent sales of properties (this is assumed to be the case copies, and others)) in the Doing Business scenario). For the first sale of a property a VAT payment of 12% of the property value is paid. Stamps are adhered to the Public Deed. Payments of registration fees (GTQ.160.00 plus GTQ 1.5 for each GTQ 1,000 of transaction value) are made to the notary, who will then pay the property registry. The documentation requested by the notary shall include: (i) Updated non-encumbrance certificate of the property issued by the Property Registry (Obtained in Procedure 1); (ii) Photocopy of the ID of seller and buyer (passport or local ID). In case the seller/buyer is a Company, a photocopy of the appointment in which the Company gives sufficient faculties to proceed with the transfer of property is necessary. In some cases, a Board of Director´s resolution may be required; (iii) Cadastral value obtained at DICABI (Obtained in Procedure 2); (iv) Last receipt of payment of the property tax (Impuesto Único Sobre Inmuebles, IUSI); (v) Cadastral value obtained at the Municipality of Guatemala (Obtained in procedure 3). 5 Public deed is delivered to the Property Registry for its recording 7 days GTQ 2,684.37; (QTG 160 Agency : Property Registry (Registro General de la Propiedad de Guatemala) (www.rgp.org.gt) + 0.15% of transaction The public deed is delivered to the Property Registry to be recorded under the name of the buyer. value (registration fees)) It is also advisable to obtain a certificate at the Property Registry to verify that the change of ownership has been properly recorded after registration is completed. The internal procedures conducted by the Property Registry are as follows: (1) All incoming cases are scanned and then randomly assigned to the officials (Operadores). (2) The official registers the property electronically; issues the case file (Expediente) and if the legal requirements are met, registers the transaction (Inscripción); (3) The Accounting Department verifies the payment of fees; (4) The Registrar or auxiliary registrars approve and sign the registration certificate. With Decree 42-2006, electronic signatures from auxiliary registrars are legally valid. Each one is assigned a unique number by which they can electronically sign, facilitating the registration process; (5) The Archives Department prints the Inscription of the Property Transfer and prepares it for the user. It is also possible to verify the authenticity of the inscription of the transaction through www.rpg.org.gt (section “Validar razones registrales”). The buyer accesses to this information though a verifying code and a reference code previously given by the Property Registry. 6 Notify the Municipality of the transaction 10 days no charge Agency : Municipality of Guatemala Once the transaction is concluded the notary notifies the Municipality of Guatemala City of the change in ownership. This step is important to update the cadastral value of the property for tax collection purposes. There is a small fine if this procedure is not fulfilled, but it has no effect on the validity of the registration of the property transfer obtained in the previous step. The notary needs to provide a copy of the title deed together with the notice. She/he will follow up with the municipality until they receive a statement of the updated records showing the updated information regarding the ownership of the property. Notaries can notify the registration of property transfers to the Municipality of Guatemala City online. However, the majority of Notaries are still communicating property transfers by courier to the Municipality. 7 Notify the National Cadastre and Valuation Agency (DICABI) of the transaction 10 days no charge Agency : National Cadastre (Dirección de Catastro y Avalúo de Bienes Inmuebles, DICABI) The National Cadastre and Valuation Agency (DICABI) must also be notified of the change of ownership. This notification is presented simultaneously with the notification provided to the municipality. Notaries can notify the registration of property transfers to DICABI online. However, the majority of Notaries are still communicating property transfers by courier to DICABI. Takes place simultaneously with previous procedure. Page 24 Doing Business 2020 Guatemala Details – Registering Property in Guatemala – Measure of Quality Answer Score Quality of the land administration index (0-30) 13.5 Reliability of infrastructure index (0-8) 4.0 Type of land registration system in the economy: Deed Registration System What is the institution in charge of immovable property registration? Registro General de la Propiedad In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Scanned 1.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Guatemala Municipality In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Scanned 1.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Separate databases 0.