Lew number (77) Foreign Investment act
I.
RICARDO ALARCON DE QUESADA,
President of the Republic of Cuba's National Assembly of People's Power, ¡Error!
Marcador
no definido.
LET
IT BE KNOWN:
That the Republic of Cuba's National Assembly of People's Power, in session on September
5th, 1995, during the Fifth Regular Session of the Fourth Legislature, has approved the
following:
WHEREAS:
In today's world, without the existence of the socialist bloc, with a globalizing world
economy and strong hegemonistic tendencies in the economic, political and military fields,
Cuba, in order to preserve its accomplishments despite the fierce blockade to which it is
subjected; lacking capital, certain kinds of technology and often markets; and in need of
restructuring its industry; can benefit from foreign investment, on the basis of the
strictest respect for national independence and sovereignty, given that such investment
can usher in the introduction of innovative and advanced technology, the modernization of
its industries, greater efficiency in production, the creation of new jobs, improvement in
the quality of the products and services it offers, cost reduction, greater
competitiveness abroad, and access to certain markets, which as a whole would boost the
efforts the country must undertake in its economic and social development.
WHEREAS:
The Constitution of the Republic, as it was modified in 1992, recognizes among other forms
of property, joint ventures, companies and economic associations which are established in
conformity with the law and, in regard to state property and in exceptional cases, when
such action is deemed useful and necessary for the country, provides for the partial or
total transference of ownership of economic objectives with the goal of developing them.
WHEREAS:
The changes taking place in the national economy, aimed at actively promoting and boosting
the investment of foreign capital in Cuba and broadening the possibilities in terms of the
forms and areas of investment, among other
essential factors, surpass the legal possibilities offered until now by Decree-Law No. 50,
"On Economic Association among Cuban and Foreign Entities," approved on February
15, 1982.
WHEREAS:
In order to broaden and facilitate foreign participation in the nation's economy, it is
suitable to adopt new legislation which provides greater security and guarantees to the
foreign investor and allows the country to obtain financial resources, technology and new
markets in any productive sector and in the service sector, when mutual interests have
been identified, for the fundamental purpose of achieving sustainable development in the
country and a recovery of the national economy.
THEREFORE:
The National Assembly of People's Power, making use of the authority conferred upon it by
Article 75, paragraph b) of the Constitution of the Republic, resolves to issue the
following
FOREIGN
INVESTMENT ACT
CHAPTER
I
Article
1.1.
This Act has the purpose of promoting and encouraging foreign investment in the territory
of the Republic of Cuba., in order to carry out
profitable activities which contribute to the country's economic capacity and sustainable
development, on the basis of respect for the country's sovereignty and independence, and
the protection and rational use of natural resources; and of establishing, for that
purpose, the basic legal regulations under which this can be realized.
2.
The norms contained in this Act comprise, among other elements, the guarantees granted to
investors, the sectors of the economy which can receive foreign investments, the forms in
which they can be utilized, the various types of investments, the procedure for their
authorization, the regulations for these investments relating to banking, taxation, and
labor, and the norms related to the protection of the environment and the rational use of
natural resources.
CHAPTER
II
GLOSSARY
Article
2.
This Act recognizes the following terms and their definitions:
a)
International economic association: Joint action by one or more national investors and
one or more foreign investors within the national territory for the production of goods,
the offering of services or both for profit, in its two forms, which consist of joint
ventures and international economic association contracts.
b)
Authorization: Document
issued by the Executive Committee of the Council of Ministers or a Government Commission,
for the realization of one of the forms of foreign investment authorized by this Act, for
a specified period.
c) Foreign capital: Capital originating outside the country, as well as part
of the profits or dividends belonging to the foreign investor which are reinvested in
accordance with this Act.
d) Top management posts: Positions
belonging to members of the management and administration of the joint venture and totally
foreign capital company, as well as the representatives of the parties to international
economic association contracts and the management personnel of totally foreign capital
companies.
e)
Government Commission: Commission
designated by the Executive Committee of the Council of Ministers with the authority to
approve foreign capital investments in its area of competence, as stipulated in this Act.
f) Administrative concession: Unilateral
action on the part of the Government of the Republic, whereby an entity is granted the
right to exploit a public service or a natural resource, or to build or utilize a public
work under terms and conditions to be determined.
g)
International economic association contract: Pact or agreement among one or more national investors and
one or more foreign investors, for the realization of actions fitting an international
economic association, even without the establishment of a legal entity distinct from each
of the parties.
