Cuba's landmark tax code to take effect

The first comprehensive tax code in Cuba since the 1959 revolution that abolished almost all taxes is to take effect on Jan. 13, 2013. Under the "Tax Act 113" which replaces the former one dating from 1994 and a slew of other tax laws, the largely tax-free life for most Cubans who have not paid taxes for half a century is on its way out. The new tax code is designed to boost private sector growth and agricultural productivity, finance public spending and maintain a balanced budget. It includes 19 different taxes and covers everything from contributions to the state budget to taxes on inheritance, environment, sales, transportation and farmland, license fees and social security. To encourage the private sector, the new tax system gives a three-month tax exemption to private start-ups. It also stipulates that a labor tax of 20 percent will be gradually reduced to 5 percent by 2017 and small businesses with five employees or less are exempt from taxation. Under the new regulations, state-run companies, which used to simply hand over all their revenue to the government, will pay a 35 percent tax on their profits. Agriculture and forestry will enjoy tax preferences. For example, farmers may deduct up to 70 percent of their revenue as costs. Farmers to reclaim previously idle state land won't have to pay taxes for two years. "The new Cuban fiscal policy should contribute to the sustained increase in economic efficiency and revenue for the state budget, in addition to contributing to the maintenance of an adequate financial balance," official daily Granma said. Cuban officials have also said they had studied the tax systems of a number of other countries, including China, Vietnam, Venezuela, Brazil, Spain and Mexico, and adapted them to meet Cuba's needs. The new tax code was approved by the National Assembly on July 23, 2012.