The Cuban Government desists from forcing self-employed workers (TCP) to set up a micro, small or medium-sized company (MSMEs) if they have up to three people hired. As had been arranged in the rule issued in this regard in August 2021if they did not reconvert within a year from the entry into force of the law (specifically until last September 20), the licenses of these self-employed workers would be cancelled.
In a note published this Thursdaythe Ministry of Labor and Social Security and the National Tax Administration Office (Onat) back down, and report having agreed “to allow those who have up to three contracts and have kept paying their taxes, to continue carrying out their activities “.
The tax authorities do not explain the decision beyond the fact that it is based “on the recognition that said TCP continue to carry out the same activity.” Similarly, they remember that the self-employed cannot exceed three employees, because otherwise they will have to “reconvert their business into a company” (MSMEs or non-agricultural cooperative) “or stop exercising self-employment”.
In the same document, they recall that carriers who did not renew their license and those who did not make any tax payments will be removed. In addition, “it will be updated ex officio”, that is, they will be automatically reconverted to mipyme, “contracted artists and temporary agricultural workers who have no other self-employment activity”, “TCPs without contracts who perform a single or several economic activities” and the self-employed who, although they have up to three employees, “carry out more than one business”.
The tax authorities do not explain the decision beyond the fact that it is based “on the recognition that said TCP continue to carry out the same activity”
For the Cuban economist based in Spain Elijah Amor Bravothe decision is nothing more than a victory for the workers in the “declared war” on the regime, which forced them “artificially” to become MSMEs “and thus score a political success with the approval of the new regulations for economic actors” .
“The final balance of the process has meant that the creation of MSMEs, some 5,000, has been well below what the leaders expected,” says Amor, and hence the decision of the Ministry of Labor and ONAT. Meanwhile, in Colombia, more than 300,000 SMEs were created in 2021, and in Chile, more than 200,000 that same year.
However, he believes that with the measure, the Government has also “shown its claws”, by setting the condition of paying taxes. “The Onat, coming from behind, has managed, apparently, to impose its criteria, and has managed to set the precedent that, in troubled times like the current ones, it is better to collect a peso than to comply with a transitory provision of one more decree.”
The low acceptance of reconverting into a company could be due, among other reasons, to fear of increased control by the Government and the banking system and the lack of tax incentives.
This same Thursday, the Onat made it known too that it has placed a “preventive seizure” on the bank accounts “of all the entities that did not make the payments on account or partial payments of the Tax on Profits and the Contribution for Performance of the State Investment (non-tax income) corresponding to the third quarter of the year in progress”.
The decision, they explain, “responds to the fact that there are companies that stopped making these important contributions – whose legal payment deadline ended on October 24 – despite all the proactive actions deployed by the country’s tax offices to promote their correct compliance and punctual”.
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