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification No 0.0 number for properties? Transparency of information index (0–6) 4.5 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Anyone who pays the 1.0 in the largest business city? official fee Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: https://www.rgp.org.gt /web/registro/solicitud -de-certificaciones https://www.rgp.org.gt /web/registro/ingreso- y-devolucion-de- documentos Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable property Yes, online 0.5 registration in the largest business city made publicly available–and if so, how? Link for online access: https://www.rgp.org.gt /web/registro/solicitud -de-certificaciones https://www.rgp.org.gt /web/registro/ingreso- y-devolucion-de- documentos Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: https://www.rgp.org.gt /web/registro/cat%C3 %A1logo-de- servicios-registrales Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency Yes 1.0 in charge of immovable property registration? Page 25 Doing Business 2020 Guatemala Contact information: Fiscalía de Delitos contra el Registro de la Propiedad, Ministerio Publico located at 15 Avenida 15-16, Zona 1 Edificio Gerona Ciudad de Guatemala, teléfonos 2411-9903 https://www.rgp.org.gt /index.php/seguridad- registral; Oficina de Acceso a la Información Pública y Procedimientos Jurídicos (Ocursos) Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 registration agency? Number of property transfers in the largest business city in 2018: 11,719 in 2018 Who is able to consult maps of land plots in the largest business city? Anyone who pays the 0.5 official fee Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, in person 0.0 Link for online access: Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and No 0.0 if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Are all privately held land plots in the economy mapped? No 0.0 Land dispute resolution index (0–8) 5.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Còdigo Civil, decreto Ley 106, del 14 de septiembre de 1963. Articles 1125 and 1148 Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Constitución Política de la República de Guatemala; Código Civil (Articles 1125 and 1148); Decreto Ley 106 del 14 de Septiembre de 1963. Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Page 26 Doing Business 2020 Guatemala Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of government issued identity documents? Yes 1.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Juzgado de Primera businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located Instancia Civil y in the largest business city? Mercantil How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 2 and 3 1.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 27 Doing Business 2020 Guatemala Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 28 Doing Business 2020 Guatemala Getting Credit - Guatemala Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Strength of legal rights index (0-12) 9 5.3 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 5.1 6.8 8 (53 Economies) Credit registry coverage (% of adults) 22.8 14.6 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 37.1 47.6 66.7 100.0 (14 Economies) Figure – Getting Credit in Guatemala – Score 85.0 Score - Getting Credit Figure – Getting Credit in Guatemala and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 90.0: Colombia (Rank: 11) 85.0: Costa Rica (Rank: 15) 85.0: Guatemala (Rank: 15) 80.0: Honduras (Rank: 25) 80.0: El Salvador (Rank: 25) 52.0: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 29 Doing Business 2020 Guatemala Figure – Legal Rights in Guatemala and comparator economies 12 11 10 10 9 9 Index Score 8 8 6 5.3 4 2 0 Guatemala Colombia Costa El Honduras Latin Rica Salvador America & Caribbean Page 30 Doing Business 2020 Guatemala Details – Legal Rights in Guatemala Strength of legal rights index (0-12) 9 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents Yes to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the No original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third No party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? Yes Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Guatemala and comparator economies 9 8 8 8 7 7 7 7 Index Score 6 5.1 5 4 3 2 1 0 Guatemala Colombia Costa El Honduras Latin Rica Salvador America & Caribbean Page 31 Doing Business 2020 Guatemala Details – Credit Information in Guatemala Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? No Yes 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or No Yes 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 3,854,994 2,364,980 Number of firms 30,654 22,637 Total 3,885,648 2,387,617 Percentage of adult population 37.1 22.8 Page 32 Doing Business 2020 Guatemala Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James • Ease of shareholder suits index (0–10): Access to internal appointed 60% of the shareholder-elected members. corporate