Taxes in Cuba for Individuals & Businesses

The Cuban tax system finances extensive social services and public infrastructure through a framework that has evolved with the country’s changing economic landscape. As Cuba has expanded its private sector, its tax structure has been modified to incorporate new forms of economic activity, reflecting a blend of socialist principles with market-oriented reforms. The government relies on a mix of direct and indirect taxes that apply to individuals, private businesses, and foreign investors to generate revenue.

Personal Taxation

An individual’s tax obligations in Cuba are determined by their residency status and sources of income. A person is considered a tax resident if they have a fiscal domicile in Cuba or are present in the country for at least 180 days within a tax year. Cuban residents are taxed on their worldwide income, while non-residents are taxed only on income generated from Cuban sources.

The primary direct tax on individuals is the Personal Income Tax, known as Impuesto sobre los Ingresos Personales. This tax is applied progressively, meaning the rate increases as income rises, and applies to salaries, self-employment earnings, and rental income. The tax brackets are:

• 15% for annual income up to 10,000 Cuban Pesos (CUP)
• 20% for income between 10,000.01 and 20,000.00 CUP
• 40% for income between 30,000.01 and 50,000.00 CUP
• 50% for all income exceeding 50,000.01 CUP

Self-employed individuals, known as cuentapropistas, are a significant and growing part of the tax base. Their net income, after deducting allowable business expenses, is subject to these progressive rates. Individuals can deduct expenses incurred in their economic activity, provided at least 80% can be justified with documentation.

In addition to income tax, a mandatory Social Security Contribution (Contribución a la Seguridad Social) is levied. Employers are responsible for making these contributions on behalf of their employees, paying 14.5% of the employee’s salary. Self-employed individuals contribute under a separate regime, paying 20% on a self-selected contribution base, which has a minimum of 2,000 CUP.

Other taxes individuals might encounter include those on property transfers and inheritances. A 4% rate applies to donations and some transfers, while inheritances are subject to progressive rates based on the degree of kinship. The basis for calculating these taxes is determined by new minimum reference values for properties based on their geographic zone.

Consumption and Transaction Taxes

The Cuban tax system utilizes indirect taxes embedded in the price of goods and services, affecting the daily economic activities of residents and visitors.

A key component is the Sales Tax (Impuesto sobre las Ventas). Unlike a Value-Added Tax (VAT) system, Cuba applies a tax at different rates depending on the point of sale and product type. A general rate of 10% is applied to retail sales and services, impacting consumers when they purchase goods or dine at restaurants, while a lower rate of 2% is applied to wholesale transactions.

The Services Tax (Impuesto sobre los Servicios) is another significant indirect tax, applied at a 10% rate on public services. This tax covers a wide array of services rendered within the country. Services exported from Cuba are exempt from this tax as an incentive to encourage foreign currency earnings, while services brought in from abroad and rendered on Cuban territory are subject to the tax.

For travelers and importers, Customs Duties (Derechos de Aduana) are a major consideration. These taxes are levied on goods brought into the country and are a tool for both revenue generation and economic control. The specific duties can vary significantly based on the type and quantity of the item being imported.

Corporate and Business Taxes

The taxation framework for legal entities operating in Cuba is designed to capture profits generated within the country while also providing incentives to attract foreign capital. The main levy on businesses is the Corporate Profits Tax (Impuesto sobre Utilidades). The standard rate for this tax is 35% on net profits for companies with total foreign ownership, which is in line with the corporate tax rates of several other countries in the region.

In addition to the profits tax, businesses are responsible for a Tax on the Use of a Labor Force, which is a 5% payroll tax on the total remuneration paid to workers. Capital gains are not taxed separately; instead, they are treated as ordinary corporate income and taxed at the standard 35% rate.

Businesses can deduct a range of expenses to arrive at their net taxable profit, provided they are properly documented and justified. These deductible items include:

• Production costs
• Distribution and sales expenses
• Administrative overhead
• Financial expenses

Mariel Special Development Zone

To stimulate foreign investment, Cuba established the Mariel Special Development Zone (ZEDM). Located west of Havana, this zone offers significant tax breaks to attract international companies. Businesses established within the ZEDM are exempt from the Corporate Profits Tax for the first 10 years of their operation. After this initial period, they are taxed at a reduced rate of 12%.

This special regime also provides exemptions from the tax on the use of the labor force and customs duties on imported equipment and materials needed for the investment process.

Tax Administration in Cuba

Tax compliance in Cuba is managed by the national tax authority, the Oficina Nacional de Administración Tributaria (ONAT), which is responsible for taxpayer registration, tax collection, and enforcement of tax laws.

The first step for any taxpayer is to register with ONAT to obtain a unique Tax Identification Number (Número de Identificación Tributaria, or NIT). Registration must be completed within 15 calendar days of receiving authorization to conduct an economic activity. For an individual, this requires presenting an identity document and the official license or permit for their work, while a legal entity must provide its articles of incorporation and proof of registration in the commercial registry.

After registration, taxpayers are required to file tax returns according to a set schedule. The deadline for the annual income tax declaration is April 30th for the preceding tax year, and corporate profits tax returns are due by March 31st. Filing can often be done through ONAT’s digital platform, though the process can be complex for those unfamiliar with the system.

ONAT provides several payment methods, including bank transfers and payments through authorized intermediaries. Failure to meet deadlines can result in fines and other penalties.