The Republic of Cuba is an island surrounded by the Caribbean Sea and the Atlantic Ocean. Its proximity to the coast of North America promotes trade with the region's countries. Entrepreneurs who intend to register a company in Havana or any other city in Cuba are attracted by the opportunity to create a business in a low-tax country. Tourism is actively developing in the island state, and investments in agriculture, industry, and construction are encouraged. Registering a company in Cuba attracts excellent prospects for doing business because, in this country, the transformation of state property into private property has yet to occur.
Advantages of registering a company
- possibility of registration of companies with 100% foreign capital;
- case of free transfer of funds from the country;
- freedom of choice of activities (except for health care, education, and defense);
- legislative protection of private investments;
- availability of free economic zones.
Main forms of legal presence and doing business
The list of legal forms in which a foreigner can establish a company in Cuba is set by the Law on Foreign Investment.
- a Joint venture (JV). It is a Cuban corporation that issues registered shares owned by both national and foreign investors;
- entirely foreign capital companies (IBC). The opening of a company in Cuba is allowed to a non-resident, who can manage it and be responsible for all its obligations. The foreigner is granted a residence permit in the country.
JVs and IBCs can establish branches and representative offices in Cuba and abroad and participate in the capital of enterprises registered abroad.
One form of doing business in Cuba is the international economic association agreement (IEA), which does not involve the creation of a separate legal entity. Instead, the deal is concluded between one or more Cuban investors and foreign entrepreneurs. Cuban legislation defines a list of areas where such contracts are allowed.
- Obtain a permit to operate (for companies with 100% foreign capital);
- Choose a unique name for the company;
- Register the company in Cuba with the Chamber of Commerce or coordinate the inclusion of a non-resident in the register of foreign partners;
- Open a bank account to conduct business;
- Obtain the necessary licenses and permits (for some regions of activity).
Legislation and regulatory environment
The main legal act regulating the activities of non-resident investors is the "Law on Foreign Investment" of 2014. Its most important provisions are:
- Preservation of benefits granted to foreign investors during the entire stipulated period;
- Protection of the owners' property against legal claims by third parties or the extraterritorial application of the laws of other states.
- The possibility of tax-free transfer of profits and dividends abroad in freely convertible currency.
Foreigners are allowed to buy a company in Cuba or become part-owners. Conflicts arising between partners of the organization are solved by the statutes and, if necessary, in the Provincial Public Court. In addition, the Cuban International Commercial Arbitration Court is on the island and is considered one of the oldest in the Latin American region.
When registering a company in Cuba, it is crucial to keep in mind that the amount of income tax on companies with foreign capital is differentiated depending on the participation of local businesses in them:
- for companies with local ownership:
- an exemption applies for the first eight years;
- the total rate is 15%;
- for companies with 100% foreign capital:
- 35% - general rate;
- 50% - for companies engaged in natural resource extraction.
In addition, companies can get permission to reinvest net profits and be exempt from the need to pay the appropriate tax for tax optimization.
It is more profitable for foreigners to open a business in Cuba in the free economic zone, where tax incentives are available:
- corporate tax - 12% (not withheld during the first ten years of the company's existence);
- income tax - 1% (withheld from the second year);
- tax on the use of labor - 0%.
Cuba has signed double taxation agreements with ten countries around the world.
Open a business in Cuba: how Prifinance lawyers can assist
Although, in general, the country's legislation is conducive to attracting foreign investment, opening a company in Cuba requires more effort, as it requires obtaining permits from government agencies. The procedure for setting up a company is quite long, and in case the entrepreneur has made mistakes or has yet to submit a complete set of documents, it will take even longer to register the business.
Prifinance lawyers will advise on the procedure in detail. We will help buy a business in Cuba and prepare all the necessary documents for registering a new company. Our services include providing a legal address, stamps, and opening a bank account.