RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/GTM/6
12 March 2002
(02-1264)
Committee on Subsidies and
Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement on
Subsidies and Countervailing Measures
Replies to Questions Posed by Switzerland1, the European Community2,
Japan3, Canada4 and the United States5
The following communication, dated 7 March 2002, has been received from the Permanent
Mission of Guatemala.
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QUESTIONS POSED BY SWITZERLAND
1. Switzerland understands that it may be difficult to reflect the subsidy per unit for all
three programmes for which Guatemala is seeking an extension of the transition period.
However, to better understand the scope of the request it would be helpful if Guatemala could
provide to this committee at least the total amount of the different subsidies, in this case theamount of duties and taxes foregone by Guatemala for the last five years. In the same line, we
would like to ask Guatemala to supply statistical data of the value of total exports under the
notified programmes.
2. Could Guatemala also specify if the programmes under discussion are open to national
as well as to foreign legal entities and that the same application procedures apply to both,
national and foreign companies?
Correct, these programmes apply to both national and foreign companies, and the application
procedures and requirements are the same. Unfortunately, we do not have statistical data for all threeprogrammes. However, the following table illustrates the export shares corresponding to firms
covered by programme I.
                                                     
1 G/SCM/Q3/GTM/1
2 G/SCM/Q3/GTM/2
3 G/SCM/Q3/GTM/3
4 G/SCM/Q3/GTM/4
5 G/SCM/Q3/GTM/5G/SCM/Q3/GTM/6
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Guatemala:  Shares of Total Exports Acc ounted for by Firms Covered by Decree 29-89
Period 1998-2000
(In thousands of Quetzales)
Exports 1998 % 1999 % 2000 %
Totals 3,606,257.6 100 3,340,994.2 100 3,852,532.7 100
Decree 29-89 1,310,682.8 36.3 1,250,349.9 37.4 1,164,922.9 30.2
No statistical information is available on the total quantity of subsidies provided.
To demonstrate the impact of the programmes, a Ministry of the Economy study showed that
for 1999, the Government's foregone revenue in respect of the Income Tax [ Impuesto Sobre la Renta
(ISR)] amounted to Quetzales 277 million. This was offset by the 22,268 jobs created directly,
entailing wage payments equivalent to Quetzales 319 million.
Note:  see the rates mentioned in reply to question 4 posed by the EC.
QUESTIONS POSED BY THE EUROPEAN COMMUNITY
1. Please indicate when the pr ogrammes came into operation.
Programme I…..Law 29-89……in effect since August 1989.
Programme II….Law 65-89……in effect since April 1990.
Programme III…Law 22-73……in effect since July 1973.
2. Please indicate whether the programmes provide for other forms of subsidies than
exemption of export duties and internal taxes (e.g., grants, provision of goods or services).
No.
3. Do the programmes provide for a condition to use domestic materials? If yes, please
describe the relevant provision.
They do not provide for such a condition.
4. Please indicate the rate of import duty or internal tax exemption as of
1 September 2001.
12 per cent rate of Value Added Tax (IVA).
The tariff is variable depending on the goods being imported by the beneficiaries.
The income tax subject to exemption is equivalent to the maximum marginal rate of 31 per
cent of earnings.
5. Please describe any changes to the programmes since 1 September 2001, if any. In
particular, indicate any changes to the rate of exemption or the coverage of the programmes,
e.g., in terms of products, location etc.G/SCM/Q3/GTM/6
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No changes.
6. Under programme I, a company must be "r ecognized by the Ministry of Economy" in
order to be eligible.  Please describe the requirements for being "recognized".
REQUIREMENTS WHICH MUST BE MET BY COMPANIES SEEKING TO QUALIFY UNDER
DECREE NO. 29-89 OF THE CONGRESS OF THE REPUBLIC
1. Application signed and stamped by the legal representative of the company, addressed to the
Industrial Policy Directorate, providing full detail s regarding the company and its legal representative.
2. Technical/Economic Study,* signed and stamped by an active qualified industrial economist
or engineer. Template attached.
3. Authenticated copy of the trading licence for the firm or company concerned, or photocopy of
the owner's identity card.
4. Authenticated photocopy of the articles of association of the company, and any amendments
thereto.
5. Authenticated photocopy of the notarial instrument appointing the legal representative and the
identity card of the owner if the firm in question is a sole proprietorship.
