Guarantees for Investors
Foreign investments in Cuba enjoy full protection and legal certainty and cannot be expropriated, unless such action is executed for reasons of public utility or social interest and compensated at fair market value.
The government guarantees the benefits granted to foreign investors and their investments and the free transfer abroad, in convertible currency, free from taxes or any other fees, of the dividends or profits obtained by the foreign investor and the selling or transferring of its rights with governmental authorization. Additionally, foreign investments in Cuba are protected against legal claims by third parties or the application of extra-territorial laws. These guarantees are complemented by agreements to prevent double taxation and sixty-three (63) agreements for the Promotion and Reciprocal Protection of Investments executed by the Cuban government.
For detailed information about investors’ guarantees, please contact us.
Modalities of Foreign Investments
Foreign investments in Cuba include (a) direct investment and (b) investments in equities or other securities or bonds. Foreign investments must conform to one of the following three forms: 1.-Joint Venture; 2.-International Economic Association Agreement; and 3.- Wholly Owned Foreign Businesses.
A joint venture is a Cuban company that adopts the form of a corporation in which one or more national investors and one or more foreign investors participate as shareholders. The joint venture entails the formation of a separate legal entity. The business affairs, organization and operations of the company are contained in the company’s association agreement or by-laws. Joint ventures may establish offices, branch offices and subsidiaries both within the national territory of Cuba and abroad, and can also form part of entities abroad.
International Economic Association Agreement
An international economic association agreement is an agreement between one or more national investors and one or more foreign investors without forming a legal entity distinct from that of the parties. International economic association agreements include, among others, risk contracts for the exploration of nonrenewable natural resources, construction, agricultural production, hotel management services and contracts for the provision of professional services.
Wholly Owned Foreign Businesses
In this modality, the foreign investor manages the company, enjoys all the rights thereof and is ultimately liable for the company’s obligations. Wholly owned foreign businesses may establish offices, branches and subsidiaries, both within the country and abroad, as well as being able to participate in entities abroad.
The Law No.113 (Taxation System) and its supplementary regulations contain the principles, rules and general procedures of the Cuban tax system. New tax incentives for joint enterprises and parties to international economic association contracts have been approved as part of the country’s efforts to encourage foreign investments.
Under the Special Tax System established in connection with the Foreign Investment Act (Chapter XII of Law No. 118), investors in joint ventures and international economic association contracts are generally exempt from personal income taxes, employment taxes, customs duties for the import of equipment, machinery and other exemptions during the investment process. Additionally, such businesses are generally not subject to income taxes for the first eight years. Wholly owned foreign businesses, however, remain subject to Law No. 113, although the Cuban Ministry of Finance and Prices may, in its discretion, grant tax benefits when foreign investment is of special interest to the government.
For more information about the tax regime applicable to foreign investments, please contact us.
Labor and Social Security
The Labor System under Foreign Investment is regulated by Law No. 118 and its supplementary legislation. The employees shall be, as a rule, Cuban or foreign citizens permanently residing in the Republic of Cuba and shall be hired by an employing entity except for executives and top management positions.
Cuban or foreign workers residing permanently in the Republic of Cuba shall be hired by the Cuban investor and their payroll shall be paid in Cuban pesos. Nevertheless, the top management of joint ventures, wholly owned foreign companies or the parties to international economic association agreements shall be entitled to determine when certain top executive, technical or highly skilled positions are to be filled by persons who are not permanent residents in the country and, in those cases, top management shall be able to determine the labor conditions to be applied. The non-permanent residents in the country who are hired shall be subject to the Cuban immigration laws and procedures and shall obtain a work permit.
For detailed information about the labor and social security regime applicable to foreign investments, please contact us.
The Mariel Special Development Zone (MSDZ)
With the completion of Phase I of the Mariel Special Development Zone (MSDZ), Cuba seeks to position itself as a strategic trading plaza in close proximity to numerous important ports in the Americas.
The MSDZ is strategically located to receive super vessels and their containerized and non-containerized cargo destined for the Caribbean, U.S., South America and Central Europe. Businesses to be established in the area are governed by Decree-Law No. 313 “Mariel Special Development Zone” and its complementary regulations in which special policies and regimes are applied, offering additional tax incentives and making less cumbersome the inclusion of foreign investors in key economic sectors important to Cuba, such as telecommunications, renewable energy, agriculture, packaging and bottling, biotech, construction materials, high tech, logistics, warehousing, tourism and real estate. The Law No. 118 “Foreign Investment Act” and its supplementary rules are also applicable by extension to the foreign investment established in the MSDZ and offer more advantageous conditions for investors.
For detailed information about the MSDZ, please contact us.
Foreign trading entities in Cuba are incorporated under Decree No. 206 of April 10, 1996. Foreign trading entities should not be confused with the trading entities under the foreign investment umbrella.
Such Decree regulates the authorization to engage in commercial activities in compliance with the license issued in each case, except for the execution of the following activities: (a) to import and export directly, with commercial purposes; (b) to engage in the wholesale and retail trade of goods and services, except the after-sales and warranty services, specifically agreed upon in the contracts that allow foreign trade operations; and (c) to distribute and transport goods within the national territory.
For more information about trading, please contact us.