14ymedio, Havana, 28 October 2022 — The Cuban Government will stop forcing self-employed workers (TCP) to become a micro, small or medium-sized business (SME) if they have up to three employees. As provided in the rule issued in August 2021, if they haven’t done the conversion within one year from the entry into force of the law (specifically, until September 20), the licenses of those who are self-employed will be canceled.
In a note published this Thursday, the Ministry of Labor and Social Security and the National Office of Tax Administration (ONAT) backed down and announced that they have agreed to “allow those who have up to three employees and have continued to pay their taxes to continue the exercise of their activities.”
The tax authorities don’t explain the decision beyond its being based “on the recognition that such TCPs continue to develop the same activity.” Similarly, they remind the self-employed that they can’t hire more than three employees, because otherwise they must “convert their business into a company” (SME or non-agricultural cooperative) “or cease the exercise of self-employment.”
In the same document, they remind carriers who didn’t renew their license and those who didn’t make any tax payments that they will be canceled. In addition, “companies that hire artists and eventual agricultural workers who don’t have another self-employment activity,” “TCPs without employees who carry out one or more economic activities” and the self-employed who, even if they have up to three employees, “own more than one business,” “will be updated ex officio,” that is, automatically converted into SMEs.
For the Cuban economist Elías Amor Bravo, based in Spain, the decision is nothing more than a victory of the workers in the “declared war” with the regime, which forced them “artificially” to become an SME “and thus aim for a political success with the approval of the new regulations of economic actors.”
“The final balance of the process has meant that the creation of SMEs, about 5,000, has been far below what the leaders expected,” says Amor Bravo, hence the decision of the Ministry of Labor and the ONAT. Meanwhile, in Colombia, more than 300,000 SMEs were created in 2021, and in Chile, more than 200,000 that same year.
However, he believes that with the measure, the Government has also “shown its claws,” by adding the matter of taxation. “The ONAT coming from behind has apparently managed to impose its criterion and set the precedent that, in turbulent times like these, it’s better to collect a peso than comply with a transitional provision of one more decree.”
The low acceptance of converting into a company could be due, among other reasons, to the fear of increased oversight by the Government and the banking system, and the lack of tax incentives.
This same Thursday, the ONAT also announced that it has created a “preventive embargo” on bank accounts “of all entities that didn’t make the payments on account or partial payments of the Value Added Tax and the Return on State Investment Contribution (non-tax income) corresponding to the third quarter of the current year.”
The decision, they explain, “responds to the fact that there are companies that stopped making these important contributions – whose legal payment deadline ended on October 24 — despite all the proactive actions deployed by the country’s tax offices to promote their correct and timely fulfillment.”
Translated by Regina Anavy
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