6. Authenticated photocopy of the company's NIT (tax identification number) document.7. Authenticated photocopy of the company's exporter code information.
8. Simple photocopy of the company's registration with the Guatemalan Institute for Social
Security (IGSS).
9. Name and telephone number of the advisor of the company or of the owner, if the firm is a
sole proprietorship.
A. INFORMATION ON THE COMPANY
• Business name.
• Information on the legal representative of the company.
• Location of the plant and administrative offices.
• Address for service of documents.
• Startup date of industrial operations.
• The specific benefits which the applicant company is seeking to qualify for.
• Source of the investment.
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* 
Economic information and data which the technical/economic study must contain – Decree 29-89G/SCM/Q3/GTM/6
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B. PRODUCTION ACTIVITY
• Activity engaged in by the company.
• Production process for each of the products to be exported, including their respective
production flow diagrams.
• Flow diagram for the plant, including the pertinent ground plan of the premises.
C. INFORMATION TABLES
• Capacity installed and utilized for each product.
• Value of production, including sales for each particular product.
• Local and foreign raw materials which the company will use in its production
process, indicating exact amounts in Quetzales.
• Employment structure.
• Comprehensive investment plan.
• Projected financial statements.
• Production costs.
• Profit and loss accounts.
• General balance sheet.
• Economic Value Added at market prices.
• Net balance-of-payments benefit.
• Foregone revenue.
D. OTHER
• List of products to be exported together with their Central American Tariff System
(SAC) nomenclature.
• List of machinery and equipment, quantity, c.i.f. value.
• List of imported raw materials together with their SAC nomenclature.
7. Please indicate for each programme how many companies have benefited from the
respective programme as of 1 September 2001.
Program I, Legislative Decree 29-89, currently covers 450 companies.
Program II, Legislative Decree 65-89, currently covers 21 free zones, of which only 13 are in
operation, with a total of 90 users.
Program III, Legislative Decree 22-73, includes just  one free zone, in which 52 users are operating.
8. The notification states that the subsidy programmes are "applicable for up to ten
years".  Please elaborate on when and how Guatemala intends to phase out these programmes.
"The declaration regarding the procedure pursuant to which the extensions prescribed in
Article 27(4) are granted to particular developing  country members states that these programmes may
be used until the end of calendar year 2007. This, however, is without prejudice to the provisions of
Paragraph 1(f) of Declaration G/SCM/39 of 20 November 2001."G/SCM/Q3/GTM/6
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QUESTIONS POSED BY JAPAN
1. Could Guatemala please provide the number of corporations receiving benefit from
these three programmes?
See reply to question 7 posed by the EC.
2. Could Guatemala please provide the amount of exportation by each corporation
receiving benefit from these three programmes?
We have no detailed information available that would make it possible to estimate the exports
made by each firm under each of the notified programmes. See our reply to the question posed bySwitzerland.
3. Could Guatemala please provide respective examples of the benefit from these three
programmes?
Example (Programme I)
A company whose profit for the year (1 year) is Q. 217,000.00 obtains an income tax (ISR)
exemption in respect of Q. 67,270.00.
If the importation of machinery and equi pment amounts to Q. 2,400,000.00, the customs duty
[derechos arancelarios a la importación (DAI) ] exemption amounts to Q. 22,560, and the value added
tax (IVA) exemption amounts to Q. 288,000.00.
Government revenue foregone:
Q. 67,270.00+ …… ISR
Q.  22,560.00 ……. DAI
Q. 288,000.00 …… IVA
   TOTAL Q. 755,660.00 …… Total exemption under programme I.
QUESTIONS POSED BY CANADA
1. How long have these programmes existed?
See reply to question 1 posed by the EC.
2. What are the levels of benefit, i.e., is there a full exemption from taxes or do companies
pay a percentage of regular rates?
There is a total exemption from the taxes notified for each programme.
3. For how long can a company enjoy these benefits?  If there is an expiry can a company
re-apply for exemptions?
In the notifications for our programmes, we explained that the subsidies granted were
applicable for 10 years. We also indicated that it was not possible, under either of the three notified
programmes, to extend this period of time.
