[Versión español al final 👇]

_{Image by Michal Jarmoluk in Pixabay}

"...Death and taxes"

This phrase that is generally attributed to Benjamin Franklin (... who was not the first one to say it but well...) reflects how these two things are the only inescapable in our life. In Cuba this "phenomenon" of taxes has undergone several changes. With the fall of the socialist camp of the USSR, the country had to readjust, and natural persons practically did not pay "visibles" taxes, those that were included in the products that were acquired, you did not even know about that, because they were numbers that were handled in high spheres and you only got the final price, without more detail.

Let's see, that has not changed 😅, the tax of the product or service is included in its final price, so you do not know how much it is, however there are other things that have been modified.

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With the implementation of Law 113 of the Fiscal Policy, in 2012, the issue really became serious, at least for individuals. There was a resurgence of plural employment and private work; in Cuba it is not called that way, it is as if some words gave hives. Here it was called Self-Employed Worker and now more recently Non-State Management Form, nothing... the self-employed/private of all life, I don't want to confuse you. Well, this entity, when starting to receive incomes other than those that until now could be managed from the payroll of a state-owned company, had to start paying taxes.
I should clarify that state workers also pay taxes, but they are not the ones who keep the accounts.

At the beginning, most of the quotas were fixed and very small, almost representative. This changed over time and quite a lot.

_{Imagen de Firmbee en Pixabay}

Now I am going to tell you about the taxes that I, as a natural person who owns a private business, have to pay. In fact, you can have several businesses, and they are all calculated in a very similar way. This is for those of us who are not small or medium-sized companies (Mipymes), because in that case it is more complex.

First let's look at the following, we must know the parts of a tax in our Tax Law:

• Taxable Fact: This is the activity that I perform, for which I must pay the tax. For example: Real estate lessor, photographer, decorator....

• Passive subject: That is me (or you!). You have no choice but to be passive and accept that you have to pay.

• Taxable Base: This is what you earned! Don't leave a single penny!

• Tax Rate: This is the proportion that is used on your taxable base to determine what you have to pay. In my case it is a percentage and a flat rate, depending on the taxable event.

• Tax rate: What makes you cry. This is the little money you have to pay as tax.

Annually, the National Office of Tax Administration (ONAT) makes available to taxpayers in the Tax Portal , a group of information of interest. You access with your user that you must create from your Tax Identification Number (NIT) .

There you will find published what is known as fiscal vector. It is a document in which all your tax obligations are reflected. This is an auditable document, although it can be kept digitally.

Every month, before the 20th, I have the obligation to make the payment of the tax dues corresponding to the previous month.

To keep the account, you have to fill in the income and expense register. In which you are going to add with exact date, the day you received an income or made an expense related to your business. This is also an auditable document, it can be filled out digitally.

At the end of the month, at the end of the column, you put the total sum of your income and expenses. These will be your taxable income, to which the tax rates will be applied depending on the taxes you have to pay due to the way you manage your business.

In my case, as I belong to the General Contribution Regime (RG) I have these types of taxes to pay:

• Tax s/ sales and services || MONTHLY PAYMENTS
• Tax on personal income || MONTHLY PAYMENT
• Tax on land transportation || ANNUAL PAYMENT
• Special contribution to social security || QUARTERLY PAYMENT

I will recreate it for you with an example:

Let's assume that, in the month of May, your net income amounted to 20 000 pesos (about 102 USD in the informal market) (quite a bit more than what any professional in the state sector earns).

Note: These numbers are hypothetical, don't even think that I am going to put here what I earn 🤣.

Well, once I have my income, I review the expenses related to the direct exercise of the activity.
Here there are several issues against. I explain: for example, if I exercise my activity at home, there is no way to check how much electricity I used for personal consumption and how much, for work, so electricity, I can not deduct it as a direct expense).

Another aspect against is that many materials necessary for the exercise of the activity, you have to buy them in the informal market, for the simple reason that the government does not have any offer. So there, you are left without their due receipt of payment and the inputs are mostly sold in USD (1 usd = 195 CUP).

With some changes introduced, now you can deduct at the end of the year, 100% of your expenses, but .... Only if you can demonstrate with documentary evidence, 80% of these. You can imagine that many real expenses are impossible to prove, so we have to pay for them as well.

Back to the account: Let's suppose I manage to get my hands on a receipt that justifies 2000 pesos. That is not useful for the monthly bill, only for the annual bill. So keep it with love. Why doesn't it help you? Well, because the calculation of the tax to be paid on a monthly basis is made on your net income. Without deductions.

_{Screenshot of the Fiscal Vector}

Let's suppose that this month we have to pay all the taxes that are reflected to me in the Fiscal Vector:

That is:

Net Income: 20 000 || Actual Expenses: 3000 || Demonstrable Expenses: 2000

As you can see all calculations are made on net income and not on profit. This is a great difficulty for most businesses today because that expense is something that you need to continue working and that month after month you have to re-invest. You never get to enjoy it. So you actually have a profit of 16 530 pesos and from that you deduct 3470.00 which is the tax payments.

So in reality you are left with 13 060 pesos to live on (67 usd). The way to get more profit could be to reduce expenses, but with the inflation in Cuba this only tends to increase.

Therefore, you proceed to pay either in person at the bank , or through a virtual payment gateway, which is the method I use.

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As to what you can do with that money, I think several of my Cuban hivers friends have done some analysis on this.

• Inflation in Cuba: Economic Challenge || Author: @jordy0827
• Inflation, shortages and MSMEs: A problem with no solution in sight || Author: @crptogeek

At the end of the year, the Personal Income Affidavit must be made, but that is a topic for another post. 😄

I hope you found it of some interest how this example of how the Cuban tax regime works for private workers.

I must clarify that I am not a specialist in the subject, so I am only talking to you from my personal experience.

Hopefully and that you had a lot of fun reading about taxes! 😅🤣🤣🤣🤣

Best regards and see you!

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SPANISH VERSION

_{Imagen de Michal Jarmoluk en Pixabay}

Los impuestos! 😅 Lo siento si este tema hace que te hierva la sangre, pero es lo que hay.😆

Death and taxes!

Esta frase que se le atribuye generalmente a Benjamín Franklin (... que no fue el primero que la dijo pero bueeeno...) refleja como estas dos cosas son la únicas ineludibles durante nuestra vida. En Cuba este "fenómeno" de los impuestos ha sufrido varios cambios. Con la caída del campo socialista de la URSS, el país tuvo que reajustarse, y las personas naturales prácticamente no pagaban impuestos, salvo aquellos que venían incluidos en los productos que se adquirían, pero de eso tu, ni te enterabas, porque eran números que se manejaban en las altas esferas y a ti solo te llegaba el precio final, sin más detalle.
A ver, eso no ha cambiado 😅, el impuesto del producto o servicio está incluido en su precio final, así que tampoco te enteras de cuánto es, sin embargo hay otras cosas que si se modificaron.

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