Loans – Prensa Libre

We are going to refer to the tax implications of one of the figures of financial leverage that are used in companies, such as loans, which are invested for the execution of operations and also used as working capital. In the more than 25 years of practicing business consulting and auditing for various companies of all kinds of activities, we have realized that most of them use external financing as a mechanism for their growth, and the purpose is to generate higher profits , so that the focus of credit is precisely the expansion of the business, increasing production, expanding markets, etc.

In practice, two variants of business loans can be given, from the point of view of their destination: 1) For the personal use of the owner or partners, and; 2) For exclusive destination of business activity. The financing that is used for the owners, although it is true that the credit is obtained in the name of the company, not to be used as working capital, in addition to representing fiscal risk, because it does not comply with the general rule of income tax (ISR ), that are useful, necessary, pertinent or indispensable to produce or preserve the source of taxable income, also has a negative impact on the profitability of the company, because the generation of interest represents an expense for the company, and these financial disbursements can cause losses and have sometimes led to bankruptcy of some companies.

The other scenario is the case of successful companies whose growth has been largely thanks to obtaining loans and whose use is intended solely and exclusively for the operations of the same as working capital, meets the general condition of being useful, necessary, pertinent and indispensable to produce or conserve the source of taxable income and also have a positive impact on the business, because it contributes to its growth and expansion. Notwithstanding the expense that the payment of interests represents, they are constituted in tax shields, as they are considered deductible from the ISR regime. So properly planned and managed business loans produce positive results for companies.

For the handling of interest, in addition to the general rule indicated above, the various requirements for its deduction are contained in articles 21 and 24 of the Tax Update Law, of which we highlight two cases: 1) Interest from loans Obtained with banking and financial entities, commercial companies and persons residing in Guatemala, are deductible, provided that the condition of making and paying the withholding, banking, is met, when applicable and, likewise, that they are duly documented. The second group is made up of interest on loans obtained abroad. To be deductible, they must be with banking or financial entities registered and monitored by the bank inspection body and authorized for intermediation activity in the granting country. The payment of this interest is not subject to withholding. If the interests are paid to non-residents, who are not monitored and inspected in their country, they are not deductible and a ten percent withholding applies.

In accordance with this income tax regulation, if the company has obtained loans with entities residing abroad, it is important to examine their situation, to give it the treatment as required by the Tax Update Law.

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