h)
Totally foreign capital company: Commercial
entity with foreign capital, without the involvement of any national investor.
i) Joint venture: Cuban
commercial company which adopts the form of a nominal share corporation, in which one or
more national investors and one or more foreign investors participate.
j) Employing entity: Cuban
organization with legal status, authorized to establish a contract with a joint venture or
a totally foreign capital company, through which it supplies, at the company's request,
the workers of various skills needed by the company, whoare employed by that organization.
k) Assets: Wages, income and other remuneration, as well as
increases, compensations and other additional payments received by Cuban and foreign
workers, with the exception of those stemming from the economic stimulation fund, if it
exists.
l) Foreign investment: Capital input by foreign investors, in any of the forms
stipulated by this Act.
m) Foreign investor: The person or corporation, with a foreign domicile and
foreign capital, that becomes a shareholder in a joint venture or participates in a
totally foreign capital company, or that is party to an international economic association
contract.
n) National investor: State company or entity with legal status, a
corporation or other Cuban national entity whose address is in national territory and
which becomes a shareholder of a joint venture or is party to an international economic
association contract.
CHAPTER
III
Article
3: The foreign investors within Cuban national
territory enjoy full protection and security and their assets cannot be expropriated,
except for reasons of the public good or in the interest of society, as declared by the
Government, in accordance with the Constitution of the Republic, current legislation, and
international agreements covering the mutual promotion and protection of investments
undertaken in Cuba. In the case of expropriation, indemnification is made in freely
convertible currency and is equal to the commercial value established by mutual agreement.
If
an agreement is not reached, the price is set by an organization with internationally
recognized prestige in the assessment of business assets, authorized by the Ministry of
Finance and Prices and contracted for that purpose with the assent of all parties, or of
the foreign investor and the Ministry of Foreign Investment and Economic Cooperation, if
the affected party is a totally foreign capital company.
Article
4.1.
The period of time granted for the development of operations by a joint venture, the
parties to an international economic association contract or a totally foreign capital
company, can be extended by the same authority that authorized the entities, as long as it
is requested by the interested parties before the end of the period.
2. If the period is not
extended, at the time of its expiration the joint venture, international economic
association contract or totally foreign capital company shall be liquidated, as stipulated
in the constituent documents and existing legislation, and the portion due to the foreign investor shall be paid in freely convertible
currency, except in the case of an express agreement to the contrary.
Article
5. Foreign investments are equally protected against
third party reclamations which comply with the law and are in accordance with Cuban laws
and rulings of national courts of justice.
Article
6. 1.
At any moment, subject to the consent of all parties, the foreign investor in an
international economic association can sell or transfer its total or partial share of the
company to the State or a third party, subject to government authorization, receiving the
corresponding price in freely convertible currency, except in the case of an express
agreement to the contrary.
2. The foreign
investor in a totally foreign capital company can at any moment sell or transfer, in any
form, to the State or a third party and subject to authorization by the Government, its
total or partial share of the company, receiving the corresponding price in freely
convertible currency, except in the case of an express agreement to the contrary.
Article
7. The corresponding price to be paid to the foreign
investor, in the cases discussed in Articles 4 and 6 of this Act, is set with the consent
of both parties, or when that is not feasible, by an organization with internationally
recognized prestige in the assessment of businesses and authorized by the Ministry of
Finance and Prices to operate in national territory, and contracted for that purpose
jointly by all parties, or by agreement of the foreign investor in a totally foreign
capital company and the Ministry of Foreign Investment and Economic Cooperation.
Article
8. The State guarantees the foreign investor the
free transference abroad, in freely convertible currency, free from taxes or any fee
related to such transference, of:
a) Net profits or dividends obtained as a result of the
investment; and
b) The moneys due him or her in the cases discussed
in Articles 3, 4 and 6 of this Act.
2.
Foreign citizens working in a joint venture, for the parties in any other form of
international economic associations or in a totally foreign capital company, as long as
they are not permanent residents in Cuba, have the right to transfer abroad the income
they receive, within stipulated amounts and according to the other regulations issued by
the National Bank of Cuba.
Article
9. Joint ventures and the parties to international
economic association contracts are obliged to pay taxes in line with the special
regulations stipulated by this Act, until the expiration of the period for which they were
authorized.
The stipulations made in the previous
paragraph are not applicable to the rates, contributions (with the exception of social
security contributions) and formal duties established in current legislation, nor to the
payment obligations included in the Mining Act of December 21, 1994, or other legal
provisions which may be issued in regard to natural resources, which shall be observed in
the manner and extent stipulated in those laws.
