CubaTax Obligations Detailed

Employers in Cuba have various tax obligations related to their employees.

Employer Taxes and Contributions

• Profit Tax: 35% of profits.
• Sales or Services Tax: 10% of sales or services provided.
• Payroll Tax: 5% of payroll.
• Local Government Revenue Tax: 1% of revenue.
• Social Security Contributions: 14% of employee salaries. Additionally, information from other sources mentions a range between 1% and 5% depending on the employment type. This might require further clarification with local authorities.
• Dividend Tax (for mipymes owners): Up to 20% of dividends.

Employee Taxes and Deductions

• Income Tax: 20% on earnings above 30,000 Cuban pesos (approximately $109 USD per month as of January 2024). The employer is responsible for deducting this tax monthly. There are additional mentions of income tax for foreign workers at a rate of 15% of salary and bonuses.
• Social Security Contributions: The employer deducts the employee's portion of social security from their salary.

Other Relevant Tax Information

• Tax Year: The fiscal year in Cuba runs from January 1 to December 31.
• Work Permits: It's crucial for employers to ensure foreign employees have the necessary work permits and documentation. Without these, foreign nationals cannot legally work in Cuba.

It is important to note that tax regulations can change, and it's recommended to consult with local tax authorities or a tax professional for the most up-to-date information. This overview reflects the available information as of today, February 5, 2025.

In Cuba, employee tax deductions encompass income tax, primarily impacting private sector workers and those with non-state employment.

Income Tax

• Private Sector Employees: A progressive income tax rate applies to private sector employees, starting at a lower rate and increasing with income. This also pertains to self-employed individuals, those in the artistic and agricultural sectors, designers, social communicators, journalists, personnel receiving bonuses, and partners in MSMEs receiving dividends. As of 2024, a 20% income tax is levied on earnings above 30,000 Cuban pesos (approximately $109 USD) per month. However, for those in the agricultural sector a fixed rate of 2% applies.

• Non-State Employment: Individuals engaged in economic activities outside of government employment are subject to income tax. Two regimes exist: one based on accounted profits (for incomes over 100,000 CUP, equivalent to roughly $4,000 USD, and specific occupations like food retailing), and another using a fixed monthly fee based on occupation (for other retailers). The profit-based regime allows deductions for costs up to a limit defined by the Minister of Finances, along with deductions for other taxes.

• Income from Abroad: Income from remittances sent from abroad is not taxed. However, income derived from contracts taken abroad is taxed at a 4% rate without deductions.

Other Taxes and Deductions

While specific details about additional deductions are limited in the provided sources, other taxes and potential deductions related to Cuban employment may exist, such as social security contributions and other mandatory deductions. It's important to consult official Cuban government resources or a qualified tax advisor for precise details on these deductions and updated information for 2025.

Tax Declaration and Payment

The tax declaration and payment campaign typically begins in January. For the 2024 tax year, the deadline for self-employed workers and others under the progressive income tax system is April 30th, 2025. Other taxes, such as the tax on profits for legal entities, have different deadlines. Early payment incentives might be available. Check with ONAT (Oficina Nacional de Administración Tributaria) for current deadlines and incentives.

It's crucial to remember that tax laws and regulations are subject to change. This information is based on data available as of February 5, 2025, and might not reflect the most recent updates. Consulting directly with Cuban tax authorities or a qualified professional is always advisable for the latest details.

Cuba does not have a Value Added Tax (VAT) system. Instead, it utilizes a sales tax (Impuesto sobre la Venta) and an indirect tax on services (Impuesto sobre los Servicios). As of February 5, 2025, there are also plans to introduce an 18% VAT by 2026, which will replace the current goods and services tax.

Sales Tax (Impuesto sobre la Venta)

This tax applies to goods intended for use and consumption within Cuba.

• Wholesale Rate: 2%
• Retail Rate: 10%
• Exemptions: Exported goods are exempt.

Services Tax (Impuesto sobre los Servicios)

This tax applies to revenue generated from services rendered within Cuba.

• Rate: 10%
• Exemptions: Exported services are exempt. Services originating from abroad but performed in Cuba are taxable.

