Engaging a contractor in Guatemala runs on the FEL invoice. An individual registers with the tax authority (SAT), issues an electronic invoice for each payment, and pays tax on gross income under one of two regimes: the simplified regime at 5% up to GTQ 30,000 a month and 7% above, or a 25% tax on net income. Exports of services are exempt from the 12% IVA, and foreign currency moves freely. The legal risk is classification, because article 18 of the Labour Code looks at continued dependence and direction. This guide covers the contractor’s tax, reclassification, the contract and the payer’s paperwork. The payment side is on our Guatemala payouts page. It is general information, not legal advice.
The contractor’s tax and invoices
Simplified regime. The tax is 5% of monthly gross income up to GTQ 30,000 and 7% on the excess, calculated on the amount net of IVA. When the payer does not withhold, the contractor pays directly on form SAT-1311 within ten business days of the following month (SAT, checked 2026-10-26). On GTQ 30,000 of net monthly income, GTQ 1,500.
Net-income regime. The alternative is 25% of net income, with costs deductible, determined and paid quarterly. The choice is made through SAT and cannot change until the next tax period (PwC, reviewed 2026-06-09, checked 2026-10-26).
Territorial tax. Guatemala taxes compensation for services rendered in Guatemala and other Guatemalan-source income (PwC, reviewed 2026-06-09, checked 2026-10-26), so a foreign client does not move the contractor outside it.
IVA. The standard rate is 12%, and exports of goods and services are exempt (PwC, reviewed 2026-06-09, checked 2026-10-26). Invoices are electronic documents authorised by SAT through FEL (Sovos, checked 2026-10-26). Ask the contractor’s accountant whether your engagement qualifies as an export, and have the invoice show it.
Reclassification risk
Article 18 of the Labour Code defines an employment contract as the link by which a person provides personal services, or carries out work personally, under continued dependence and immediate or delegated direction of another, for pay of any kind (Invest in Guatemala, checked 2026-10-26). The label does not decide it.
A single client, a set schedule, a fixed monthly fee and your instructions are the facts a claimant would use (contractor misclassification). An employee brings employer-side social security of 12.67% of monthly payroll, with 4.83% on the employee side (PwC, reviewed 2026-06-09, checked 2026-10-26), and the annual Bono 14 of one month’s ordinary salary, paid in July (Deel, checked 2026-10-26). If the role is a job, hire through an EOR.
What to put in the contract
- A written services agreement scoped to deliverables, with the fee, currency, receiving account and who bears transfer charges.
- A FEL invoice for every payment, matched to the payment reference.
- Whether the fee is gross or net of the contractor’s tax and of IVA.
- IP assignment in writing: do not rely on a default; assign the rights explicitly and ask local counsel about formalities.
- Independence markers: the contractor’s own equipment and schedule, the right to work for other clients, and a fee tied to deliverables.
Taxes and paperwork
The contractor’s side. Register with SAT, set up FEL, issue an invoice per payment, and file and pay the regime’s tax.
The client’s side. Pay against the invoice. US payers collect a W-8BEN from an individual and file no 1099: the place of performance decides the source of the income (irs.gov, checked 2026-10-26). Guatemala is not on the IRS list of US income tax treaty partners (irs.gov, checked 2026-10-26).
How to pay contractors in Guatemala
Wise pays quetzals from its local bank account into the contractor’s account; its US page quoted USD 38.19 to send USD 1,000 by direct debit at 1 USD = 7.6426 GTQ (wise.com, checked 2026-10-26). A SWIFT wire is the alternative, to a quetzal or dollar account: Decree 94-2000 makes holding and moving foreign currency free (Banguat, checked 2026-10-26). Rails, costs and platforms are compared on our Guatemala payouts page.
Contractor of Record in Guatemala
A Contractor of Record is the contracting party for the contractor and reduces reclassification risk; it does not remove it. In Guatemala the work still has to look independent, and a COR can collect the FEL invoice and keep contracts consistent across a team. Read the liability clause in the contract rather than the product name. Where the role is a job, with your hours, your tools and core work, hire through an EOR instead. Compare providers in our COR rating.