CHAPTER
IV
SECTORS
OPEN TO FOREIGN INVESTMENT
Article 10. Foreign investments may be authorized in all
sectors, excluding health and education services for the population and the armed forces
institutions, with the exception of the latter's commercial system.
FOREIGN
INVESTMENTS
FIRST
SECTION
MANIFESTATIONS
AND FORMS OF FOREIGN INVESTMENT
Article
11.
For the purposes of this Act, foreign investments are defined as:
a) Direct investments, through which the foreign investor
participates in an effective manner in the management of the joint venture or totally
foreign capital company, and through which the foreign investor makes his or her own
contributions in international economic
association contracts; and
b) Investments in stocks or other securities or bonds,
either public or private, which do not fit the definition of direct investments.
Article
12. Foreign
investments shall adopt one of the following forms:
a)
Joint venture;
b) International economic association contract; or
c) Totally foreign capital company.
SECOND
SECTION
JOINT
VENTURES
Article
13.
1. Joint ventures imply the establishment of a legal status distinct from that of any one
of the parties. They adopt the form of nominal share corporations and current legislation
in this field applies to them.
2. The proportions of capital stock which should be
contributed by the foreign investor and the national investor are agreed upon by both
partners and defined as part of the authorization.
3. The establishment of a joint venture must take the form
of a public document, and annexes to this notarized document include the agreement of
economic association, the bylaws governing the company and the authorization.
The
agreement of economic association contains the fundamental pacts between the partners for
the realization and development of the joint venture's operations, and for the achievement
of its objectives, among them the guarantees of Cuban participation in the administration
or joint administration of the company and the assurances of a market for the company's
products or services; the bases of its accounting system and the estimate and distribution
of profits.
The
joint venture's bylaws shall include provisions related to the corporation's organization
and operation, which must cover the general shareholder's meeting, its characteristics and
organization; the necessary quorum and the requirements for exercising the right to vote
at the general shareholders' meeting; the structure and characteristics of the management and administrative body; the method
by which these bodies make their decisions, both in the general shareholders' meeting and
within the management and administrative body, which could range from a simple majority to
unanimity; provisions for dissolution and the procedure for liquidating the company; as
well as other stipulations resulting from the current legislation in the field, this Act
and the agreements between the parties.
4. If the public document does not designate the person or
persons who shall administer the joint venture, the first general shareholders' meeting
can be held and the members of the management and administrative body can be designated, in line with the bylaws.
5.
Once the joint venture is created, the partners cannot be changed except with the consent
of the parties and the approval of the authority that granted the authorization.
A
change of partners is defined as the substitution of the foreign partner by another person
or company, or of the Cuban partner by another person or company.
6.
Joint ventures can establish offices, representations, branch offices and affiliates, in
national territory and abroad, as well as participating in entities abroad.
7.
A joint enterprise acquires legal status when it is included in the Registry maintained by
the Republic of Cuba's Chamber of Commerce regarding these activities.
THIRD
SECTION
INTERNATIONAL
ECONOMIC ASSOCIATION CONTRACTS
Article
14.
1. International economic association contracts have the following characteristics, among
others:
a) They do not imply a legal entity separate from those of
the contracting parties.
b) They may have the objective of carrying out any activity
authorized by the contracting parties.
c) The contracting parties are free to stipulate all the
pacts and clauses that they deem to be in accordance with their interests, as long as they
do not infringe on the authorized objective, the conditions of the authorization or
current legislation.
d) Each contracting party makes separate contributions,
which constitute a cumulative amount which they own at all times, and even though they do
not constitute capital stock, it is in their interest to establish a common fund, as long
as the portion of ownership belonging to each of the parties is well defined.
2. The text of the contract states the proportion of taxes
to be paid by each party and the times of the year in which profits are distributed among
them, after meeting their fiscal obligations, as well as the responsibility for losses, if
there are any.
3. In an international economic association contract, the
party which carries out an act of management which benefits all parties is fully
responsible to third parties, but among the
parties each one is responsible to the extent or proportion stipulated in the contract.
4. Once an international economic association contract is
granted, the participants cannot be changed, except with the agreement of the parties and
the approval of the authority that granted
the authorization.
5. An international economic association contract must be
presented in the form of a public document in order to be approved and goes into effect
the moment it is included in the Registry maintained by the Republic of Cuba's Chamber of
Commerce regarding these activities.
