The Defense of the Legal Representative of a Legal Entity in Tax Crimes in Guatemala

Mónica Medrano, Senior Counsel at ARIAS Guatemala and expert in criminal litigation, presents this article on the defense of the legal representative of a legal entity in tax crimes in Guatemala.

The article 38 of the Guatemalan Criminal Code refers to the criminal liability of legal entities, which shall be attributable to their directors, managers, executives, representatives, administrators, officials, or employees who: a) participated in the act, and b) without whose participation the act would not have been carried out.

This article stipulates that the legal entity shall be liable in cases where its directors, executives, representatives, administrators, officials, or employees participate with its authorization or consent, when the crime is committed through lack of control or supervision and the results are favorable to it, or when the crime is committed by decision of the board of directors.

Most tax crimes regulated by the Guatemalan Criminal Code carry financial penalties for the legal entity, in addition to the penalty attributable to the individual who is linked to the process as a representative of the legal entity.

Thus, for example, Article 358 "B” of the Criminal Code, which explains the crime of special cases of tax fraud, says that: "[...] if this crime is committed by employees or legal representatives of a legal entity, seeking to benefit that entity, in addition to the penalties applicable to those involved in the crime, the legal entity shall be fined an amount equivalent to the amount of tax evaded [...]”.

Similarly, Article 358 "C” of the Criminal Code, which refers to the crime of misappropriation of taxes, says that in addition to the penalty applicable to the person responsible, the legal entity shall be fined an amount equivalent to the unpaid tax if the crime is committed by directors, managers, administrators, officials, employees, or legal representatives of the legal entity acting for its benefit. This is like the penalty for the legal entity for committing the crime of resistance to the tax administration's supervisory action, according to Article 358 "D” of the Criminal Code.

Therefore, the imposition of principal penalties on a legal entity in criminal proceedings is necessarily linked to the criminal liability of the individual who acted on its behalf in the act attributed to it. In this sense, the effectiveness of the legal entity's defense will depend largely on the defense of the individual, since both must face criminal proceedings, with the difference that the individual may be subject to two principal penalties (imprisonment and a fine) and the legal entity only a fine and, in cases of recidivism, the cancellation of its legal personality.

A legal entity may exercise a defense in criminal proceedings independently of the individual associated with it, as stated by the Guatemalans Constitutional Court in case file 6434-2021, judgment dated February 24, 2022: "[...] considering that in criminal proceedings in which an entity—a legal entity, collective or moral—is accused of committing an offense, in accordance with its right to defense, it may appear in the proceedings, either through its ordinary legal representatives or through an agent with broad powers to represent it in court before the competent jurisdictional bodies, since any criminal liability that may arise in the course of the proceedings shall not be attributed to the person who has appeared in court, but to the legal entity that has been charged, and in accordance with the nature of such entities—fictitious nature—their participation in the proceedings must always be through their representatives, whether those designated for ordinary business or specific legal representatives [...]".

However, the defense of the legal entity in criminal proceedings must be consistent with the defense of the individual who acted on behalf of the entity at the time the criminal act was allegedly committed. This is due to, if the legal representative is convicted of a crime, the legal entity will also be convicted.

For example, if a legal representative of a legal entity facing criminal proceedings decides to opt for specific procedures that involve the acceptance of criminal responsibility, such as acceptance of charges or summary proceedings, which lead to a conviction for the defendant, the legal entity will also be convicted and ordered to pay a fine equivalent to the tax omitted in the judgment.

Therefore, when subject to criminal proceedings, it is essential that individuals and legal entities act in coordination and in defense of common interests, using all the mechanisms provided by law to prove their innocence.

In criminal practice, it often happens that by the time the Superintendency of Tax Administration (SAT) files a complaint with the judicial authorities and the Public Prosecutor's Office conducts an investigation into possible tax crimes, the legal representative, manager, administrator, or employee of the legal entity involved in the investigated event no longer has any connection with the company. However, even though there is no longer a relationship between the accused and the legal entity, it is important to establish communication with the subject under investigation and design a joint defense strategy.

It is important to note that Guatemala does not regulate mitigating circumstances for criminal liability for legal entities, so there are no mitigating factors that reduce their criminal liability, unlike other jurisdictions that value compliance programs and their proper implementation, reducing the penalty for the legal entity and even exempting it from liability.

In Guatemala, the existence of such programs can only be used in criminal proceedings as a defense argument to indicate to the justice administration bodies that the entity did not fail to control or supervise its personnel, but the assessment of this argument will depend solely on the judge, since in practice the Public Prosecutor's Office does not usually consider it valid.

Therefore, in cases where a commercial entity is being investigated for the possible commission of a tax crime, it is advisable to exercise the joint defense of the natural person and the legal entity involved, so that, depending on the complexity of the case, the path to follow in defending their interests can be defined.



The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.