Foreign Investment Legal Regime
Law No. 118/2014: “Law of Foreign Investment”
Decree No. 325/2014: “Regulations of the Law of Foreign Investment” of the Council of Ministers
Resolution No. 46/2014 and No. 47/2014 of the Banco Central de Cuba
Resolution No. 128/2014 and No. 129/2014 of the Ministry of Foreign Commerce and Investment
Resolution No. 16/2014 of the Ministry of Labor and Social Security
Agreement No. 7567, May 2014, of the Council of Ministers
Foreign Investment in Cuba
Law No. 118 establishes the types of business that can be adopted within foreign investment:
Joint enterprise
International economic association contracts including, among others, contracts for hotel management, production or services, contracts to provide professional services, risk contracts to explore nonrenewable natural resources, for construction and agricultural production
Enterprises with 100% foreign capital; foreign investors can set up on national territory as:
a. Natural persons acting on their own behalf
b. Juridical persons constituting a Cuban affiliate of the foreign entity which they own
c. Juridical persons setting up a branch of a foreign entity
Furthermore, a general principle to grant new tax incentives for joint enterprises and parties in international economic association contracts was approved; The Special Taxation Regime * has been established in the new regulatory framework for foreign investment, as follows:


* Joint enterprises and international economic associations are governed by what has been established in legislation in force (Law No. 113 of the Taxation System), with the adjustments of this special regime. Enterprises with 100% foreign capital pay taxes according to legislation in force. In the case of International Economic Association Contracts for Production, Services and Professional Services Management, this is governed by what has been established in legislation in force (Law No. 113 of the taxation System) with the adjustments of this special regime, especially the tax on profits in the gross incomes type, 4%.


Taxes
Law No. 118 Foreign Investment
Special Economic Development Zone of Mariel
Law 113 Taxation System
About Profits
0% during 8 years and as an exception for a longer period. Subsequently 15%. 0% on reinvested profits. It may be increased to 50% for exploitation of natural resources.
0% during 10 years and as an exception for a longer period. Subsequently 12%. Application of Lay No. 118 for profits reinvestment.
35% May increase to 50% for exploitation of natural resources.
For using labor force
Exempted
Exempted
Progressive reduction from 20% (2012) to 5% (2016).
Contributions to local development
0% during investment recovery
Exempted
Is being established gradually in the Budget Law
About sales or services
0% during first year of operations, subsequently 50% discount on wholesale sales and on services.
0% during first year of operations, subsequently 1%
2% on wholesale sales and 10% on servicers. New taxable items shall be gradually incorporated
About personal incomes to partners or Parties
Exempted
Law No. 118 applies
15%.
For using or exploiting natural resources and preserving the environment (5 taxes)
50% discounts during investment recovery
Law No. 118 applies
For the use of beaches, waste disposal into hydrographic basins and terrestrial waters: defined in the annual Budget Law. Use of bays and forestry resources according to taxable items in Law 113
Customs
Exempted during the investment process
Exemptions for importation of means, equipment and goods are exempted
Taxable items are established in the Customs Duties
The Article 47 of Law 1128 establishes: “The Ministry of Finances and Prices, having heard the opinion of the Ministry of Foreign Commerce and Investment, taking into account the benefits and the amount of the investment, capital recovery, indications provided by the Council of Ministers for prioritized sectors of the economy, as well as the benefits it may bring to the national economy, may grant total or partial exemptions, on a temporary or permanent basis, or grant other tax benefits according to what has been established in taxation legislation in force, for any of the types of foreign investment recognized in this Law”.
Taxes Applicable to Enterprises with 100% Foreign Capital
Profit Tax
35% that may go up to 50% for exploitation of natural resources, or up to 50% of the 35% that is the tax type established.
Workforce Tax
It is gradually reduced until 5% in 2016.
Sales Tax
5% on wholesale sales, 10% on retail sales. Gradual application until 2016.
Services Tax
10% gradual application until 2016.
Special Products and Services Tax
No tax is paid on sales, especially for products and on services for: (1) goods constituting raw material for industrial production and for goods and (2) services destined for exportation
Environmental Tax
For the use or exploitation of beaches, for approved waste disposal in hydrographic basins, for the use and exploitation of bays, for the use and exploitation of forestry resources and wildlife and for the right to use terrestrial waters: gradual application of these taxes and the majority of their taxable types shall be established in the Annual Budget Law
Territorial Contribution
Gradually established in the Budget Law.
Customs Tax
To be set in the Customs Tariffs.
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