CHAPTER  I

PURPOSE AND CONTENT

 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 that 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 should 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 that these may adopt, 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 protection of the environment and the rational use of natural resources.

CHAPTER  II

GLOSSARY

Article 2.

In this Act, the following terms are used with the definitions indicated in each case:

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 the part of profits or dividends belonging to the foreign investor that may be reinvested in accordance with this Act.

d) Top management posts:

Positions corresponding to person responsible for the direction and administration of the joint ventures and of the company with totally foreign capital as well as the representatives of the parties to international economic-association contracts and the manage­ment personnel of companies with totally foreign capital.

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 in correspon­dence with what is 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 execute 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 joint realization of actions appropriate to an international economic association, without the establishment of a legal entity distinct from each of the parties.

h) Company with totally foreign capital:

Commercial entity with foreign capital, without the involvement of any national investor.

i)  Joint venture:

Cuban commercial company which adopts the form of a registered-share corporation, in which one or more national investors and one or more foreign investors participate as stockholders.

j)  Employing entity:

Cuban organization with legal status, authorized to establish a contract with a joint venture or a company with totally foreign capital, through which it supplies, at the company’s request, the workers of various skills needed by the company, who will be employed by that organization.

k) Assets:

Salaries, 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, should this exist.

l)  Foreign investment:

Capital input by foreign investors, in any of the forms stipulated by this Act.

m) Foreign investor:

The natural or juridical person, with a foreign domicile and foreign capital, that becomes a shareholder in a joint venture or participates in a company with totally foreign capital, 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 domiciled in the national territory and which becomes a shareholder of a joint venture or is party to an international economic-association contract.

CHAPTER  III

GUARANTEES FOR INVESTORS

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 company with totally foreign capital.

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 company with totally foreign capital, 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 company with totally foreign capital 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 company with totally foreign capital 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 Finances 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 company with totally foreign capital and the Ministry of Foreign Investment and Economic Cooperation.

Article 8.

1. 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 company with totally foreign capital, 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.

CHAPTER  V

FOREIGN INVESTMENTS

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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 company with totally foreign capital, 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)   Company with totally foreign capital.

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 registered-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 company with totally foreign capital, 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 company with totally foreign capital 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 company with totally foreign capital, 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 company with totally foreign capital 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 company with totally foreign capital: 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 juridical person, proof that the foreign investor is a legitimate representative author­i­zed to make the specific invest­ment.

e)   The documents accompanying the investment request must be duly authenticated, when per­tinent.

3. In order for the Ministry of Foreign Investment and Economic Cooperation to 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 it must be notified to the applicants.

Article 24.

1.  The authorization contains the conditions under which it is 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 established by said Committee.

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 operate 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.

CHAPTER  X

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.

CHAPTER  XI

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 company with totally foreign capital 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 company with totally foreign capital 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 company with totally foreign capital 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 as 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%).