Cuba Payroll & Tax Overview

Transcription

1 Cuba Payroll & Tax Overview A GUIDE TO DOING BUSINESS IN CUBA 2018

2 Contents 1.0 Key Country Facts and Public Holidays Business and Culture in Cuba Visas and Work Permits Tax and Social Security Compliance Statutory Absence/Payments About This Payroll and Tax Overview 9

3 1.0 Key Country Facts and Public Holidays 1.1 Official Language The official Language is Spanish. 1.2 Currency The official Currency is Cuban peso, Cuban convertible peso 1.3 Country Dial code The country dial code is Country abbreviation The country abbreviation is CU. 1.5 Statutory Filing Payment Methods Both mixed companies and totally foreign capital companies must use a government employment entity to hire employees and negotiate their contracts. The workers in mixed companies who are Cuban or foreign permanent residents in Cuba, with the exception of the members of the management or administration, shall be contracted by an employing entity proposed by the Ministry for Foreign Investment and Economic Collaboration and authorised by the Ministry of Labor and Social Security. In totally foreign capital companies, the services of Cuban workers and foreign workers residing permanently in Cuba, with the exception of the members of the management and administrative body, shall be hired through a contract between the company and an employing entity proposed by the Ministry for Foreign Investment and Economic Collaboration, and authorised by the Ministry of Labor and Social Security. The entities will be proposed by MINVEC and approved by the Ministry of Labor and Social Security. The agency designated in most cases is ACOREC, S.A. (Agencia de Contratación a Representaciones Comerciales, S.A.). Employers make payments to the ACOREC. 1.6 National Minimum wage 225 Cuban pesos ($9) per month 1.7 Filing Deadlines Payments must be paid by the 20th of the month following the month in which remuneration was paid. Employers and individuals are required to submit annual taxes returns on or before April 30 of each year and the filing of returns is mandatory. 1.8 Fiscal year Jan. 1 through Dec Time Zone UTC -4.00, UTC Holiday Holiday Type 1 January 1 January Liberation Day National Holiday 2 January 2 January New Year Day National Holiday 14 April 30 March Good Friday National Holiday 1 May 1 May Labour Day / May Day National Holiday 25 July 25 July Revolution Anniversary National Holiday 26 July 26 July Day of the Rebellion National Holiday 27 July 27 July Revolution Anniversary Celebration National Holiday 10 October 10 October Beginning of the War of Independence National Holiday 25 December 25 December Christmas Day National Holiday 31 December 31 December New Year's Eve National Holiday

4 2.0 Business and Culture in Cuba 2.1 Establishing as an Employer Personal relationships are incredibly important to Cubans in business since little gets accomplished without the influence of political officials; in fact, many managers and supervisors in important businesses are often political appointees without the necessary qualifications. If you want to call a meeting during a meal, have it during lunch; dinners are a more formal occasion and it s considered inappropriate to discuss work during dinner. Also, know that during business meetings, it s not unusual for a foreigner to be left waiting for as much as an hour; this is normal, and it shouldn t be a cause of personal offense. When speaking Spanish with Cubans or working on business translations, know that Cubans will typically address foreigners using the formal usted until they are familiar. The formal usted is the most appropriate way to address among business people in Cuba; the informal form tú is commonly used in Cuba when conversing with friends or family. As part of the updating of the Cuban economic model, foreign investment in Cuba is aimed at diversifying and expanding export markets, access to advanced technologies, import substitution, obtaining external financing, the creation of new sources of employment, recruitment of management methods and linking it with the development of productive chains, as well as the change of the country's energy matrix by harnessing renewable energy sources. The investment of foreign capital is governed by Law no. 118 "Foreign Investment Law" of March 29, 2014, in force since 28 June of the same year. The legal framework including rules complementary to the Law was published in the Official Gazette no. 20 Extraordinary of April 16, Employment The minimum work age in Cuba is 17. Almost all Cubans working in state owned enterprises apply to and are hired directly by the entities that employ them. All employees are covered by an individual work contract as well as a collective bargaining agreement that specify employment qualifications, work rules and the reasons and procedures for termination. In order to dismiss a worker, management must show cause as provided by law and the employment contract. Employees may terminate a work contract upon giving the requisite notice. In state enterprises, unions and workers participate in the hiring and promotional decisions. Although the new decentralised management system grants sole discretion to management to make such decisions, legislation permits the creation of an advisory body called the commission of experts 18 comprised of union, worker and management representatives. Once constituted, management must consult with this commission on hiring and promotional decisions. Pressures for greater efficiency have resulted in the introduction of new employment requisites as idoneidad demostrada or demonstrated qualifications, eliminating the absolute privileges of seniority. Workers, who once were secure in their positions as long as they showed up most of the time and complied with work rules, now must strive to meet performance requirements. These requirements and procedures for measuring them are increasingly incorporated into the collective bargaining agreement. Cuban workers have considerable mobility, particularly at positions lower than management, although transferring from one city to another is generally difficult because of the difficulty of obtaining housing unless the new work centre supplies it. In some work centers, worker stability is a problem, and management together with the union seek ways of making work conditions attractive to keep the workforce steady.

