The corporate tax rules for foreign investment business entities in Cuba are regulated by the Law 118 (the Foreign Investment Act) of 2014. According to the article 47 of the Law 118, the MPF (Ministerio Publico Federal) could issue exemptions regarding all applicable taxes.
According to the Law 118 (Article 34), the following corporate taxes in Cuba are due by joint venture companies (JVs), foreign investors who are part of international economic association contracts (IEACs) and entirely foreign owned companies:
Cuban Corporate taxation
The corporate tax in Cuba is applied as follows:
• Joint Ventures with Cuban state entities and International Economic Associations: exempt for the first eight years, after which the corporate tax in Cuba is 15%. Could however increase to maximum 50% if the business involves natural resources (oil or minerals). Profits which are reinvested are exempt from taxation. Our lawyers in Cuba can provide more details on this matter.
• 100% foreign own companies: 35%.
Other taxes for JVs and IEACs in Cuba
Other Cuba corporate taxes due by JVs and IEACs are:
• Payroll tax: previously set at 11%. This has been removed now;
• Social security contribution: The tax is set on a yearly basis by the Law of the State Budget. The Law 117 of the State Budget for 2014 for example was set at a rate of 14%;
• Customs duties: Not applicable during the development stage (following development stage customs duties are due in accordance with the set tariffs);
• Services tax (10%): JVs and IEACs have the right of a permanent 50% reduction, and exemption is granted in the first year of business;
• Wholesale goods tax (2%): JVs and IEACs have the right of a permanent 50% reduction, and exemption is granted in the first year of business;
• Territorial contribution for local developments: 1% of the gross income. Exempted in the investment recovery period;
• Tax on the use and exploitation of forestry and wild fauna: JVs and IEACs are granted a 50% reduction in the investment recovery period;
• Land transportation tax: The tax depends upon the type of business entity established in Cuba the rates are fairly small;
• Document tax: The tax depends on the type of document – the rates are fairly small;
• Withholding tax: None. However, JVs and IEACs which make agreements to buy services or products abroad have to withhold a 4% of the buying price;
• Personal income tax (for expatriates): Due on a monthly basis at of 15% from the income gained or generated in Cuba. No yearly declaration is required.
If you would like to know more, please contact our law firm in Cuba.