What's new in Cuba's proposed foreign investment law

Factbox: What's new in Cuba's proposed foreign investment law

Thu Mar 27, 2014 12:20pm EDT



(Reuters) - Cuba's National Assembly is set to approve a new foreign

investment law on Saturday that the communist-run country hopes will

attract badly needed capital, improve growth and create jobs.



Accompanying regulations, which may differ from previous rules, will not

be published for 90 days.



Following are some differences between the current and the proposed new

law, and a summary of what remains unchanged.



NEGOTIATION



CURRENT LAW: Negotiations with Cuban authorities go through various

steps with no time limit until a proposal reaches the Council of State

or Council of Ministers, at which point the two bodies have 60 days to

approve or reject.



NEW LAW: Some minor ventures approved at the ministerial level within 45

days. Larger ventures still must go through the more lengthy process of

passing the Council of State or Council of Ministers.



TAXATION



CURRENT LAW: Profits taxed at 30 percent and use of labor at 25 percent

(11 percent for the right to use a worker and 14 percent for social

security).



NEW LAW: Cuts profit tax in half to 15 percent and eliminates the labor tax.



CURRENT LAW: Profits from mining, oil and other raw material ventures

can be taxed at higher levels, up to 45 percent.



NEW LAW: Taxes on profits in mining, oil and other raw material ventures

are limited to 22.5 percent.



CURRENT LAW: Any tax breaks for investing in Cuba are negotiated.



NEW LAW: Investors are exempted from paying a profit tax for eight years

upon the signing of an agreement.



CURRENT LAW: Investors are subject to income tax.



NEW LAW: Investors are exempted from income tax.



FOREIGN OWNERSHIP



CURRENT LAW: Allows for 100 percent foreign ownership, but in practice

the government rarely if ever approves permits for wholly owned foreign

groups.



NEW LAW: Also allows for 100 percent foreign ownership but denies those

companies the same tax benefits afforded to joint ventures with the

Cuban state or associations between foreign and Cuban companies.



CURRENT LAW: Does not specifically exclude Cubans living abroad, but in

practice they are not allowed to invest.



NEW LAW: Does not specifically exclude Cubans living abroad.



CUBAN INVESTMENT



CURRENT LAW: Only state-run companies are authorized to form ventures

with foreign investors.



NEW LAW: In addition to state-run companies, private farm and non-farm

cooperatives authorized to form ventures with foreign investors.



WHAT REMAINS THE SAME



Under the proposed new law, the following remain basically unchanged

from the 1995 legislation, although this could change upon publication

of accompanying regulations.



SETTLEMENT OF DISPUTES



Disputes are to be settled by Cuba-based arbitration unless specified

otherwise in agreements.



LABOR



Joint ventures and other forms of association must hire labor through

state-run companies, paying agreed-upon wages in convertible currency.

The hiring organization then pays Cuban workers in the local peso and

handles labor disputes.



Companies must use Cuban citizens and residents for all positions, with

the exception of high-level management.



IMPORT/EXPORT



Companies may import and export directly, bypassing the state's

cumbersome trading companies.



MARIEL SPECIAL DEVELOPMENT ZONE



The Mariel Special Development Zone retains its tax laws, which are even

more favorable than those in the proposed new law. Investors in Mariel

will also benefit from other provisions of the new law.



(Reporting by Marc Frank; Editing by Daniel Trotta and Sophie Hares)



Source: Factbox: What's new in Cuba's proposed foreign investment law |

Reuters -

http://www.reuters.com/article/2014/03/27/us-cuba-investment-factbox-idUSBREA2Q1I820140327