5 3.0 Visas and Work Permits 3.1 Visas Passport required Return ticket required Visa required Australian Yes Yes No British Yes Yes No Canadian Yes Yes No Other EU Yes Yes No USA Yes Yes No Visas are not required by nationals referred to in the chart above for stays of up to 90 days. Business visas are not really issued for Costa Rica. If intending to do business, the normal procedure is to enter on a tourist visa and conduct your business within that time. If you wish to stay longer without leaving the country to renew your visa you can apply for a Business Temporary Residence Permit once you are there. Nationals not referred to in the chart are advised to contact the embassy to check visa requirements for Costa Rica. Visas issued by consulates of Costa Rica are valid for stays up to 30 days. 3.2 Work Visa You must obtain a work permit if you are a foreigner who wishes to work in Cuba. This is not easy to do, because the system makes it so the jobs are in favour of locals. Every job in Cuba is distributed by the state. Workers are selected and paid through a Cuban State agency. You must apply for a work permit through the Ministry of Work and Social Security. As the salary is under socialism, it is very difficult to earn and save a substantial amount of money from regular jobs. Cubans make an average of American dollars per month. It is easier to work for an international company stationed in Cuba, or as a freelancer or journalist. You can apply for a Temporary Residenc0he Card if you land a job and work visa.

6 4.0 Tax and Social Security 4.1 Tax No Change 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. 4.2 Social Security Social insurance is administered by the Directorate of Social Assistance and Social Services and the National Institute of Social Security of the Ministry of Labor and Social Security. All salaried workers of the state are covered by social insurance.

7 5.0 Compliance 5.1 Employer Registration Employers have to register and obtain a tax identification number within 15 days of receiving work authorisation. 5.2 Starters/Registration A foreign investor interested in starting his business activities in Cuba must submit the following documents: Authorised copy of the appropriate authenticated and registered documents of incorporation, the company registration certificate or a similar deed from the investor s country; Financial statements of the last accounting period; Sponsorship letter of the main office, if the investor represents a branch or subsidiary; Certified consent from the management proving approval of the investment; Appropriate authenticated powers of attorney; Evidence of the investor s experience in the business activity; If the investor is a private person, he has to present a copy of his identification documents and bank guarantees issued at least six months earlier. The documentation evidencing the company incorporation, the company registration certificate and the powers of attorney have to be authorized appropriately by the authorities of the investor s country, the consulate of Cuba located in the respective country and they have to be translated into Spanish. 5.3 Leavers/De-registration Employers have to deregister the employee from the National Office of the Tax Administration (ONAT) and the National Institute of Social Security of the Ministry of Labor and Social Security.

8 6.0 Statutory Absence/Payments 6.1 Annual Leave Every worker is entitled to enjoy one month of paid annual leave after 11 months of effective work. Workers are also entitled to 9 paid public holidays 6.2 Maternity Leave During pregnancy and up to the 34th week, the working woman will have the right to six days or twelve half days of paid leave for her medical and dental care prior to delivery. In order to guarantee the care and development of the child during his first year of life, the working women will have the right every month to one day off, with pay, to take her child for a paediatric check-up. 6.3 Parental Leave In 2003, the government took another step towards breaking down the traditional division of family duties by giving either the father or the mother the option of taking paid leave at 60% of salary to care for their infants from 12 weeks up to one year of age. The parents may opt for the father to take the leave whether or not the couple is married.

9 7.0 About This Payroll and Tax Overview 7.1 Copyright All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher. 7.2 Disclaimer Every effort has been made to ensure that all information in this booklet is correct at the time of publication. This information should be used as reference only and not as a sole source of decision making. 7.3 The Global Payroll Association Global Payroll Association is the first international payroll association of its kind. We are a central hub for all-things payroll. A one-stop-shop supplying comprehensive directories, interactive training and in-depth country resources. We are here to help you with your global payroll needs, no matter how complex, connecting you with the world s leading experts and offering a forum to network with other like-minded global professionals. Global Payroll Association welcomes international payroll, HR and financial professionals of all levels.

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