documents; Evidence obtainable during trial and - Has not adopted bylaws or articles of association that go beyond the minimum requirements. allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures • Extent of shareholder governance index (0–20): Sum of the made—that is, the transaction was not entered into fraudulently. extent of shareholders rights, extent of ownership and control - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and and extent of corporate transparency indices directors that approved the transaction. • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 33 Doing Business 2020 Guatemala Protecting Minority Investors - Guatemala Stock exchange information Stock exchange Bolsa Nacional de Valores Stock exchange URL http://www.bvnsa.com.gt Listed firms with equity securities 17 City Covered Guatemala City Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Extent of disclosure index (0-10) 3.0 4.1 6.5 10 (13 Economies) Extent of director liability index (0-10) 2.0 5.2 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 5.0 6.7 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 3.0 3.0 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 1.0 2.3 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 1.0 2.3 5.7 7 (13 Economies) Figure – Protecting Minority in Guatemala – Score 30.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Guatemala and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 80.0: Colombia (Rank: 13) 48.0: Costa Rica (Rank: 110) 47.3: Regional Average (Latin America & Caribbean) 42.0: Honduras (Rank: 120) 36.0: El Salvador (Rank: 140) 30.0: Guatemala (Rank: 153) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 34 Doing Business 2020 Guatemala Figure – Protecting Minority Investors in Guatemala and comparator economies – Measure of Quality Guatemala 1 2 3 1 3 5 Colombia 5 7 9 7 4 8 Costa Rica 1 5 5 3 2 8 El Salvador 3 0 3 1 4 7 Honduras 0 8 3 1 3 6 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Latin America & Caribbean 2.5 5.4 4.4 2.5 3.2 6.5 0 5 10 15 20 25 30 35 40 45 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 35 Doing Business 2020 Guatemala Details – Protecting Minority Investors in Guatemala – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 3.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Existence of a conflict 1.0 without any specifics Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure 0.0 obligation Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 2.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Not liable 0.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) No 0.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) No 0.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 5.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? No 0.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved 1.0 questions only Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 3.0 Does the sale of 51% of Buyer's assets require shareholder approval? No 0.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? No 0.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? No 0.0 Extent of ownership and control index (0-7) 1.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0 Page 36 Doing Business 2020 Guatemala Must the board of directors include independent and nonexecutive board members? No 0.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? No 0.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? No 0.0 Must Buyer pay declared dividends within a maximum period set by law? No 0.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Extent of corporate transparency index (0-7) 1.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? No 0.0 Must Buyer disclose information about board members’ primary employment and directorships in other No 0.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? No 0.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? No 0.0 Page 37 Doing Business 2020 Guatemala Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the • Collecting information, computing tax payable second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 38 Doing Business 2020 Guatemala Paying Taxes - Guatemala Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Payments (number per year) 8 28.2 10.3 3 (2 Economies) Time (hours per year) 248 317.1 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 35.2 47.0 39.9 26.1 (33 Economies) Postfiling index (0-100) 33.0 47.5 86.7 None in 2018/19 Figure – Paying Taxes in Guatemala – Score 91.7 69.2 87.3 33.0 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Guatemala and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 78.0: Costa Rica (Rank: 66) 77.5: El Salvador (Rank: 70) 70.3: Guatemala (Rank: 104) 60.5: Regional Average (Latin America & Caribbean) 58.6: Colombia (Rank: 148) 49.9: Honduras (Rank: 167) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 39 Doing Business 2020 Guatemala Figure – Paying Taxes in Guatemala