Cuba To Introduce New Tax Code

by Mike Godfrey, Tax-News.com, Washington

05 December 2012

A new tax code in Cuba will become effective on January 1, 2013, introducing a total of 19 taxes in support of the government's efforts to foster a partly free-market economy.

The code is to include the introduction of corporate and personal income taxes, inheritance tax, land and real estate taxes, environmental levies, social security contributions, and a sales tax.

A progressive income tax regime has been in place since the 1990s for privately-owned businesses, the self-employed and farms, starting at a rate of 15% on annual income up to CUP10,000 (USD377), increasing to 50% on earnings above PES50,000. This will remain under the new tax code. However, under the reforms, state-owned businesses, which have hitherto merely handed over all of their revenues to the government, will be subject to a 35% tax rate on profits. State-owned enterprises account for almost nine-tenths of all businesses in Cuba.

The new law also introduces a 25% social security tax, but this will be gradually reduced over a five-year period until it reaches 5%. Businesses with five employees or less will be exempt from this tax.

A number of tax concessions will be introduced to stimulate economic activity and development, particularly for the agriculture sector.

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