Tax System

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Investor Considerations
Income and capital taxes
Tax treaties
Indirect taxes

Investor considerations

Moderate corporate taxation.
Tax exemptions and holidays can be negotiated on a case-by-case basis.
No tax treaties with other countries are in force.
Indirect taxes are not significant.
Stamp tax is levied on various documents;
Resolution 52/82 issued by the Ministry of Finance and Prices contains the tax rules.

Income and capital taxes

In order to determine the taxable net profits for corporate income tax, the following can be deducted from the net profits obtained:

the amount of profits reinvested in order to increase the share capital of the joint venture company or of the contributions in the case of other types of economic associations;

the amount assigned to the "economic stimulation fund";

the amount reserved for contingencies or for other purposes agreed by the parties, be these compulsory or voluntary;

the losses recorded in previous years, distributed proportionately over the immediately following five years.

Resolution 52/82 also states that the cancellation of a debt due from the taxpayer is considered income for the period in which the cancellation took place. Moreover, "any amount resulting from reductions of (legal) reserves built up voluntarily, or liquidation of said reserves, shall be considered as earnings for the year in which such reduction or liquidation took place". By the same note any amount credited to reserves is deductible when calculating net profits.

Capital profits are also covered by resolution 52/82, which states that " any profits arising from the sale or transfer of properties, goods, or other assets of the tax paying entity.....shall be considered as earnings for the period in which such transaction took place". Profits from the revaluation of property, goods and other assets shall be considered earnings, except when the Ministry of Finance and Prices agrees that the revaluation is deductible from levied earnings. There is no distinction between income from a trade and profits made on the sale of an asset.

The corporate income tax rates are a flat 30% regardless of the level of profits, or 35%, if the entity is totally foreign owned.

According to resolution 52/82, depreciation on fixed assets of the joint venture company is deductible from gross earnings up to a maximum annual percentage over the purchase cost.

Amortisation of organisational and installation expenses are allowed as a deductible as a pro rata expense over a maximum period of five years.

Interest on loans from banks and official banking institutions, in Cuba and abroad, are deductible from gross earnings.

The tax year is the calendar year and taxes are payable by February of the following year. An independent Cuban audit firm must assess the joint venture company for tax purposes. Foreign accounting firms can also be employed but only for usage abroad. Taxes are payable to the Ministry of Finance and Prices (Department of Income).

Economic associations have their own special tax regulations as set out in Law 77.

Investments in natural resources are taxable on income up to a rate of 50%.

The Ministry of Finance and Prices is empowered to temporarily exempt, either in full or in part, joint venture companies from paying taxes and/or import duties.

There is no tax on a joint venture’s turnover or assets.

Tax treaties

No tax treaties are in force between the Republic of Cuba and any other country. Income received in Cuba from abroad (e.g. remittances from family members) are tax free in Cuba, but may be subject to withholding taxes in the country of origin.

Indirect taxes

There are only a few type of indirect taxes, as set out below:

Tourism: subject to the visa a foreign visitor needs, the simple tourist visa application fee is £ 15 (i.e. tourist card); on the departure from Cuba, the visitor will be charged an airport departure tax, which amounts to US$ 15.

Stamp tax: except for the US$ 500 registration fee when registering an approved joint venture with the Cuban Chamber of Commerce, there are only a few documents which require payment of a tax.

Road tax: on the possession or property of any motor vehicle for land transportation.

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