and comparator economies – Measure of Quality 100 87.2 90 80 Index score 70 60 48.2 49.5 47.5 50 40 33.0 35.1 30 20 10 0 Guatemala Colombia Costa El Honduras Latin Rica Salvador America & Caribbean Page 40 Doing Business 2020 Guatemala Details – Paying Taxes in Guatemala Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Corporate 1.0 online 23.0 25% or 7% taxable profits or 19.65 income tax gross income Solidarity tax 1.0 online 1% net asset or 17.68 included in other (ISO) gross income taxes Employer paid - 1.0 online 126.0 12.67% gross salaries 14.29 Social security contributions Capital Gains Tax 1.0 online 10% capital gains 0.51 Property tax 1.0 online 0.9% property value 0.45 Tax on interest 1.0 10% interest income 0.26 Advertising tax 1.0 0.5% advertising 0.01 expenses Employee paid - 0.0 jointly 4.83% gross salaries 0.00 withheld Social security contributions Value added tax 1.0 online 99.0 12% value added and 0.00 not included (VAT) land sale Totals 8 248 35.2 Page 41 Doing Business 2020 Guatemala Details – Paying Taxes in Guatemala – Tax by Type Taxes by type Answer Profit tax (% of profit) 20.2 Labor tax and contributions (% of profit) 14.3 Other taxes (% of profit) 0.7 Page 42 Doing Business 2020 Guatemala Details – Paying Taxes in Guatemala – Measure of Quality Answer Score Postfiling index (0-100) 33.0 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process Restricted to international traders and others Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT refund per 0.0 case study scenario Time to obtain VAT refund (weeks) No VAT refund per 0.0 case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 50% - 74% Time to comply with a corporate income tax correction (hours) 15.0 75.2 Time to complete a corporate income tax correction (weeks) 13.8 56.9 Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 43 Doing Business 2020 Guatemala Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 44 Doing Business 2020 Guatemala Trading across Borders - Guatemala Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Time to export: Border compliance (hours) 36 55.3 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 310 516.3 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 48 35.7 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 105 100.3 33.4 0 (20 Economies) Time to import: Border compliance (hours) 72 55.6 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 405 628.4 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 32 43.2 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 37 107.3 23.5 0 (30 Economies) Figure – Trading across Borders in Guatemala – Score 78.0 70.8 72.2 73.8 74.6 66.3 87.0 94.7 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Guatemala and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 89.8: El Salvador (Rank: 46) 77.6: Costa Rica (Rank: 80) 77.2: Guatemala (Rank: 82) 69.1: Regional Average (Latin America & Caribbean) 64.3: Honduras (Rank: 130) 62.7: Colombia (Rank: 133) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 45 Doing Business 2020 Guatemala Figure – Trading across Borders in Guatemala – Time and Cost Time (hours) Cost (USD) 80 72 405 450 70 400 60 310 350 Time (hours) Cost (USD) 48 300 50 250 40 36 32 200 30 105 150 20 100 10 37 50 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 46 Doing Business 2020 Guatemala Details – Trading across Borders in Guatemala Characteristics Export Import Product HS 09 : Coffee, tea, matï and spices HS 8708: Parts and accessories of motor vehicles Trade partner United States United States Border Santo Tomás de Castilla port Santo Tomás de Castilla port Distance (km) 298 298 Domestic transport time (hours) 8 8 Domestic transport cost (USD) 750 750 Details – Trading across Borders in Guatemala – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 33.3 105.0 customs authorities Export: Clearance and inspections required by 8.0 0.0 agencies other than customs Export: Port or border handling 28.0 205.0 Import: Clearance and inspections required by 72.0 200.0 customs authorities Import: Clearance and inspections required by 0.0 0.0 agencies other than customs Import: Port or border handling 72.0 205.0 Page 47 Doing Business 2020 Guatemala Details – Trading across Borders in Guatemala – Trade Documents Export Import Phytosanitary Certificate Customs Import Declaration Export Permit /Permiso de la Asociacion Nacional del Café Bill of Lading Commercial Invoice Commercial Invoice Bill of Lading Packing List Customs Export Declaration Certificate of Origin Packing List Terminal Handling Receipts Terminal Handling Receipts SOLAS certificate Inspection Report Certificate of Origin SOLAS certificate Page 48 Doing Business 2020 Guatemala Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. Page 49 Doing Business 2020 Guatemala Enforcing Contracts - Guatemala Standardized Case Claim value GTQ 64,540 Court name Guatemala City Court of First Instance City Covered Guatemala City Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Time (days) 1402 774.2 589.6 120 (Singapore) Cost (% of claim value) 26.5 32.0 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 6.0 8.8 11.7 None in 2018/19 Figure – Enforcing Contracts in Guatemala – Score 0.0 70.3 33.3 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Guatemala and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 55.2: Costa Rica (Rank: 111) 53.5: Regional Average (Latin America & Caribbean) 51.9: El Salvador (Rank: 126) 44.2: Honduras (Rank: 154) 34.5: Guatemala (Rank: 176) 34.3: Colombia (Rank: 177) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 50 Doing Business 2020 Guatemala Figure – Enforcing Contracts in Guatemala – Time and Cost Time (days) Cost (% of claim value) 1600 45.8 50 Cost (% of claim value) 1402 1400 1288 38.8 40 1200 Time (days) 32.0 1000 28.4 920 852 816 26.5 30 24.3 774.2 800 21.5 589.6 20 600 400 10 200 0 0 Colombia Costa El Guatemala Honduras Latin OECD Rica Salvador America high & income Caribbean Page 51 Doing Business 2020 Guatemala Figure – Enforcing Contracts in Guatemala and comparator economies – Measure of Quality Guatemala 2 0.5 0.5 3 Colombia 2.5 1.5 1.5 3.5 Costa Rica 2.5 3.5 0.5 3 El Salvador 2.5 2 0.5 3 Honduras 2.5 2 0 3 OECD high income 2.5 3.2 2.4 3.6 Latin America & Caribbean 2.4 2.2 1 3.6 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Guatemala Indicator Time (days) 1402 Filing and service 66 Trial and judgment 796 Enforcement of judgment 540 Cost (% of claim value) 26.5 Attorney fees 15 Court fees 6.5 Enforcement fees 5 Quality of judicial processes index (0-18) 6.0 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 0.5 Court automation (0-4) 0.5 Alternative dispute resolution (0-3) 2.0 Page 52 Doing Business 2020 Guatemala Details – Enforcing Contracts in Guatemala – Measure of Quality Answer Score Quality of judicial processes index (0-18) 6.0 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.0 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? No 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 0.5 1. Time standards 0.5 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? No 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? No 0.0 5. Are there any electronic case management tools in place within the competent court for use by judges? No 0.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 0.5 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the general public No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.0 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 53 Doing Business 2020 Guatemala 2. Mediation/Conciliation 0.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or No section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 54 Doing Business 2020 Guatemala Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 55 Doing Business 2020 Guatemala Resolving Insolvency - Guatemala Indicator Guatemala Latin America & OECD high Best Regulatory Caribbean income Performance Recovery rate (cents on the dollar) 28.1 31.2 70.2 92.9 (Norway) Time (years) 3.0 2.9 1.7 0.4 (Ireland) Cost (% of estate) 14.5 16.8 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 4.0 7.2 11.9 None in 2018/19 Figure – Resolving Insolvency in Guatemala – Score 30.3 25.0 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Guatemala and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 71.4: Colombia (Rank: 32) 45.6: El Salvador (Rank: 92) 39.2: Regional Average (Latin America & Caribbean) 34.6: Costa Rica (Rank: 137) 32.6: Honduras (Rank: 143) 27.6: Guatemala (Rank: 157) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 56 Doing Business 2020 Guatemala Figure – Resolving Insolvency in Guatemala – Time and Cost Time (years) Cost (% of estate) 4 3.8 16.8 18 3.5 3.5 14.5 14.5 14.5 16 Cost (% of estate) 3.0 3.0 2.9 14 3 Time (years) 12.0 12 2.5 9.3 10 2 8.5 1.7 1.7 8 1.5 6 1 4 0.5 2 0 0 Colombia Costa El Guatemala Honduras Latin OECD Rica Salvador America high & income Caribbean Page 57 Doing Business 2020 Guatemala Figure – Resolving Insolvency in Guatemala and comparator economies – Measure of Quality Guatemala 0 2 2 0 Colombia 5.5 3 2 0.5 Costa Rica 2 3 1 0 El Salvador 4 2 3 0 Honduras 4 2 1 0 OECD high income 5.3 2.8 2.1 1.9 Latin America & Caribbean 3.7 2.4 1.9 0.8 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Guatemala and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 80 68.7 70 60 50 40 32.4 31.2 28.1 29.5 30 19.9 20 10 0 Guatemala Colombia Costa Rica El Salvador Honduras Latin America & Caribbean Page 58 Doing Business 2020 Guatemala Details – Resolving Insolvency in Guatemala Indicator Answer Score Proceeding foreclosure A foreclosure would probably be the most likely procedure to apply, based on the Civil Procedure code, the Commercial Code and Decree 107 (Art. 294). In general, collective insolvency proceedings are less frequent than foreclosures in Guatemala. The foreclosure proceeding would