Cuban SMEs will have to declare taxes digitally

All small and medium-sized enterprises (MSMEs) in Cuba must declare taxes before the National Office of Tax Administration (ONAT) in an exclusively digital format. This was established by Resolution No. 8 of 2024 of the Ministry of Finance and Prices (MFP) published on February 15, 2024 in the Official Gazette of Cuba.

The fact is that all companies with legal personality must have the mandatory presentation of the affidavit in digital form.

In this sense, Vladimir Rigueiro Alli, Minister of Finance and Prices, expressed that the decision was taken taking into account several processes. Among them, progress in the process of computerization of society in Cuba stands out.

Therefore, the aim of the regulation is to facilitate the completion of this procedure for taxpayers and improve tax control mechanisms.

Let us remember that Law No. 113 of the Tax System (July 23, 2012) already stipulates the obligation to submit a written declaration on the profits obtained. This is directed to those subject to tax and is submitted annually during the quarter following the end of the fiscal year.

Now, the MFP's new resolution doesn't change what's been selected. It now imposes, on a mandatory basis, the digitization of tax returns.

How to calculate profits tax?

Here it must be made clear that micro, small and medium companies are subject to a 35% profit tax in the country. Therefore, the first step is to determine your gross income. In this process, all the income earned by the company during the financial period is added.

The next thing is to make an operating expense deduction. That is, from the total income, the expenses necessary to generate this income are subtracted.

The third step is to calculate net profit before taxes. That is, the difference between gross income and deductible expenses.

After that, previous tax losses are applied. So, if the legislation allows it, it is possible to offset tax losses from previous years against the profits of the current period. Therefore, the tax base will be reduced.

In fact, the next step is to determine the tax base. Additional adjustments are applied to net profit before tax according to each country's tax laws to arrive at the tax base.

A tax rate is then applied, which can be flat or progressive, depending on the jurisdiction.

Finally, tax breaks can be applied to investments, research and development, or to taxes paid in other jurisdictions. In addition, other specific deductions are also included to reduce the tax payable.

The truth is that in this context, and with new legal regulations, not all SMEs have the ability to adapt. The main reason is that many of them do not have enough computing and communication technologies to do so.

We add to this that they must pay other taxes such as sales or services tax, which amounts to 10% of the total monthly income.

There is also a tax on the use of the workforce, which is equivalent to 5% of employees’ monthly salaries.

They must also pay a social security contribution of 14% of the total monthly salaries.

Of this amount, 12.5% ​​goes to the state budget and 1.5% to social security. Finally, they must also make the regional contribution to local development of 1% of total income.