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The Cuban regime announced on Thursday a comprehensive tax reform that combines new collection tools with incentives aimed at businesses and investors, in an effort to increase tax revenues, attract capital, and support an economy battered by inflation, declining production, and a shortage of foreign currency.
The transformation of the tax system occupies a central place within the 176 economic and social measures presented by Prime Minister Manuel Marrero Cruz before the National Assembly of People's Power.
The so-called Axis 12 aims to modernize the State's revenue collection mechanisms and, at the same time, introduce incentives to stimulate business activity and investment, noted the report from the official newspaper Granma.
The most significant measure is the gradual implementation of the Value Added Tax (VAT), a tax figure widely used in market economies and which until now did not exist in Cuba in an accredited form.
According to the ruler Miguel Díaz-Canel, the new scheme will prevent what is known as cascading imposition through tax credit mechanisms supported by electronic invoicing systems.
VAT will initially be applied to certain production and consumption chains, while products included in the basic basket of goods and services will have reduced tax rates.
The reform represents a significant change from the current tax model. Historically, Cuba has operated with sales and services taxes that impose levies at every stage of economic activity, without allowing for tax compensation between companies.
With the introduction of the creditable VAT, the government aims to align itself with internationally used systems and improve the traceability of commercial operations.
Digitalization occupies another prominent place in the package. The regime will implement the electronic tax invoice and offer incentives to promote its adoption among taxpayers.
At the same time, it will apply bonuses to the sales and services tax based on the levels of banked operations, thereby reinforcing the official strategy to reduce the use of cash and increase control over economic transactions.
The authorities are also seeking to send signals to the productive sector. Among the announced measures is a reduction in the corporate tax burden through adjustments to the profit tax, with the stated aim of enhancing growth and investment capacities.
The agricultural sector will also receive preferential treatment through reduced tax rates.
However, the reduction of certain tax burdens will be accompanied by an expansion of the taxable base. The government will eliminate special deductions deemed unjustified and will establish a gross income tax for companies that report losses for more than two consecutive fiscal years, a measure aimed at limiting mechanisms of tax evasion and aggressive tax planning.
The package also includes incentives aimed at productive investment. Among these is a regime of accelerated depreciation for the acquisition of machinery, technologies related to food production, and industrial equipment, with the aim of speeding up the recovery of investments and encouraging technological modernization.
The transformations also extend to the taxation of individuals. The regime will update the personal income tax to adapt it to the current inflationary landscape.
The reform aims to raise the tax-free minimum to the equivalent of the national average salary projected for the end of 2025 and to simplify the progressive scale by reducing the number of tax brackets.
For small taxpayers, the simplified tax regime will return, aimed at less complex economic activities.
The system will include automatic adjustment mechanisms based on reported annual income and will allow the National Office of Tax Administration to concentrate its control resources on higher-income taxpayers.
However, the reform also includes tax increases. The government will raise the fixed amounts of several levies, including the tax on land transportation, the tax on vessels, environmental taxes, the document tax, and the fee for filing advertisements and commercial propaganda.
Additionally, tariff rates will be redesigned to support domestic production and facilitate the import of raw materials, technologies, and equipment intended for renewable energy sources, which are considered priority sectors by the authorities.
The measures come at a time of significant pressure on public finances. Law 181 of the Budget for 2026 anticipates a fiscal deficit exceeding 74 billion pesos, while the economy is grappling with high levels of inflation, a decline in production, and challenges in generating external revenue.
Although the regime presents the reform as a tax modernization compatible with the socialist model, the extent of the changes reflects the need to find new sources of revenue while simultaneously offering incentives to attract investment and recover some of the economic activity lost in recent years.
The introduction of VAT, tax digitization, and investment incentives are some of the most significant changes in the approved economic package.
However, their impact will depend on the government's ability to implement them in a context marked by productive contraction, institutional weakness, and the ongoing lack of confidence among many economic actors in the future of the Cuban economy.
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