4. Are there estimates of government revenue foregone?G/SCM/Q3/GTM/6
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Such data cannot be estimated at this time; however, steps are being taken to calculate the
amounts involved. We expect to have this information available in due course, and we shall forward it
to the committee.
Further information is given in the reply to the question posed by Switzerland.
5. Are there any direct payouts to companies, e.g., are there statements indicating the
percentage of taxes refunded?
There are no direct government disbursements in favor of companies benefiting under the
programmes. The programmes consist of exemptions.
6. Who can take advantage of these programmes, e.g., industry sectors, agriculture, certain
regions?
With the exception of certain agricultural products, the other sectors can take advantage of
these benefits.
7. Are there requirements to qualify for tax exemption benefits, e.g., minimum investment,
number of local employees etc.?
See reply to question 6 posed by the EC.
8. Please identify total exports that benefit from these programmes and the percentage of
national exports (annually since UR) under each programme.
See reply to Switzerland.
9. How many recipient companies/industrial parks, etc. (annually since UR) exist under
each programme?
See reply to question 7 posed by the EC.
10. Can a company benefit from more than on e of the three programmes at one time?
No.
Programme specific questions
Programme I
1. Are the tax exemptions only applied to income from exports?  If so, is income earned
from sales within the territory taxable?
Affirmative. Articles produced under these programmes may not be sold in national territory.
In the case of programmes II and III, there is the option to sell up to 20 per cent of the
pertinent products in national territory – however, such sales are not eligible for benefits, i.e., they areliable for the full amount of taxes payable on these sales.G/SCM/Q3/GTM/6
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QUESTIONS POSED BY THE UNITED STATES
1. For each of the three programmes, please pr ovide the rate of the company tax, customs
duties and other import taxes, as well as VAT  from which eligible companies are exempted.
See answer to question 4 posed by the EC.
2. For each programme, you state that the subsidy programme is applicable for 10 years.
Please explain whether these programmes have been previously extended.  If so, were they
extended for an additional ten years or for some other duration?
In the notifications for our programmes, we explained that the subsidies granted were
applicable for 10 years. We also indicated that it was not possible, under either of the 3 notified
programmes, to extend this period of time.
Also see the full reply to question 8 from the EC.
3. For each programme, you stated that the subsidy per unit cannot be quantified.  Does
the Government of Guatemala maintain informat ion or estimates on the revenue foregone from
these programmes?  If so, please provide that information, on a fiscal year, if possible.
See reply to the question posed by Switzerland. The only data available are for the income tax
(ISR) for the year 1999, in connection with programme I.
No further information is available on the total volume of exempted taxes.
4. For each programme, are all export taxes from eligible companies exempt from the
company tax?
No, only export earnings generated through this process.
5. Are all exporters in Guatemala eligible for rebates of customs duties, import taxes and
VAT upon exportation of finished products?
The only eligible companies are those firms qualifying for the notified programmes, with the
exception of those products specified in the reply to question 6 posed by Canada.
6. Are foreign nationals or foreign-based comp anies eligible for the benefits under these
programmes?
Yes.
7. Under Programme I, please explain what the eligibility criteria are for companies to be
recognized by the Ministry of Economy.  Plea se indicate how many companies have been
“recognized” under this programme.
See replies to questions 6 and 7 posed by the EC, respectively.
8. Under Programme I, please explain what the “special customs regimes” are.  Please
explain why eligibility is [contingent upon] exportation to non-Central American countries.
These programmes were created to diversify exports (traditional products are not included)
and in order to provide incentives for efforts to identify markets outside our region.G/SCM/Q3/GTM/6
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9. Under Programme II, please explain how many Free Zones have been established.
Please explain whether all of these Free Zones a re located in disadvantaged regions.  Where are
the Free Zones?
There are 21 free zones, of which only 13 are in operation. Of these 21 free zones, 13 are in
operation outside the capital city (municipalities and departments), and only eight are in operation in
the vicinity of the capital city (see attached list). The free zones are intended inter alia  to provide
economic growth opportunities and promote job creation in disadvantaged regions. This explains why
approximately 62 per cent of these establishments are in operation outside the capital city.
10. Does Guatemala maintain any statistical in formation on the value and volume of exports
from the special customs regimes, Free Zones and Industrial and Free Trade Zone?  If so,
please provide that information.
No relevant statistical data are available – only  the information provided in the reply to the
question posed by Switzerland.
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