The Congress of the Republic of Guatemala approved Decree Number 18-2026 (hereinafter, the “Decree”), which reforms the Single Property Tax Law (IUSI) and introduces amendments to the Fiscal Stamp Tax and Special Stamped Paper for Notarial Records Law and to the Tax Update Law.
In general terms, the reform redefines the tax treatment of properties used for housing, incorporates a regime of tax benefits for individuals, strengthens the tax administration and enforcement mechanisms, and modifies the Income Tax (“ISR”) treatment applicable to certain real estate transactions.
Main amendments:
1. The IUSI regime applicable to “habitual residence” is redefined.
The Decree introduces a specific regime for properties used as a habitual residence. As part of this reform, it modifies the method for determining the IUSI, establishing a rate of three per thousand for properties covered under this regime and incorporating, for the first time, a legal definition of habitual residence, understood as: “the property used primarily as the permanent residence of the taxpayer and their family unit.”
Likewise, a regime of tax benefits applicable exclusively to individuals is created, which includes, among others:
a) an exemption for homes belonging to persons over sixty years of age;
b) an exemption for continuity and tax compliance for owners who have timely paid the IUSI for twenty years; and
c) a temporary exoneration for the first home acquired through financing, applicable on a one-time basis and for a maximum term of twenty years or until the loan is paid off.
These benefits may only be applied to one property per taxpayer, are non-transferable, and are subject to compliance with the requirements and procedures set forth in the Decree.
2. Strengthening of tax administration and control mechanisms.
The Decree incorporates measures aimed at strengthening the administration and enforcement of the tax through greater coordination among municipalities, the General Property Registry, the Ministry of Public Finance, and the Superintendency of Tax Administration (SAT).
In addition, it reforms the Fiscal Stamp Tax and Special Stamped Paper for Notarial Records Law, allocating part of the revenue derived from certain real estate transfers to municipalities and enabling information-sharing mechanisms among the entities involved.
3. The ISR treatment for certain real estate transactions is modified.
The Decree also reforms the Tax Update Law to establish that gains derived from the sale of certain real property will not be treated as capital gains when the taxpayer engages in leasing, subdivision, urban development, construction, or buying and selling of real estate, and the property is linked to such activities.
In these cases, the corresponding income must be taxed under the regime for income from lucrative activities, a particularly relevant amendment for developers and operators in the real estate sector.
It should be noted that the Decree has been submitted to the Executive Branch for approval or veto, and if approved, it will be subject to enactment and subsequent publication in the Official Gazette in due course. Notwithstanding the foregoing, the breadth and significance of the approved reforms make it foreseeable that the Decree will be challenged by various sectors, a situation that should be monitored given the possible implications it could have on the implementation of the new provisions.
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