The Congress of the Republic of Guatemala approved on April 28, 2026, with 124 votes in favor, Decree 13-2026, a reform of the Tax Update Law (Decree 10-2012) that exempts dependent employees earning the minimum wage from paying Income Tax (ISR). The reform represents a substantive structural change in the ISR regime applicable to labor income and will have implications for both employees and employers across the country.
In this article we explain what the reform consists of, who it benefits, when it takes effect, and what employers must take into account to comply properly with the new regulation.
What does Decree 13-2026 establish?
The decree consists of five articles and amends, among others, paragraph "A" of Article 72 of Decree 10-2012, which establishes the taxable base on which ISR (Income Tax) is calculated for salaried employees. The main points of the reform are:
1. Vital minimum deduction indexed to the minimum wage
Until now, the Tax Update Law provided a fixed vital minimum deduction of Q. 48,000.00 annually, in force since 2012, an amount that over time lost real value against inflation and wage adjustments. With the reform, the deduction will be equivalent to 12 minimum wages annually, including the incentive bonus, and will be automatically updated each year as the prevailing minimum wage changes. This ensures consistency between wage policy and fiscal policy and prevents minimum wage increases from being neutralized by the tax burden.
2. VAT credit on personal expenses
The mechanism that allows crediting up to Q. 12,000.00 for VAT paid on personal expenses via the annual return is maintained, which encourages formality in consumption.
3. Extraordinary deduction for fiscal year 2026
As a transitional measure, Article 4 of the decree establishes an extraordinary deduction of Q. 3,024.00, with no need for documentation and additional to those provided in Article 72 of the Tax Update Law, applicable only to the fiscal period from January 1 to December 31, 2026. This deduction seeks to compensate for withholdings made during the fiscal year while the permanent reform comes into effect.
4. Effective date
The structural reforms take effect as of January 1, 2027, once the Executive Branch enacts the decree and it is published in the Diario de Centro América.
Who benefits?
The main beneficiaries are dependent employees earning the minimum wage, in any of the economic circumscriptions and productive activities in the country (agricultural, non-agricultural, and export and maquila). With the minimum wage adjustment for 2026, several workers — particularly those in the non-agricultural sector of the Guatemala department — had ended up above the ISR-exempt threshold, generating withholdings that are eliminated under this reform.
It is important to highlight that the reform:
- Does not modify ISR rates.
- Does not affect middle or high incomes.
- Does not impact other tax regimes (such as the Small Taxpayer Regime or the Profit Regime for Lucrative Activities).
Its effect is focused on protecting the income of lower-paid workers under the constitutional principle of ability to pay.
Implications for employers
Employers must review and adjust their internal ISR calculation and withholding processes once the decree takes effect. In particular, it will be necessary to:
- Recalculate the annual ISR projection of employees, applying the new deduction equivalent to 12 minimum wages and the extraordinary deduction of Q. 3,024.00 for 2026.
- Update payroll and payroll systems to correctly reflect the indexed exempt amount.
- Address the regularizations that may apply with respect to withholdings already made during the current fiscal year.
- Comply with reports and filings before the Superintendence of Tax Administration (SAT) within legal deadlines.
Failure to correctly apply the withholding can result in tax contingencies and penalties, so professional advice is recommended for an orderly transition.
What should you do if you have questions about how it affects you?
The reform has direct effects on both employers and employees, and its proper application requires a careful review of each particular case: wage structure, economic activity, circumscription, additional benefits, and tax regime.
At Asesoria Global, we accompany companies and professionals in adapting their tax and labor processes in line with the new regulation. Our team of attorneys and notaries provides comprehensive advice on:
- Review and adjustment of ISR calculations for salaried employees.
- Tax compliance and representation before SAT.
- Labor advisory and review of employment contracts.
- Tax planning for companies and individuals.
Frequently asked questions
When does Decree 13-2026 take effect?
The structural reforms take effect on January 1, 2027, once the Executive Branch enacts the decree and it is published in the Diario de Centro América. For fiscal year 2026, a transitional extraordinary deduction of Q. 3,024.00 applies.
What happens to withholdings already made to me in 2026?
Article 4 of the decree establishes an extraordinary deduction of Q. 3,024.00 for the period from January 1 to December 31, 2026, applicable with no need for documentation, intended to compensate for withholdings made during the year while the permanent reform comes into effect. The regularization is applied in the annual return.
Is the new deduction updated every year?
Yes. One of the key reforms of the decree is that the vital minimum deduction is indexed to the minimum wage: it equals 12 minimum wages annually — including the incentive bonus — and is automatically updated as the prevailing minimum wage changes each year. This prevents the deduction from losing real value over time, as happened with the fixed Q. 48,000.00 in force since 2012.
Does it apply to workers providing professional services or to individual entrepreneurs?
No. Decree 13-2026 only reforms the ISR taxable base applicable to labor income under dependency relationship. Those who invoice for professional services are taxed under the Profit Regime for Lucrative Activities or the Optional Simplified Regime, which are not affected by this reform.
As an employer, do I need to change my payroll system right away?
Yes, it is prudent to begin the review immediately. Although the structural reform takes effect on January 1, 2027, the extraordinary deduction of Q. 3,024.00 already applies to fiscal year 2026, so the annual ISR projections for each employee must be recalculated and payroll systems must be updated to avoid excess withholdings and contingencies before SAT.