FOURTH
SECTION
TOTALLY
FOREIGN CAPITAL COMPANY
Article
15 .1. In the totally foreign capital company, the
foreign investor manages the company, enjoys all the rights pertinent to it and is
responsible for all the obligations described in the authorization.
2. The foreign investor involved in a totally foreign
capital company may act as an individual or a corporation within Cuban national territory:
a) Through the creation of a foreign entity of which the
investor is the owner, within the form of a stock corporation and by being included in the
Registry of the Republic of Cuba's Chamber of Commerce; or
b) By being included in the Republic of Cuba's Chamber of
Commerce and acting independently.
CHAPTER
VI
REAL
ESTATE INVESTMENTS
Article
16 .1. Under the authorization of this Act, investments
can be made in real estate and acquire ownership and other property rights over that real
estate.
2. The investments in real estate discussed in the previous
paragraph can be utilized for:
a)
Housing and other structures destined for private residence or tourism activities of
persons who are not permanent residents in Cuba;
b) Housing or offices of foreign companies;
c)
Real estate development for use in tourism.
Article 17. Investments consisting of the purchase of real
estate which constitute corporate activity are considered direct investments.
Article
18. The conditions and terms under which the purchase and
transfer of real estate discussed in Article 16 of this Act are determined in the
authorization and must be in accord with current legislation.
CHAPTER
VII
CONTRIBUTIONS
AND THEIR VALUATION
Article
19 .1. For the purposes of this Act, contributions are
defined as the following:
a)
Freely convertible currency;
b)
Machinery, equipment or other physical or tangible goods;
c) Intellectual property rights and other rights over
intangible goods;
d) Property rights over personal items and real estate, and
other rights over these, including usufruct and surface rights; and
e) Other goods and rights.
The
contributions which do not consist of freely convertible currency shall be assessed in
that currency.
2.
Transfer in favor of national investors of property and other rights over state property,
for the purposes of contributions by them, shall be carried out under the principles
established in the Constitution of the Republic, and under the prior certification of the
Ministry of Finance and Prices, in consultation with the corresponding agency and with the
approval of the Executive Committee of the Council of Ministers.
The
payments of intellectual property rights and other rights over intangible goods shall be
covered by current legislation on the matter.
3.
Payments in freely convertible currency are set according to their value on the
international market and conversion into the national currency, for accounting purposes,
shall be realized according to the National
Bank of Cuba's exchange rates. The freely convertible currency which constitutes payment of foreign capital should enter the
country through the authorized banking entity for use in operations in the national
territory.
4.
The payments which are not made in freely convertible currency, except those consisting of
intellectual property rights and other rights over intangible goods, and which are
destined for the capital stock of joint enterprises, or which constitute payments in
international economic association contracts, are valued according to the methods freely
agreed upon by the investors. Their value can be determined with the aid of the
corresponding expert certifications drawn up by entities under the authority of the
Ministry of Finance and Prices.
5.
The evaluation of the contributions that are not made in freely convertible currency,
except for those in payment for intellectual property rights and other rights over
intangible goods, is always made with the aid of expert certifications drawn up by
entities under the authority of the Ministry of Finance and Prices.
6.
Payments consisting of intellectual property and other rights over intangible goods shall
be assessed by methods freely agreed upon by all the national and international investors
and between the foreign investor and the Ministry of Foreign Investment and Economic
Cooperation, in the case of payments to a totally foreign capital enterprise.
CHAPTER
VIII
NEGOTIATIONS
AND AUTHORIZATION OF FOREIGN INVESTMENT
Article
20.
1. For the creation of an international
economic association, the national investor must negotiate with the foreign investor every
aspect of the investment, including its economic feasibility, the respective payments, the
association's form of management and administration, as well as the legal document needed
for its formalization.
2.
In the case of a totally foreign capital company, the Ministry of Foreign Investment and
Economic Cooperation indicates to the investor the responsible Cuban entity in the sector,
subsector or economic activity for which the investment is planned, and the investor must
analyze its proposition with that entity and obtain the corresponding written approval.
Article
21.
1. Authorization for foreign investments in
national territory is granted by the Executive Committee of the Council of Ministers, or
by a commission designated for that purpose.
2.