Excise Duty (Impuesto Especial a Productos y Servicios)

Additional excise duties apply to specific goods, including alcohol, cigars, and cigarettes. The rates for these excise duties are determined annually in the budget law.

Registration and Filing

• Registration: Persons and entities subject to these taxes are required to register. Specific regulations for overseas companies regarding voluntary registration and the appointment of fiscal representatives are not yet available as of February 5, 2025.
• Returns: Taxpayers must submit monthly tax returns, filed in either Cuban Peso (CUP) or Cuban Convertible Peso (CUC).

Other Taxes

Cuba also levies other taxes, including payroll tax, stamp tax, road tax, agricultural land tax, property tax, property transfer tax, and a tax on the use and exploitation of forestry and wild fauna. Details on the specifics of these taxes can be found in official Cuban tax regulations.

Temporary Customs Exemption

As of February 5, 2025, a temporary customs exemption is in place until January 31, 2025. This exemption covers non-commercial imports of food, toiletries, medicines, and medical supplies as accompanied baggage. There are specific limits on the value and weight of these goods to qualify for the exemption. More details can be found in Resolution 311 of the Ministry of Finance and Prices.

Cuba offers various tax incentives, primarily aimed at attracting foreign investment and boosting specific sectors. These incentives range from exemptions and deductions to special tax regimes within designated zones.

Corporate Tax Incentives

• General Corporate Tax Rate: The standard corporate tax rate in Cuba is 35% of taxable net profits. This rate can increase to 50% for businesses involved in the exploitation of natural resources.
• Foreign Companies without Legal Domicile: Foreign companies without a legal domicile in Cuba are subject to a 4% tax rate on their gross income sourced from Cuba.
• Investment Incentives: Incentives like tax reductions or exemptions are offered to encourage investment, particularly in sectors like agriculture, industry, tourism, energy, mining, and construction.
• Joint Ventures (JVs) and International Economic Association Contracts (IEACs): A special corporate tax rate of 15% applies to joint ventures. Furthermore, during the first eight years of operation, all foreign JVs and IEACs are generally exempt from profit taxes. However, this exemption does not apply to hotel management, production, and service management contracts, which are subject to normal tax rates.
• Profit Reinvestment: Companies can reinvest net profits and be exempt from paying taxes on those reinvested amounts.

Free Economic Zones

Cuba has established free economic zones, such as the Mariel Special Development Zone, to attract foreign investment. These zones offer substantial tax benefits:

• Mariel Special Development Zone: In this zone, companies benefit from corporate tax exemptions for a period of ten years. During this time, income tax rates are 1% (beginning in the second year of operation) and no labor tax is applied. After the initial ten-year exemption, corporate tax rates in this zone are generally 12%.

Individual Taxes

• Progressive Income Tax: Cuba has a progressive income tax system for individuals, with rates ranging from 15% to 50% depending on income level.
• Expatriate Tax: Expatriates earning income in Cuba are subject to a 15% tax on their declared annual income. For income earned abroad, Cuban expatriates are subject to a 4% tax if there is no double taxation treaty with their country of residence.

Tax Exemptions and Deductions

• Deductible Expenses: Businesses can generally deduct 100% of expenses incurred in their business activities, provided that at least 80% of these expenses are justified. Specific limits may apply to certain activities and sectors.
• Double Taxation Agreements: Cuba has double taxation agreements with several countries to prevent expatriates from being taxed twice on the same income.

General Information

• Tax Administration: The Oficina Nacional de Administración Tributaria (ONAT) is the Cuban tax authority responsible for administering and enforcing tax laws. The tax year in Cuba runs from January 1 to December 31.
• Tax Return Filing: Tax returns must be filed annually, and deadlines vary depending on the type of tax. The tax declaration and payment campaign typically starts in January.
• Tax Incentives for Renewable Energy: Cuba is exploring opportunities in renewable energy and may offer incentives such as tax breaks or subsidies to attract investment in this sector.

It is important to note that this information is current as of today, February 5, 2025, and may be subject to change. Consulting with a tax professional or legal advisor is recommended for the most up-to-date information and personalized guidance on tax obligations in Cuba.