Cuban Government Modifies Private Sector Licenses and Taxes

Pushcart vendors pushing their products along Colón street, next to the Milanés theater in the city of Pinar del Río. (14ymedio)

14ymedio bigger14ymedio, Havana, 10 July 2018 — The announced “reordering and updating” for self-employment work appeared this Tuesday with the publication in the Extraordinary Gazette of a package of measures that modify the licensing system and the payment of taxes from the private sector.

“No activity disappears, 96 of the existing ones are grouped into 28, and from of a total of 201, there are 123,” explained Marta Elena Feitóra Cabrera, Deputy Minister of Labor and Social Security.

The 27 activities for which the issuing of licenses had been frozen, will be opened again when the regulations take effect, in December 2018.

Some activities, starting now, may continue to operate, but no new licenses will be granted. This is the case for wholesalers and retailers of agricultural products, pushcart tradesmen or vendors of agricultural products, sellers of CDs and operators of recreation equipment.

However, new license categories have been created. The permit for the preparation of food and drinks in food services and restaurants is modified with the creation of two new licenses: gastronomic services and restaurants, and bar and recreation services. The activities of baker-candy maker and renter of means of transport are also new.

In some cases a single authorization that groups several activities (as in beauty services, which groups seven) will allow a broader set of services with the same tax burden as before.

The new regulations also establish that only one authorization to exercise an activity per person will be granted and only one of the three activities of gastronomic services in restaurants, gastronomic services in cafeterias, or bar and recreation services can be exercised in the same domicile.

Other areas that will see changes are those of renters of houses, rooms and spaces, who may lease to legal persons (companies, organizations, organizations), as well as to natural persons. In addition, in the absence of the business owner, a representative may be appointed from among the employees.

Tax reform in the self-employed sector will also be significant. The government will abolish the tax exemption for the hiring of up to five workers, a measure that includes artists and non-agricultural cooperatives. In addition, the minimum taxable base for the payment of the tax for the use of the labor force is adjusted, with the minimum continuing to be 5%.

Of the 123 self-employed activities that were approved after the regrouping, 52 will be taxed by the General Scheme and 71 by the Simplified Scheme (monthly payment of a consolidated fee).

The tax regime for Havana is differentiated from the rest of the provinces in the new measures. Vladimir Regueiro Ale, general director of Fiscal Policy of the Ministry of Finance and Prices (MFP), explained that the minimum tax quota will be increased on 41 activities in the capital and 20 outside it. The increases range from 5 to 360 CUP.

The minimum tax quota of 39 activities is also reduced outside of Havana, and for 22 in Havana, and the monthly tax quotas are maintained for taxpayers registered in the grouped activities, provided they are higher than the minimum for that license.

In the event that a taxpayer turns in their license for an activity in which they have experienced a loss within a period of less than 24 months, they will recover the tax quota paid before the cancellation.

These changes will apply only to new self-employed workers. In the case of those who are already licensed, they will maintain the preconditions even if the license holders’ tax quotas have been increased.

Another novelty is the obligation to have a fiscal bank account, a measure through which the Government intends to increase control over the sector and that initially will be applied only to food services, construction services, the rental of housing, rooms and spaces, and the transportation of passengers in motor vehicles (from four to 14 seats) in Havana.

All the financial operations of the business must be passed through this account and it will be obligatory to maintain a minimum balance equivalent to three of the taxpayer’s monthly installments. The deposit account must be opened within 30 days of the notification of the National Office of Tax Administration (ONAT), and the minimum balance be deposited within 90 days. Otherwise, it will constitute a punishable offense.

The transport of passengers in Havana includes specific regulations for the control of the use of fuel, which, according to the Government, has been a source of multiple “deficiencies and irregularities.”

It is required that 100% of the expenses for fuel consumed be made by magnetic card, in addition to other expenses of the activity in the Personal Income Tax Affidavit.

The holders of the license will be required to certify the fuel consumed by magnetic card issued by Fincimex, as justification for payment of taxes.

Also modified is the tax exemption incentive for three months at the beginning of the activity, a measure that the authorities claim is used for tax evasion purposes.


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