The Executive Committee of the Council of Ministers has the exclusive power to authorize
foreign investments in any of the sectors listed below or those with the following
characteristics:
a)
When the total sum of payments made by foreign and national investors is greater than the
equivalent of ten (10) million U.S. dollars in freely convertible currency;
b) In the case of totally foreign capital companies;
c) Investments made in public services such as
transportation, communications, aqueducts, electricity, or for the construction or
exploitation of a public work;
d) When a foreign company with capital shares owned by a
foreign state is involved;
e) When the investment involves the exploitation of a
natural resource, in accordance with legislation for the protection of the environment and rational use of natural resources;
f) Investments
which include the transference of state property or of a real right which is the property of the State; and
g)
In the case of the armed forces' commercial system.
3.
The Government Commission has the power to authorize foreign investments not mentioned in
the previous paragraph.
Article
22. The foreign investor who expects to obtain
authorization for a totally foreign capital company shall present its request, jointly
with the corresponding Cuban entity, to the Ministry of Foreign Investment and Economic
Cooperation.
Article
23.
1. To set up a joint venture or establish an international economic association contract,
the written request should be presented jointly to the Ministry of Foreign Investment and
Economic Cooperation by the foreign investor and the national investor.
2. The investment request is
presented along with the following documents.
a) For the establishment of joint ventures and the granting
of international economic association contracts: draft versions of the economic
association agreement and the bylaws of the proposed joint venture or the contract to be
granted, as well as an economic feasibility study, in both cases.
b) In regard to the foreign investor: documentation
attesting to his or her identity and solvency, as well as proof that he or she is a
legitimate representative of the corporation, when applicable.
c)
In regard to the national investor, in the case of a state enterprise or entity: express
written acceptance granted by the maximum authority in the sector, subsector or economic
activity in which the foreign investment is being made; in the case of a commercial
association or civilian service organization based on totally Cuban capital, express
authorization of the general shareholders' meeting, which grants the specific authority to
sign the corresponding documents with the foreign investor.
d)
When the foreign investor proposes the constitution of a totally foreign capital company:
acceptance by the maximum authority of the sector, subsector or economic activity for
which the investment is planned, the text of the bylaws, an economic feasibility study,
documentation attesting to the foreign investor's identity and solvency, and in the case
of a corporation, proof that the foreign investor is a legitimate representative
authorized to make the specific investment.
e)
The document accompanying the investment request must be duly authenticated, when
pertinent.
3. In order for the Ministry of Foreign Investment and
Economic Cooperation for accept the request, it must be presented with the formalities
described in the present Article.
4. Once the request is accepted by the Ministry of Foreign
Investment and Economic Cooperation, it shall be submitted for consultation to all the
corresponding agencies and institutions, in order to obtain their report on matters
pertinent to them.
5.
Once the above procedures are completed, the Ministry of Foreign Investment and Economic
Cooperation shall refer the accumulated documentation and its evaluation to the Executive
Committee of the Council of Ministers or the Government Commission, as the case may be, so
that it may make the pertinent decision.
6.
The decision denying or approving the foreign investment is handed down within a period of
sixty (60) days from the date on which the request was
presented, and the applicants are notified.
Article
24.
1. The authorization contains the conditions
under which is it granted and the objective and time period of the form of investment in
question.
2.
If the objective of the approved investment is the exploitation of a public service or a
natural resource, or the construction and exploitation of a public work, the Executive
Committee of the Council of Ministers may grant the corresponding administrative
concession, under the terms and conditions it establishes.
Article
25. The conditions established in the authorization
can be clarified through the Ministry of Foreign Investment and Economic Cooperation, at
the request of the parties.
CHAPTER
IX
THE
BANKING SYSTEM
Article
26.
1. Joint ventures, foreign investors and
national investors which are party to international economic association contracts,
jointly or individually, and totally foreign capital companies shall open accounts in
freely convertible currency in any bank in the National Banking System, through which they
shall receive and make payments related to their operations.
2. Joint ventures and national investors who are parties to
international economic association contracts may open and maintain accounts in freely
convertible currency in banks located abroad, with the authorization of the National Bank
of Cuba.
Article
27. Joint ventures, parties to international economic
association contracts and totally foreign capital companies can be authorized on an
exceptional basis by the Executive Committee of the Council of Ministers to effect certain
charges and payments in nonconvertible national currency.
Article 28. Joint ventures, foreign investors and national
investors who are parties to international economic association contracts, and totally
foreign capital companies can arrange loans in foreign currency:
a)
With a bank in the National Banking System or a financial entity approved by the National
Bank of Cuba;
b)
With banks or financial entities abroad, in accordance with existing legal regulations
covering this matter.