take around 3 years. It would start with the creditor filing a claim before the court for the enforcement of the sale of the property used as a collateral. The debtor has to be personally notified about the claim. The debtor will have the opportunity to counter-claim. The claim has to be sent to the debtor’s home and he has to personally acknowledge the receipt of the claim. This can take a while, delays at this stage are very common. Once the debtor is finally reached, he has three days to object. Several rounds of objections are very common. Even though in “via de apremio” there are limits to the objections the debtor can make, it is common to face a lot of delays because of the objections. After that, it will take about 1.5 years until the approval to initiate foreclosure is handed down by the Court. Once the debtor finally accepts the claim, after several rounds of objections, the judge sets a time and date for the public auction. It can take around from 6 months to 1 year to organize and complete the auction. Also, it is not uncommon to organize several auctions because the hotel is not sold in the first one. Also, it is common that the debtor opposes how the hotel was valued. The public auction has to be published in the Diario Oficial at least three times, and also at the court (this will take a minimum of one month). Outcome piecemeal sale Because of the sale of the property through a public auction, the hotel won’t be able to continue operating and its assets will be sold piecemeal. Time (in years) 3.0 The foreclosure proceeding will take approximately 3 years in Guatemala from the moment of Mirage’s default until the debt is repaid to the secured creditor. It will take 1.5 years until the approval to initiate foreclosure is handed down by the Court, including the notification period and the debtor’s counter-claim. After that stage, it will take 1 year for the auction to take place (including the necessary time to appoint an auctioneer, the scheduling of the auction and the sale of the real estate). It will take additional 6 months for the judge to approve the sale and have it registered. Cost (% of estate) 14.5 The cost for a foreclosure proceeding as described above would amount approximately to 15% of the value of Mirage’s estate. The main component of this expenditure would be the attorney’s fees, which would amount 8% of the value of Mirage’s estate. The rest would be the costs of the custodian and property appraisal which would amount to 5% of the value of Mirage’s estate. The rest of the cost would be judicial and notification expenses. Article 396 of the Procedural Civil and Commercial Code of Guatemala provides that in no case the total fees of all professionals involved in the insolvency process may not exceed 12% of the value of the claim. However, this article does not apply to foreclosures. They can be calculated according to the professional schedules for arbitrators, attorneys, judicial leaders, experts, auditors and trustees. (Decree 111-96) Recovery rate 28.1 (cents on the dollar) Page 59 Doing Business 2020 Guatemala Details – Resolving Insolvency in Guatemala – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 4.0 Commencement of proceedings index (0-3) 2.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may file for 0.5 liquidation only Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor 0.5 may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (a) Debtor is 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value generally unable to of its assets pay its debts as they mature Management of debtor's assets index (0-6) 0.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the No 0.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? No 0.0 Does the insolvency framework allow avoidance of preferential transactions? No 0.0 Does the insolvency framework allow avoidance of undervalued transactions? No 0.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of No 0.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.0 Which creditors vote on the proposed reorganization plan? N/A 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote No 0.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 2.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 60 Doing Business 2020 Guatemala Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 61 Doing Business 2020 Guatemala Employing Workers - Guatemala Details – Employing Workers in Guatemala Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 457.4 Ratio of minimum wage to value added per worker 0.8 Maximum length of probationary period (months) 2.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 50.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? Yes Restrictions on weekly holiday? Yes Restrictions on overtime work? Yes Paid annual leave for a worker with 1 year of tenure (working days) 15.0 Paid annual leave for a worker with 5 years of tenure (working days) 15.0 Paid annual leave for a worker with 10 years of tenure (working days) 15.