In Cuba, all employers, regardless of industry or size, must register with the National Tax Administration (ONAT). This registration can be done online or in person at a local ONAT office. The registration process typically requires providing company information, business activity details, and a list of employees.

Social Security Contributions

Employers in Cuba have a joint responsibility with their employees to contribute to the country's social security program. The contribution rates vary depending on whether the employer is in the public or private sector. Public sector employers contribute 12.5% of employee earnings, while private sector employers contribute 14.5%. The social security program covers pensions, disability benefits, survivor benefits, maternity leave, and healthcare.

Income Tax Withholding and Reporting

Employers in Cuba are also responsible for withholding income tax from employee salaries based on a progressive tax rate scale. They must file monthly income tax returns with ONAT, detailing withheld taxes and employee income information.

Other Tax Considerations

Employers engaged in sales of goods or services may be subject to sales tax. They may also be responsible for additional payroll taxes, such as contributions to social funds. To ensure compliance with specific tax obligations based on business activities and industry, it's recommended to consult with a tax advisor or accountant in Cuba.

In Cuba, the income tax system is progressive, meaning that tax rates increase as income rises. The current tax brackets, as of June 2023, are 5% on income up to 30,000 Cuban pesos (CUP) per month and 20% on income above 30,000 CUP per month. Employers withhold income tax from employee salaries and pay it to the National Tax Administration (ONAT). Some employees may need to file an annual income tax return to reconcile their tax payments, even with employer withholding.

Social Security Contributions

Employees contribute a portion of their earnings to Cuba's social security program. The contribution rates range from 1% to 5% of earnings, depending on the occupational category. These social security contributions fund pensions, disability benefits, survivor benefits, maternity leave, and healthcare.

Solidarity Tax

Employees earning above a certain threshold are subject to a solidarity tax. The rate is 5% of income above the threshold.

Other Potential Deductions

Union members may have union dues deducted from their salaries. Certain professions may require deductions for professional fees or association dues. Employees may also be able to claim deductions for charitable contributions to certified organizations.

In Cuba, there is no Value-Added Tax (VAT) system in place. Instead, businesses providing services in the country are subject to other forms of indirect taxation.

Types of Taxes on Services

Businesses in Cuba may encounter the following types of taxes:

• Sales Tax: This tax is applied to the sale of certain goods and services. The rate can vary based on the type of service provided.
• Turnover Taxes: Businesses may be subject to specific turnover taxes based on their industry and activities.

Invoicing and Taxes

When it comes to invoicing and taxes, businesses must adhere to the following:

• Tax Identification: Businesses must include their tax identification numbers on invoices.
• Tax Calculation: Businesses must calculate and charge relevant sales taxes or turnover taxes on their invoices for eligible services.

Important Notes

It's important to note the following:

• Indirect Tax Landscape: Cuba's taxation system for services is distinct from the VAT model used by many other countries. It's essential to understand the specific sales taxes or turnover taxes applicable to your industry.
• Professional Guidance: It's advisable to seek advice from tax advisors specializing in Cuban tax law to properly navigate taxes relevant to your type of services.

Joint ventures in Cuba can benefit from a reduced corporate tax rate of 15%, down from the previous 30%. This lower rate makes establishing a joint venture in Cuba an attractive proposition. Additionally, foreign joint ventures and wholly foreign-owned enterprises are exempt from profit taxes for their first eight years of operation. This exemption allows businesses to focus on growth and reinvestment in the early stages.

Tax Incentives in the Mariel Special Economic Development Zone (ZEDM)

The ZEDM offers even more generous tax benefits to attract foreign investment. Businesses in the ZEDM enjoy a longer 10-year profit tax exemption. Following the exemption period, companies pay a favorable 12% corporate tax rate. Income tax is waived during the first year of operation, followed by a minimal 1% tax. The ZEDM doesn't apply the tax on the use of labor, and there is no social security contribution of 14% that applies outside the zone.

Other Notable Tax Incentives

Distributions of profits (dividends) to foreign investors are exempt from taxation. Profits reinvested into the Cuban business are exempt from taxation. In certain cases, imports of raw materials and exports of finished products can receive tax exemptions. Foreign workers are subject to a 15% income tax on earnings generated in Cuba.

Important Considerations

Tax incentives are often linked to the approval process for foreign investment. Ensure you meet the necessary requirements and get official approval for your project to benefit from these incentives. Certain sectors or projects may qualify for additional or specialized tax incentives. Cuba may have tax treaties with certain countries, potentially offering further benefits.