Cuban Tax Regime to Foster Private Sector, Agriculture

Cuba’s new tax regime became effective on January 1, 2013, following the enactment of the nation’s first comprehensive tax code since the triumph of the revolution in 1959.

The “Tax Act 113”, which replaces the former one dating from 1994 and a slew of other tax laws, introduces a total of nineteen taxes including environmental levies, social security contributions, and a sales tax.

The new tax code is designed to boost private sector growth and agricultural productivity, finance public spending and maintain a balanced budget, the Cuban government said.

State-owned businesses, which account for almost nine-tenths of all enterprises, will be subject to a 35% tax rate on profits. 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.

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

Cuban officials have also said they had studied the tax systems of a number of other countries, including China, Vietnam, Venezuela, Brazil, Spain and Mexico, and adapted them to meet Cuba’s needs.