Guatemala's New Tributary Law for Cattle Ranchers

Late in the evening of November 19, 2024 the Congress of Guatemala approved Decreto 31-2024, Ley para la Integración del Sector Productivo Primario y Agropecuario.?A law that establishes the creation of two special simplified taxation regimes.

The second regime, which is primarily focused on cattle, would be designated for individuals or legal entities engaged in the production and commercialization of products from the livestock, aquaculture, and beekeeping sectors.

This regime would register those involved in activities such as breeding, fattening, development, production, processing, slaughter, transformation, and intermediation of such products, with the intended purpose of selling them in supermarkets, cantonal and municipal markets, and collection centers.

The proposal indicates that this sector would be required to pay a tax equivalent to 1.5% of their gross sales, whether within or outside the farm or production areas, as a definitive payment.

Additionally, intermediaries of bovine products would be required to pay a tax of 10% on their profits, while exporters would need to comply with a 2% tax on their gross sales when conducted with live animals.

To avoid impacting final sellers of livestock products, the law specifies that this sector is exempt from paying the tax. The same applies to those subject to a value-added tax (VAT) due to working for large companies.

Raised Eyebrows

Many have argued that this law was passed to facilitate money laundering and to reduce costs for those engaging in such activities. As is well known in Latin America, the lack of traceability and accountability makes cattle an excellent mechanism for laundering money. In fact, some of the actors that pushed this law to fruition are well known for engaging in such practices within the country.

Although the law appears to favor cattle ranchers, the country shows little intention of genuinely improving the traceability of its animals. A more balanced law would have incorporated features that reward cattle ranchers who implement robust animal-traceability systems from purchase to sale. This would require increased involvement from the Agriculture Ministry, particularly in tagging animals upon birth and maintaining accurate records. However, it is evident that increasing traceability was not the primary objective of this legislation.

Another concern is that the law disproportionately benefits certain industries while leaving others behind. This creates an unfair playing field, which has sparked criticism from various sectors.

Encouraging Outlook

On the other hand, the law brings a more positive development for cattle ranchers. For the first time, they will be able to deposit funds into bank accounts without the fear of being criminalized. In the past, transactions were often conducted in secrecy to prevent accounts from being frozen or shut down. This legal change is expected to bring growth to the livestock industry and encourage more individuals to participate in various aspects of the sector.

By reducing hurdles and creating a more stable financial environment, the legislation could serve as a stepping stone for increased investment in the industry. Proponents argue that it will not only boost the economy but also open doors for small and medium-sized producers to expand their operations. While the law has its flaws, it undeniably offers a significant opportunity for growth in the livestock sector, if implemented correctly. This law will enter in effect in March of 2025.