EXPORT
AND IMPORT SYSTEM
Article
29. Joint ventures, national and foreign investors
who are parties to international economic association contracts, and totally foreign
capital companies have the right, in accordance with established legislation in the field,
to export their products directly and to import, also directly, whatever is needed for
their purposes.
LABOR
SYSTEM
Article
30. Foreign investment activities must observe the
labor and social security legislation in effect in Cuba, with the adjustments included in
this Act.
Article
31.
1. The workers in activities corresponding
to foreign investments shall be, as a rule, Cubans or foreigners permanently residing in
Cuba.
2.
However, the management and administrative bodies of joint ventures or totally foreign
capital companies, or the parties to international economic association contracts, may
determine that certain top administrative positions or some posts of a technical nature
shall be filled by persons who are not permanent residents in the country and, in those
cases, determine the labor conditions to be applied and the rights and obligations of
those workers.
Nonpermanent
residents in the country who are contracted are subject to the country's current
legislation covering immigration and foreigners.
Article
32
1. Joint ventures, the parties to
international economic association contracts and totally foreign capital companies may be
authorized to create an economic stimulus fund for Cubans or permanent residents in Cuba
who are working in activities corresponding to foreign investments.
2.
The contributions to the economic stimulus fund shall be made out of earned profits. The
amount of these contributions shall be agreed upon between the joint ventures, foreign
investors and national investors who are party to international economic association
contracts, and totally foreign capital companies, on the one hand, and the Ministry of
Foreign Investment and Economic Cooperation, on the other hand.
Article
33. 1. The
workers in joint ventures who are Cuban or permanent residents in Cuba, with the exception
of the members of the management or administration, are contracted by an employing entity
proposed by the Ministry of Foreign Investment and Economic Cooperation, and authorized by
the Ministry of Labor and Social Security.
The
members of the management or administration of a joint venture are designated by the
general shareholders' meeting and hired directly by the joint venture.
Only
in exceptional cases, with the proper authorization, may a joint venture directly employ
all the persons who work in that company, and always in accordance with current legal
provisions in the field of hiring.
2.
The persons working for the parties to international economic association contracts are
contracted by the Cuban party, in accordance with current legal provisions in the field of
employment.
3.
In totally foreign capital companies, the services of Cuban workers and foreign workers
residing permanently in Cuba, with the exception of the members of the management and
administrative body, shall be hired through a
contract between the company and an employing entity proposed by the Ministry of Foreign
Investment and Economic Cooperation, and authorized by the Ministry of Labor and Social
Security.
The
members of the management and administration of the totally foreign capital company are
designated by the company and directly hired by it.
4.
Payments to Cuban workers and foreign workers residing permanently in Cuba are made in
national currency which must be obtained beforehand from convertible foreign currency,
except in the case described in Article 27 of this Act.
Article
34.
1.
The employing entity discussed in the previous Article individually contracts and directly
hires Cuban workers and permanent residents. This employing entity pays those workers
their wages.
2.
When a joint venture or totally foreign capital company considers that a specific worker
does not meet the requirements of the job, it can request that the employing entity
replace that worker with another. Any labor dispute is settled with the employing entity,
which pays the worker, at its own expense, the indemnification to which he or she is
entitled, determined by the competent authorities. In pertinent cases, the joint venture
or totally foreign capital company compensates the employing entity for such payments, in
accordance with the procedure established, and always in compliance with existing
legislation.
Article
35. Notwithstanding what is stipulated in the
preceding articles of this Chapter, the authorization approving the foreign investment can
in exceptional cases establish special labor regulations.
Article
36. The technological advances consisting of
innovations and other tangible goods which are covered by intellectual property law and
which are developed within the framework of an international economic association or by
Cuban workers in a foreign capital company are covered under current legislation in the
field.
Article
37. The Ministry of Labor and Social Security is
empowered to issue as many complementary legal provisions is it considers necessary for
the best application of what is described in this Chapter, especially in the fields of
hiring and labor discipline.
CHAPTER
XII
SPECIAL
TAXATION AND DUTIES SYSTEM
Article
38. Joint ventures, foreign investors and
national investors who are parties to an international economic association contract are
subject to the following fiscal obligations:
a) Income tax;
b)
Tax covering the utilization of the labor force and contributions to social security;
c)
Customs duties and other payments;
d)
Land transportation tax, covering the ownership or possession of land motor vehicles; and
e)
Documents tax, which covers rates and payments when applying for, obtaining or renewing
certain documents.
