With the aim of keeping income redistribution from the country’s Tax System, on the basis of generality and equity of the tax load and the need for lessening the state budget involvement in the financing of Social Security, the Resolution 261/2016 of the Ministry of Finance and Prices (MFP) will come into force next October.
The news was issued in a press conference this Thursday in the aforementioned Ministry, where authorities from various sectors offered details about the new regulations.
That Resolution establishes, in the first place that a Special Contribution to the Social Security will be applied to workers of the business sector earning wages above 500 pesos (CUP) per month, if their income matches the following concepts: additional payment on enterprise improvement; performance-based payment; or distribution of profit as extra payment for enterprise streamlining mechanism.
The tax to be paid will be 5% of the remuneration, as applied to the workers from sector under state budget who have enjoyed a wage increase: teachers, health workers, lawyers, judges and finance officers; and workers under enterprise streamlining mechanism, the platform fishing fleet, the hired personnel and concessionary from Mariel Special Development Zone, and workers from the foreign investment sector.
The Resolution also indicates that the tax will be applied to workers from the Cuban enterprise system, who are paid 2 500 pesos (CUP) or more, with incomes matching any of the aforementioned concepts.
For this tax the amount to be paid will be 3% of the remuneration if it fluctuates between 2 500 and 5 000 pesos (CUP) and 5% for wage earners with more than 5 000 pesos.
How to pay?
According to deputy Minister of Finance and Prices Meisy Bolaños, the Resolution indicates that the tax will be monthly deducted from the worker’s salary, and the enterprise will hand it over to the state budget.
Thereby, the effective payment of the social obligation is guaranteed, while the work of that entity is easier, since the workers are not forced to go through procedures like the Sworn Statement and the annual liquidation (in the case of Tax on personal income). That tax had been previously paid by self-employees and artists.
Seminars have been carried out since February for the successful application of this Resolution. In addition, the tax administrators in charge of the payment and the taxpayers’ records were updated. Likewise the bank institutions have already braced for these new taxes coming from enterprises.
About this process of preparation, Head of Labor and Salaries of the Cuban Workers’ Union (CTC) Abel Rivero said that the union have held meetings with more than 90% of the workers, the remaining 10% will gather in the next few days.
Deputy Ministers of Finance and Price said that although the Resolution must have been applied in the second semester of this year, it was postponed until the fourth trimester in the last regular session of the National People’s Power Assembly.
The Answer to your Questions
The National Tax Administration Office (ONAT) has produced an instructive folding sheet to be distributed in all the working centers obliged to pay taxes. This document, as well as other explanations and the Resolution 261/2016 are also available on the official webpage of the Tax Administration and on Facebook and Twitter accounts of the Ministry of Finance and Price.
More information will be given to the population by answering questions about the tax implementation through two TV round tables, forums, debates and others.
Director of Income of the Ministry of Finance and Price Vladimir Regueiros illustrated that the workers are protected by some sections. Such is the case of the priority given to the workers’ commitment with relatives for the maintenance payment ahead of the tax duty.
Other payments like the credits for home appliances and home repairs will be deducted after the corresponding tax.
Regueiros stressed that when the wage is inferior to the amount to be taxed by the Social Security or the tax on personal income, the amount accrued is held and the difference is registered as debt to the state budget.
This situation might be observed in the case of enterprises with payments every two weeks, since the assessment of the requirements for the application of the tax is set for a month. In the first payment the tax is not held, and the amount could be insufficient in the second payment.
Before this situation, the Director said that, the entity can strain a point by subscribing a settlement with the worker, and informing the ONAT. The same procedure can be used when the tax payment cuts income fine.
In the case of an individual holding more than one job, the total amount of the tax on the worker’s income is withheld. If the contacts are signed up in different entities, the tax will be paid in both of them, following the requirements.
Meisy Bolaños said that this Resolution is based on the Tax System Law 113 which is being gradually applied, depending on the country’s economic situation the Special Tax to Social Security is the most natural and such spending is not backed by taxpayers.
She added that the financing of Social Security will continue to grow in line with the increase of retired people ( 1 696 000 pensioners today), and because the payment has been modified for the workers retired in 2009 under Law 105.
The average monthly salary of the enterprise sector was 779 pesos in the first semester of 2016, which reflects an increase as compared with 2013.
The directors said that state workers’ contribution needs to expand and the application of special regimes of contribution in the non-state sector, as established by guideline 137.
-The CUC extra payment will not be taxed.
-The additional payments under the concept of Masters and Doctorate courses are considered salaries and will be taxed if the requirements are met.
-The tax on personal income is estimated on the total of payments to workers without deducting the Special Tax to Social Security. The tax load should never exceed the 10%.
-The budgeted units are exempted from taxes, although special treatment and performance-based payment are applied.
-The taxes go to the state budget of the territory where the enterprise is located.
-If any state worker subjected to these taxes is acting as self-employee, the tax payment will be made separately, according to the rules for every sector.
Examples of taxes according to payments
The worker for an enterprise with streamlining mechanisms earning 690 pesos a month
-385 pesos under concept of basic salary
-105 pesos under additional payment of streamlining business mechanism
-200 pesos as performance-based payment.
The requirements for the application of the Special Tax: income above 500 pesos, including streamlining mechanism and performance-based payment.
-Taxable base: 690 pesos
-Special Contribution to Social Security: 34.50 pesos
Worker of a state enterprise earning 2 650 pesos per month, including the performance-based payment:
Personal Income Tax
- Taxable base: 2 650 pesos
-Charge: 79.50 pesos
Special Contribution to Social Security
- Taxable base: 2 650 pesos
-Charge: 132.50 pesos
Total charge: 212 pesos
Tax Load: 8%
Worker of an enterprise with streamlining mechanism earning 470 pesos per month
-365 pesos under the scale salary concept,
-105 pesos for additional payment of streamlining mechanism
The requirements for the application of the Special Contribution or the Tax on personal income are not met