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Accompanying regulations, which may differ from previous rules, will not
be published for 90 days.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