With the implementation of Law 113 of 2012 on the Tax System, a new tax outlook has taken hold in the country due to the great increase in activity in the non-governmental sector, with the enforcement of Decree-Laws 305 and 306 of 2012 of the Council of State on Non -Farming Cooperatives and Resolution 353/2013 of the Ministry of Finance and Prices, and Resolutions 41 and 42 by the Ministry of Labor and Social Security, whereby 201 licenses were approved for self-employment.
As of that moment, a tax system was established directly related to periodic income received from carrying out business activities. Based on the foregoing, the following tax obligations for the non-governmental sector were regulated:
- Sales Tax
- Service Tax
- Personal income tax, additional tax payment which is paid by means of a Sworn Return
- Tax on Profits, for Non-Farming Cooperatives
- Tax for Use of Workforce
- Rate for Placing Ads and Publicity
- Social Security Contribution
Sales and service tax is applied based on a rate of 10% of monthly income
Personal income tax (*), which must be paid at the end of the fiscal year, is calculated based on a progressive scale as follows:
|
Annual taxable income |
Tax rate |
|||
|
Up to |
10,000 |
15% |
||
|
Over |
10,000 |
Up to |
20,000 |
20% |
|
Over |
20,000 |
Up to |
30,000 |
30% |
|
Over |
30,000 |
Up to |
50,000 |
40% |
|
Over |
|
|
50,000 |
50% |
To determine the tax base or amount to which the calculations above are applied, you first deduct all of the expenses incurred by the taxpayer, which may be used to a greater or lesser extent according to the law for each type of business license or activity. This amount is not included in the tax base either because, of the amount remaining, 10,000 CUP [Cuban pesos] are exempted from the payment. Each year, instructions are provided on how to complete Form DJ-08, as the ONAT officially calls the tax return.
Self-employed workers who fall under the simplified system do not file an annual sworn return and therefore are not required to pay this tax.
The Tax for Use of Workforce is calculated, for the year 2016 (**), according to the following formula:
|
Number of workers |
How it is calculated |
Three-month calculation for one worker |
|
First 5 workers --------------- no tax paid |
||
|
6-10 |
Average monthly wage for the province of La Habana (595.00) increased by 50% (892.50) |
892.50 x 10%=89.25 For 3 months=267.75 |
|
11-15 |
2 average monthly wages (1,190) |
1,190 x 10%=119 For 3 months=357 |
|
16 workers or more |
3 average monthly wages (1,785) |
1,785 x 10% = 178.5 For 3 months=535.50 |
Social Security Contribution is paid based on 20% of the amount chosen by the taxpayer, according to the scale of values defined by the law. In these cases, the minimum amount to be paid is 87.50 CUPs.
The rate for placing ads and publicity applies to every Cuban or foreign individual and legal entity who puts up plaques, posters, signs, labels, billboards and other advertisements or the like for commercial publicity or advertising purposes. (Law 113/2012 Arts. 339 et seq.).
When determining the tax rate to be paid, there are different rates which vary depending on the area where the ad or publicity is placed and on its size.
The laws that govern the Cuban tax system applicable to the non-governmental sector is the following:
- TCP (self-employed workers)
Labor and Social Security Ministry Resolution 41, 42 and 353 of 2013
National Housing Institution Resolution 283/2011 (Leasing)
State Council Decree-Law 315/2014 (Violations)
- CNA (Non-Farming Cooperatives)
State Council Decree-Laws 305 and 306/2012
Council of Ministers Decree 309/2012
Ministry of Finance and Prices Resolution 427/2012
- General
National Assembly of the People’s Power Law 113/2012
Resolution 120/2013 ONAT, procedure to prepare the sworn return
(*)lLaw 113/2012 on Tax System.
(**)The average wage for the province of Havana is the one used in this table. It changes every year, wherefore this amount needs to be updated. On the other hand, the tax rate to be applied to calculate the Workforce tax is 10% for the year 2016. Starting in 2017, it will be 5% as per Tax System Law 113 of 2012.