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Cuba - Taxation

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Anybody who has a home in Cuba is subject to taxation. If you are a foreign national and you have spent 180 days of one tax year in the country then you are also liable to taxation on any money you have made during your time in the country. However, the concept of ‘residence’ makes no difference in Cuba. If you are there, regardless of nationality or reasons why, then you are liable if you have spent the minimum number of days in the country. It is also worth noting that for the purposes of taxation in Cuba, the vast majority of Cuban people will be taxed on all money that they earn worldwide. It is only those who are not full-time residents of the country that will only be taxed on their local income.

Residents of Cuba pay income tax (impuesto) at anything from 10% to 50%, depending upon the level of their income. Anybody who earns up to 3000 CUP each year will pay at the lowest rate, then for every extra 3000 CUP that is earned the rate goes up by 5%, until it reaches the maximum of 50%. There are some deductions that can be made for certain expenses if the individual is eligible. If you are completing a tax return (sustantivo) and feel you have a legitimate expense then the Cuban tax office will be able to advise you on how to deduct this. This might include items such as charitable donations or genuine work related expenses.

The tax year (año fiscal) in Cuba generally runs from January to December but for most people will be a period of 12 months that begins when they first become liable for tax payments. Every person liable for tax must file a tax return with the National Tax Administration or for some employees tax money can be deducted from salaries. Some workers will find that only a proportion of their tax is deducted via their salary and they will still have to file an income tax return to calculate what is still owed. This is usually 70% of the tax that is due, with the remaining figure to be calculated when the return is completed.

There are some forms of income which are exempt from taxation and there are several tax treaties in place which allow Cuba to provide information to other countries on the income of some foreign residents, and which also allow expats to earn money without it being taxed in two different countries. This means that those who are foreign nationals but residing in Cuba will have income from other countries taxed there, as in Cuba expats are only taxed on the money they earn there.

There is no separate Capital Gains tax (impuesto sobre las ganancias de capital). Any money that is made from the sale of assets is taxed at the standard income tax rate and should be included on the personal income tax return, as should monies from other sources of income such as property rentals and share dividends. Inheritance tax (impuesto a la herencia) is payable at either 2% or 4% depending upon the type of inheritance and the relationship between the deceased and the beneficiary, so this rate can be variable. Property taxes (impuesto sobre el patrimonio) are payable in Cuba at an annual rate of 2% of the value of the property. This applies equally to homes in the towns and cities, rural areas, land and even boats.

There is no VAT system in Cuba, although sales tax (impuesto al valor agregado) is added to a number of imported goods and services such as utilities. This is a variable tax depending upon the item it has been applied to and which currency has been used. There are also different rates applicable for items which have been imported to those which have been exported.

Those who do not submit a tax return on time will find that there are a number of penalties which range from fines to prison sentences for more severe cases of tax evasion (evasión de impuesto). Payments of monies should be made at the same time that the return is filed with the tax office.

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