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 15.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 0.0 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 0.0 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 0.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 0.0 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 5.1 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 25.3 Page 62 Doing Business 2020 Guatemala Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 50.6 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 27.0 Unemployment protection after one year of employment? No Page 63 Doing Business 2020 Guatemala Business Reforms in Guatemala From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2019 Starting a Business: Guatemala made starting a business easier by reducing the minimum capital requirement, reducing the registration fees and streamlining registration procedures. DB2018 Dealing with Construction Permits: Guatemala made dealing with construction permits more complicated and expensive by expanding the classification of projects requiring an environmental impact assessment. DB2017 Paying Taxes: Guatemala made paying taxes less costly by reducing the rate of corporate income tax. DB2016 Paying Taxes: Guatemala made paying taxes less costly for companies by reducing the corporate income tax rate. Trading across Borders: Guatemala reduced the documentary and border compliance time for importing by making electronic submission of documents compulsory and eliminating the need for many hard-copy documents. DB2015 Starting a Business: Guatemala made starting a business easier by eliminating certain registration fees and reducing the time to publish a notice of incorporation. Paying Taxes: Guatemala made paying taxes easier and less costly for companies by enhancing the electronic system for filing and paying corporate income tax and VAT and by reducing the capital gains and corporate income tax rates. On the other hand, it also made paying taxes more complicated by introducing a new form for capital gains tax. DB2014 Dealing with Construction Permits: Guatemala made dealing with construction permits easier by streamlining procedures through the creation of a one-stop shop, backed by agreements between institutions and agencies involved in the permitting process. Paying Taxes: Guatemala made paying taxes easier for companies by introducing a new electronic filing and payment system. DB2013 Dealing with Construction Permits: Guatemala made dealing with construction permits easier by introducing a risk-based approval system DB2010 Dealing with Construction Permits: Guatemala made dealing with construction permits easier through a new land management plan that simplified the risk-based approval process for building permits and through new zoning regimes that speeded up the approval process. Registering Property: Guatemala made registering property easier by streamlining the process at the cadastral office, by reorganizing operations, and making greater use of electronic services. Getting Credit: Guatemala strengthened its secured transactions system by creating a new movable asset registry that covers all types of movable assets as well as creditors and debtors and improved access to credit information by guaranteeing borrowers’ right to inspect their own data. Paying Taxes: Guatemala made paying taxes easier for companies by expanding the category of businesses for which electronic filing and payment of value added and corporate income tax is mandatory and by extending the electronic system to most banks. DB2009 Getting Credit: Guatemala strengthened its secured transactions system through a new law creating a new form of pledge over movable assets and a registry for these pledges, allowing a general description of accounts receivable and inventory used as collateral and permitting parties to a security agreement to agree to out-of-court enforcement of the security right when signing the agreement. Page 64 Doing Business 2020 Guatemala DB2008 Starting a Business: Guatemala reduced the time required for new company registration through full implementation of its one-stop shop. Dealing with Construction Permits: Guatemala made dealing with construction permits less time consuming by accelerating the issuance of decisions by the Ministry of Environment and Natural Resources. Registering Property: Guatemala reduced the time required to register property by allowing registrars to submit electronic signatures. Trading across Borders: Guatemala made trading across borders easier by implementing a new electronic data interchange system, training customs staff and improving its risk-based inspection system. Enforcing Contracts: Guatemala made enforcing contracts easier by increasing the maximum size of claims that can be brought to justices of the peace. Page 65 Doing Business 2020 Guatemala Page 66