Article
39. For the purpose of this Act, the payment of taxes
by the persons and companies mentioned in the previous Article carries the following
characteristics:
a)
Income taxes are levied at a rate of thirty percent (30%) of net taxable income. In cases
considered in the nation's interest, the Executive Committee of the Council of Ministers
can exempt all or part of the tax on net income that is reinvested in the country.
b) When the exploitation of renewable or nonrenewable
natural resources is involved, the income tax rate can be raised by decision of the
Executive Committee of the Council of Ministers. In that case, the taxation rate can be
raised as high as fifty percent (50%).
c)
In regard to the tax on utilization of the labor force and social security contributions,
the following is established:
1.
For utilization of the labor force, a discount is granted in the current taxation rate, to
a rate of eleven percent (11%).
2. Social security contributions are covered by a
taxation rate of fourteen percent (14%).
3. The taxation rates expressed in the two previous
clauses are applied on the total wages and other income from any source received by the
workers, except what is turned over to them as economic stimulus.
d) Foreign investors who are
partners in joint ventures or parties to international economic association contacts are
exempted from paying taxes on personal income obtained from the businesses' profits.
Article
40. The totally foreign capital company is obliged
throughout the duration of its operations to pay taxes in accordance with the current tax
legislation.
Article
41. For the purposes of this Act, persons and
companies discussed in the present Chapter may be granted special customs dispensations,
in accordance with existing legislation.
Article
42.
The payment of customs tariffs, duties and other fees shall be realized in freely
convertible currency, even in those cases in which the amount is expressed in national
currency, discounting the exceptional cases which may be established by the Executive
Committee of the Council of Ministers.
Article
43.
The Ministry of Finance and Prices, after consulting with the Ministry of Foreign
Investment and Economic Cooperation and taking into account the benefits and size of the
investment, the recovery of capital and the indications made by the Executive Committee of
the Council of Ministers for priority sectors of the economy and the benefits that could
be accrued by the national economy, may grant total or partial exemptions, on a temporary basis, or grant the benefits within
its jurisdiction, in relation to the special taxation system.
Article
44. Joint ventures, the parties to international
economic association contracts and totally foreign capital companies are subject to the
"Norms for Assessing the Most Significant Assets and Liabilities" issued by the
Ministry of Finance and Prices. Such persons can freely determine the accounting system
which most suits them, as long as the adopted system conforms to universally accepted
accounting principles and meets fiscal demands.
CHAPTER XIII
RESERVES AND INSURANCE
Article
45.
1. Joint ventures, foreign and national investors party to international economic
association contracts and totally foreign capital companies are obliged to establish
reserves, charged to profits, to cover contingencies that may arise in their operations.
2.
The procedure for establishing, utilizing and liquidating the reserves foreseen in the
previous clause is regulated by the Ministry of Finance and Prices.
Article
46. Without detriment to the reserves discussed in
the previous Article, joint ventures, foreign and national investors party to
international economic association contracts, and totally foreign capital companies may
establish other reserves on a voluntary basis, in accordance with the regulations of the
Ministry of Finance and Prices.
Article
47. 1. Joint ventures, foreign and national investors
who are parties to international economic association contracts, and totally foreign
capital companies should establish insurance policies, with companies authorized by the
Ministry of Finance and Prices to operate in the country, for the protection of goods,
properties, operations and any other activities or against any risks as necessary, on the
basis of premiums and other contractual conditions which are competitive internationally.
2.
Industrial, tourism or other installations or lands leased by state enterprises or other
national organizations are insured by the leasee in favor of the leasor, in accordance
with the conditions foreseen in the previous clause.
CHAPTER
XIV
Article
48.
Joint ventures, national and foreign investors party to international economic association
contracts, and totally foreign capital companies before commencing their operations, shall
ber inscribed in the Registry maintained on these activities by the Republic of Cuba's
Chamber of Commerce, within a period of thirty (30) days following the date of
authorization.
Article
49.
1. Persons and companies mentioned in the
present Chapter shall present to the Ministry of Foreign Investment and Economic
Cooperation, within a period of ninety (90) days following the end of their fiscal year,
an annual report of their operations in that period.
2.
The presentation of an annual report by the persons and companies covered by the present
Chapter is independent from their obligations to provide information to the Ministry of
Finance and Prices, the corresponding tax administration and any others that may be
established for statistical purposes.
CHAPTER
XV
Article
50. With the goal of stimulating exports and
international trade, the Executive Committee of the Council of Ministers may authorize the
establishment of duty-free zones and industrial parks, in delimited areas of national
territory.
Article
51.
1. Duty-free zones are defined as areas in
which, by decision of the Executive Committee of the Council of Ministers, a special
system can be established covering customs duties, exchange rates, taxation, labor,
migration, public order, capital investment and foreign trade, and in which foreign
investors can participate for the purposes of financial operations, importing, exporting,
storage, productive activities or reexporting.
2. Industrial parks are defined as areas in which,
by decision of the Executive Committee of the Council of Ministers, a special system can
be established covering customs duties, taxation, labor, capital investment and foreign
trade, for the development of productive activities with the participation of foreign
capital.
Article
52. The authorizations of foreign investments, if
pertinent, may consign particular facilities and incentives offered to foreign investors
in the duty-free zones and industrial parks.
Article
53. The establishment and norms related to the
operation of duty-free zones and industrial parks shall be regulated by special
legislation issued for that purpose.
CHAPTER
XVI
ENVIRONMENTAL
PROTECTION
Article
54. Foreign investment is conceived and stimulated in
the context of the country's sustainable development, which implies that during the course
of the investment, environmental conservation and the rational use of natural resources
shall be carefully undertaken.
Article
55. The Ministry of Foreign Investment and Economic
Cooperation, in pertinent cases, submits the investment proposals it receives for the
consideration of the Ministry of Science, Technology and the Environment, so that the
latter may evaluate the investment's suitability from the environmental point of view and
determine whether an environmental impact evaluation is required, as well as the
suitability of granting the pertinent environmental licenses and establishing a control
and inspection program in accordance with current legislation.
Article
56. 1.
The Ministry of Science, Technology and the Environment institutes the measures which may
be required to properly control situations that could lead to damage, dangers or risks for
the environment and the rational use of natural resources.
2.
The person or company responsible for the damage or harm is obliged to reestablish the
previous environmental situation, repair the material damage and indemnify the injured
parties.
CHAPTER
XVII
SOLUTION
OF CONFLICTS
Article
57.
1. The conflicts which may arise in relations between partners of a joint venture, or
between foreign investors and national investors party to an international economic
association contract, or between partners in a totally foreign capital company in the form
of a nominal share corporation shall be
resolved in accordance with the founding documents.
2.
The same rule applies when the conflict arises between one or more of the foreign partners
and the joint venture or totally foreign capital company to which the partner or partners
belong.
Article
58. Litigation over the execution of economic
contracts between joint ventures, foreign investors and national investors party to
international economic association contracts or totally foreign capital companies, on the
one hand, and state enterprises or other national entities are the jurisdiction of the
economic division of the People's Courts established by the Governing Council of the
People's Supreme Court.
Joint
ventures, national and foreign investors party to international economic association
contracts, and totally foreign capital companies are subject to any regulations that may
be established concerning protection against catastrophes and natural disasters.
TEMPORARY
PROVISIONS
FIRST: On the date this Act goes into effect, it applies to the
existing and operating joint venture and other forms of international economic
association. Nonetheless, the benefits
granted by Decree-Law No. 50, issued February 15, 1982, shall remain in effect during the
whole period in which an existing international economic association is authorized.
SECOND: On the date this Act goes into effect, it applies to the
requests for foreign investment authorization which are being processed. The Ministry of
Foreign Investment and Economic Cooperation and the current applicants shall determine how
to proceed.
THIRD: The complementary provisions issued by the various
central state administrative agencies for the proper application and execution of the
norms contained in Decree-Law No. 50 of February 15, 1982, shall continue to be observed
on an individual basis, as long as they do not conflict with this Act. The aforementioned
agencies, in a period of no more than three months from the date this Act goes into
effect, shall review the aforementioned norms and bring them into harmony with the
provisions of the Act.
FIRST:
Decree-Law No. 50, "On Economic Association among Cuban and Foreign Entities,"
issued on February 15, 1982, as well as any other legal provisions contrary to the
contents of this Act, are hereby repealed, and this Act shall be in force as of its
publication in the Gazeta Oficial de la República.
SECOND: The Executive Committee of the Council of Ministers and
the central state administrative agencies are authorized, in accordance with their
jurisdictions, to issue whatever provisions they consider necessary for the proper
fulfillment of this Act.
APPROVED
on the floor of the National Assembly of People's Power, International Conference Center,
City of Havana, on the fifth day of the month of September of the year nineteen
ninety-five.
(signed)
RICARDO ALARCON DE QUESADA
Published
in a special issue of the Official Gazette, Number 3, dated
September 6th, 1995.
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